activist notes


Letter to the fair trade movement by activistnotes

By Ian Hussey

[ See also my second letter to the fair trade movement and Wolfville wasn’t first! for examples of related commentary. Other related material can be found on this blog by using the categories and archives scroll-down menus ]

I’ve been thinking about writing this letter for a while. And, recently, I’ve been thinking about walking away from the fair trade movement. The thought still crosses my mind from time-to-time.

I first came across the idea of fair trade when Just Us! Coffee Roasters Coop opened a cafe and roastery in a small converted house in New Minas, Nova Scotia in 1995. I was 15 at the time, listening to punk (real punk!), and reading about NAFTA and the Zapatistas in the nation-state the world now knows as Mexico, and the solidarity of people around the world working with the Zapatistas.

Being a teenager, I was still trying to figure out the world and where I fit in it. I’m still trying to figure that out, haha. Just Us! Coop, particularly Jeff Moore, was my first teacher on matters of fair trade. The fair trade I learned about was synonymous with the coop movement, and values and actions encompassing solidarity, transparency, respect, dialogue, and mutual accountability.

The fair trade I see today does not encompass all, and in some cases any, of these values. I understand that other business models, besides various coop models, work well, too, and can encompass these values. E.g. Oxfam Fair Trade’s commitment to employing people with disabilities and using biodegradable packaging, and Alternative Ground’s general good nature, their participation in Cooperative Coffees, and commitment to the environment. That is not what I’m trying to say.

I wonder about the fair trade movement’s values. And, I wonder about “development workers'” values. I can’t tell you how many fair traders, “global citizens,” and “global educators” I’ve heard drop what the student trade justice movement and others call the H-BOMB. Help. Or similar words or concepts like “support,” “aid,” “assist,” and so on. “We must help producers.” “They need our support.” Etc. I feel like making sarcastic comments, like: “yes, let’s come down from on high and help the lowly Africans. Let’s treat them like children and like objects. Let’s do the same for other ‘developing’ people so one day they can be ‘developed’ like us.” As an organizer, that kind of comment likely wouldn’t be useful in reaching the end I and others have in mind.

Coming up through the ranks of the grassroots student movement, I learned with others in anti-oppression trainings that the H-BOMB signified a paternalistic relationship and attitude toward the people around the world we, as student organizers (some of us radicals), were working with in solidarity. This conceptual paradigm of “helping” goes right to the top of the international fair trade movement, or perhaps it starts there (let’s not get into a chicken and egg discussion).

The Fairtrade Labelling Organizations (FLO) International uses this type of language and attitude toward farmers and workers all the time. It’s commonplace throughout many of their actions. For instance, sometimes I wonder why it took FLO International about a decade to include producers on their board of directors. I wonder why it took over a decade to increase the fair trade floor price. I wonder about signing major multi-national corporations – who have screwed people around the world for decades and are showing no sign of stopping any time soon – to the fair trade label and pushing for volume while forgetting about values. I wonder what kind of signal this sends to people: producers, consumers, activists, coops, 100% fair traders, multi-nationals, and so on.

The H-BOMB is dropped throughout many of the FLO International’s various communications, including the FINE definition of fair trade – the supposed internationally agreed upon definition of fair trade; the supposed authoritative definition of fair trade. So, how do the authorities define fair trade?

(FINE comprises FLO International, the International Fair Trade Association or International Federation for Alternative Trade (IFAT), the Network of European Worldshops (NEWS), and the European Fair Trade Association (EFTA – not to be confused with the European Free Trade Association, who have the same acronym).

The FINE definition:

“Fair trade is an organized social movement and market-based approach to alleviating global poverty and promoting sustainability. The movement advocates the payment of a fair price as well as social and environmental standards in areas related to the production of a wide variety of goods. It focuses in particular on exports from developing countries to developed countries, most notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, and so on and so forth.

“Fair trade’s strategic intent is to deliberately work with marginalised producers and workers in order to help them move from a position of vulnerability to security and economic self-sufficiency. It also aims at empowering them to become stakeholders in their own organizations and actively play a wider role in the global arena to achieve greater equity in international trade” (from the Fair Trade wiki page).

Questions for the fair trade movement or whomever wants to chime in:

1. How alternative is fair trade from free trade as a market-based approach to business?

2. Can we think of more appropriate language besides “developing” and “developed”, and “North” and “South”?

3. Is fair trade about more than a supposed fair price?

4. Are we helping people or working with them?

5. Can you empower someone or give someone power?

6. Do you think others besides Europeans should be involved in the discussion aimed at defining fair trade?

7. Is fair trade just about international trade or is it about trade within a nation-state as well?

8. Do you have other questions for the fair trade movement or other alternative trade movements?

I recently posted a response to some questions students at the University of Toronto had for me about advocating for their school to adopt a Fair Trade Certified Product Purchasing Policy. In response to one of the questions, I remember writing something to the effect that if the university adopted a policy, