fair trade

The Fair Trade Fallacy: The Reality of TransFair Canada’s Impact on the Coffee Industry

In the last post, Heather discussed a fair trade product and brought to light some of the positive aspects of the fair trade industry. I decided to write a counter to her article showing some of the more negative lights of the fair trade industry to get some discussion and debate going on the topic since I have been skeptical of the fair trade industry and of the supposed non-profit business that is Ten Thousand Villages for quite some time.

One problem I have with Ten Thousand Villages has to do with what I see as the immense mark up of their product line.  Have you seen how expensive their products are? How much of that expense is going back to the actual artisan? Many of the products they ship in are priced significantly higher than the price they have been purchased for and my question is, where does their nearly $20 million in profits actually go? I found their annual reports vague in that respect, talking of the need to mark up to cover costs, but not the entire reality of the situation. It talks of profits, but not what happens to them in any great detail, where exactly these profits are reinvested, or what efforts they are taking to reduce their costs and overhead. Their use of volunteer labour must certainly help in this respect, but what other measures must be taken? Mixing business with non-profit status leaves Ten Thousands Villages in a precarious place. The non-profit status afforded to the business makes so that it MUST be under intense scrutiny and I do not believe that it has received enough scruitiny yet to ease my mind so that I can consider them fully “ethical”.

I have decided to take a look at one fair trade product to show the reality of the claims made by both TransFair Canada and organizations such as Ten Thousand Villages about the positive impacts of fair trade products. I chose one of the most popular choices in the fair trade consumption market: coffee. TransFair Canada, the only fair trade certification organization in Canada, attempts to bring equity and empowerment to producers in mostly developing countries through its certification, labeling and promotion of fair trade products. It maintains that it provides “living wages” for producers, sustainability and “addresses the injustices of conventional trade, which traditionally discriminates the poorest, weakest producers” (TransFair Canada, 2008). The niche the fair trade market has created for itself, however, has led to dependency instead of sustainability, the already strong thriving, and excluding the weak and poorest from the marketplace with no guarantee of poverty reduction in the long-term.

Fair trade came out of a response to the capitalist system which favors the strongest over the weakest, leaving many small players out of the international market and unable to receive equitable pricing. It attempts to level the playing field for small farmers based on two principles: paying farmers a “fair price” and providing them with some support to the international marketplace. Fair trade is not without criticism as the fair trade coffee industry demonstrates. Coffee is the second most traded commodity after petroleum in the world marketplace and is the economic backbone of many countries, with over twenty-five million families dependent on it for livelihood. Seventy percent of the world’s production of coffee comes from producers who farm less than ten acres of land, making it difficult for them to compete in the world market alone. The falling market price for coffee has led to devastation for many who were unable to join cooperatives or producing organizations supervised by international fair trade organizations (Utting-Chamorro, 2005).

TransFair Canada is the only non-profit organization in Canada devoted to certification, labeling and promotion of fair trade products. It spouts to incorporate values of equity and empowerment through its assurance of “better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world” by addressing the “injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers” (TransFair Canada, 2008). In reality, the poorest of the poor are being excluded; farmers are becoming increasingly dependent on primary commodities and undiversified crops; and wage increases are being diverted to cover other expenses among cooperatives and producing organizations.

The common perception that fair trade provides a guaranteed “living wage” to small producers and individual workers is deceiving. Fair trade certification ensures a minimum price to the organization of producers but not to individual producers or workers on fair trade farms. Poor management and heavy debts owed by producer organizations can consume much of the higher fair trade price before it ever reaches the growers. Wage standards only apply to employees of the producer organization and not to individual farmers and growers, with specific standards only available to full-time permanent employees. This presents a problem in an industry that is primarily contract and seasonally temporary with very few permanent positions available. In fact, Hal Weitzman of the Financial Times found on a visit to five Peruvian coffee farms that four out of five workers on Fair Trade certified farms received wages below the Peruvian minimum wage, which was not in violation of any Fair Trade standards (Weber, 2007).

The price of fair trade coffee is fixed at US $126 per quintal (100lbs), while the world price of coffee is flexible at around US $56 per quintal in much of Latin America. The reality of wages going to the actual growers is surprisingly similar. Fair trade coffee cooperatives in Nicaragua for instance, found themselves paying out fees of approximately $10 per quintal for processing, $18 per quintal for exporting, $31 per quintal for debt cancellation, $5 per quintal for community development and other monies for capitalization funds, resulting in farmers receiving on average only between US $40 and $85 per quintal for their coffee (Utting-Chamorro, 2005).  This is not significantly higher than the world price and in some cases is even lower. The export and maintenance costs of some organizations and cooperatives have led its member producers to be forced to sell their produce in the local market instead of the fair trade market at times to sustain a living. Most fair trade promotional material has led the consumer to believe that workers on the ground are actually receiving the legal minimum wage, if not higher by suggesting that growers are given “living wages”. Many small producers, although assured more stable sources of income, are still living well below the poverty-line despite the guaranteed price of coffee and “living wages” supposedly guaranteed by Fair Trade standards (Weber, 2007).

Dependency remains another crucial problem within the fair trade industry. The reliance on one product as the main source of income is the main cause of poverty for many of these individual farmers in the first place (Nicolls and Opal, 2005). Some experts have suggested that raising prices or wages in primary commodities for individual farmers makes it harder to move into other activities, preventing diversification, and locking the producers into charity channels that prevent them from truly escaping poverty. The price premium then, remains a charitable transfer dependent on external forces rather than a sustainable source of long-term income (Collier, 2007). The fair trade industry is extremely reliant on international support and aid to maintain pricing standards (Utting-Chamorro, 2005) and therefore is not truly sustainable in the long term.

There have also been complaints that the fair trade industry is dominated by “Northern” interests with insufficient producer representation and input into fair trade standardization. Fair Trade Labeling Organization International (FLO), the main cooperator and collaborator of TransFair Canada, responded to this charge by adding producers, traders and national labeling organizations to it Board of Directors (Taylor, Murray and Raynolds, 2005). The industry however remains mostly dominated and led primarily by “Northern” interests. As such, it is mostly unsustainable for local producers without intense international assistance. The cooperative spirit supposedly embodied within Fair Trade does not always flow through the entire process.

The price floor created by establishing set world prices for fair trade products such as coffee results in increased barriers for entry into the industry essentially excluding the poorest of the poor from participating. The set price leads to an excess of supply, which has been experienced in the fair trade coffee market for more than ten years and creates tremendous imbalance in the system. Fair TradeMark Canada, for instance, found that only around thirteen percent of fair trade coffee production was actually purchased by the fair trade market, with the rest being supplied to the conventional market at normal rates. The increased competition to secure the limited number of contracts within the fair trade industry has threatened to exclude the marginalized coffee growers that it supposedly supports. Obtaining certification requires soliciting organizations to obtain export contracts prior to certification and to find the necessary financing to buy and export the coffee, which often exceeds $15,000 per single exporting container (Weber, 2007), completely out of reach for the average coffee grower.

The excess supply in coffee has increased competition for contracts leading to increasing demands for dual certification; one in organic farming and one in fair trade. Obtaining certification in organic farming is a more expensive and demanding process than the fair trade certification process, as costs can soar to more than one-thousand dollars per producer. As the quality standards have increased, the FLO has also begun charging more hefty prices for its Fair Trade certification and has limited the number of contracts it will provide. This has resulted in the fair trade coffee industry continuing to be primarily dominated by those who were already large and privileged to begin with and not the poorest farmers and trades people made in claims. The most obvious way to increase the sales, so as to reduce the excess supply and elimate the market inequality, is to enlist mainstream retailers into the fair trade market, such as Nestle. This goes against the original design of fair trade and is seen as the biggest threat to the industry by many as corporate priorities overtake social consciousness (Weber, 2007).

There are some positives from all this. Many fair trade organizations are trying to encourage diversity, and the cooperative model based on individual democracy of all involved. All of the small producers asked in a survey among fair trade producers confirmed that they had in fact experienced an improvement in their living conditions as a result of their involvement with fair trade. This allowed many of them to switch from using fuel wood to using electricity, having better nutrition, educational opportunities and improvements for their farms. Fair trade has also allowed for more democratic decision making where small producers are given a chance to participate in community development decisions, and allowing them access to technical help, loans, and safety and quality control measures (Utting-Chamorro, 2005). Fair trade, however, has yet to reach its main stated goals of poverty reduction, sustainability and equity.

It is interesting that such a focus in fair wages and conditions has been directed towards the so-called “developing” nations in regards to agriculture while at the same time these problems are being mostly ignored within Canada. Canadian farm workers remain without a minimum wage, maximum daily and weekly working hours, guaranteed rest and eating periods, overtime pay and many other guarantees offered to workers in every other industry (Ontario Ministry of Labour, 2004). Why fair trade for the developing world has taken off while our own people remain without many of these same guarantees is frustrating, to say the least. If fair trade is the goal, it should be fair for all, sustainable and equitable so that rights are guaranteed to all and all have the chance to participate. I also believe that there should also be more stringent regulations that monitor the human rights situations and ethical claims made by these non-profit industries so that we can truly make an ethical purchasing descision.

Sources Cited

  1. “Employment Standards Fact Sheet- Agricultural Workers,” Employment Standards Information Centre, Ontario Ministry of Labour, Government of Ontario, Canada, Queen’s Printer for Ontario, 2004. Retrieved March 12, 2008, from http://www.labor.gov.on.ca/english/es/factsheets/fs_agri.html
  2. Chandler, Paul. “Fair Trade and Global Justice,” Globalizations, Vol. 3, No. 2, 2006, pp 255-7.
  3. Weber, Jeremy. “Fair Trade Coffee Enthusiasts Should Confront Reality,” Cato Journal, Vol. 27, No. 1, Winter 2007, pp 109-117.
  4. Taylor, Peter Leigh; Murray, Douglas L., and Raynolds, Laura T. “Keeping Trade Fair: Governance Challenges in the Fair Trade Coffee Initiative,” Sustainable Development, Vol. 13, 2005, pp 199- 208.
  5. “About Fair Trade,” TransFair Canada. Retrieved March 12, 2008, from http://transfair.ca/en/aboutfairtrade
  6. Utting-Chamorro, Karla. “Does Fair Trade Make a Difference? The Case of Small Coffee Producers in Nicaragua,” Development in Practice, Vol. 15., No. 3, 2005, pp. 584-599
  7. Nicholls, Alex and Opal, Charlotte. “Fair Trade: Market-Driven Ethical Consumption,” Sage Publications Inc.,  2005, pp 242.
  8. Collier, Paul. “The Bottom Billion. Why the Poorest Countries are Failing and What Can Be Done About It,” Oxford University Press, 2007, pp163-4.

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Cambodia’s Trouble with Landmines – is a Brighter Future Possible?

Written by Heather Wilhelm

For my birthday last week, my boyfriend bought me a beautiful necklace from a great fair trade store called Ten Thousand Villages.  The necklace is called a Peace Dove Bombshell Necklace, and upon reading the literature that came with it, I learned that this piece of jewellery was made in Cambodia by a group of artisans who had formed an organization called Rajana.  Rajana is completely owned and operated by the Khmer people of Cambodia, and offer fair salaries, education, interest-free loans and many other benefits to their workers.  They are working to create beautiful art by turning the ravages of decades of war and tragedy into prosperity for their people.  The Peace Dove Bombshell Necklaces are made from the remains of land mines that litter the land of Cambodia and have led the country to have one of the highest numbers of amputee populations in the world.  This birthday gift – as beautiful as it is – tells the story of a horrific past and the ever-present danger that face the people of Cambodia.

Between 1975 and 1979 the ruling party in Cambodia was a totalitarian government called the Khmer Rouge.  The party was led by Pol Pot and believed in extreme Communist principles including social engineering and agricultural reform.  Their radical social reform process was carried out by deporting all the inhabitants of major cities to the countryside where they combined populations with farmers and were forced into labour in the fields.  Anyone suspected of capitalism (a group that included teachers, professors, urban city dwellers, anyone connected to foreign governments, and even people who simply wore reading glasses) was arbitrarily executed, tortured or detained.  There is a large range of estimated deaths in the four years that the Khmer Rouge ruled Cambodia, but most estimates but the death toll at 1.5 million people.  This included those executed by the government, as well as those who died of starvation from lack of experience growing food, and those who died of preventable diseases because of the government’s insistence that westernized medicine be kept out of the country.  Money was abolished; schools, hospitals, banks, industrial and service companies were closed; books were burned and as mentioned earlier, almost the entire intellectual population of the country was massacred.  Most notable in the long list of treacherous crimes performed by the Khmer Rouge was the separation of children from their parents (who were believed to be tainted by capitalism) and their subsequent brainwashing (children were often given leadership roles in torture and execution) into this dangerous form of socialism.  While the Khmer Rouge were toppled from government in 1979, the group itself survived as a group into the 1990s, causing death and destruction throughout these decades.

It is estimated that four to six million landmines were laid in Cambodia over the decades of war fought there, and every year hundreds of Cambodians fall victim to the lasting effect of these forgotten weapons.  In a population of approximately 12 million people, it is estimated that more than 40,000 amputees are living, or one in every 290 Cambodians.  These amputees are chastised by their peers and have been forgotten by their government, often having to try and make a living selling merchandise on the streets for small commissions.  There are many active mine removal organizations that work within Cambodia that are trying to clear mines in an effort to make the country safer, but this sizable job is nowhere near completion leaving the citizens of Cambodia in constant danger or death or amputation.

Organizations like Rajana are imperative to the turnaround of countries like Cambodia that are suffering the after effects of decades long war, as they play a role in creating job opportunities and education for its citizens.  By providing fair wages, health care, education and more to their employees Rajana is working to create a different future for Cambodia.  Aside from creating a better social welfare system, it is imperative that the international community become active in the banning of land mines and cluster bombs.  The Ottawa Treaty also known as the Mine Ban Treaty became effective on March 1, 1999, and as of early 2009 had 156 parties to the Treaty.  Once a country has signed, they are required to cease production of anti-personnel mines as well as destroy any stockpile of mines within four years (except for a small number they are allowed to retain for training purposes).  Thirty-seven countries have not signed the Treaty, including the People’s Republic of China, India, Russia and the United States of America, all of whom are some of the largest producers and carry some of the largest stockpile of anti-personnel landmines.  By refusing to sign this Treaty, some of the most powerful countries in the world, namely the United States and China, are perpetuating a problem that has caused countless deaths and produced mass destruction.

The Peace Dove Bombshell Necklace is just one small way that we can make a difference in the eradication of land mines while at the same time allowing us to contribute to the social development of a nation.  A portion from the proceeds of every necklace sold between the International Day of Peace (September 21) and Remembrance Day (November 11) goes to Mines Action Canada while the remainder goes to the artisans making a change through the Rajana organization.  While I hazard to use this site to advertise for companies, Ten Thousand Villages has spent decades providing international communities with a venue to sell fair trade items and I feel their work should be recognized.  If you’re interested in learning more about Ten Thousand Villages and their fair trade items, visit them at www.tenthousandvillages.ca.  To learn more about the work of Mines Action Canada, visit them at www.minesactioncanada.org.  While it is often hard to read about the horrors occurring in other countries, at times I feel our minds can be eased by trying to make any kind of difference, however small or insignificant it may seem.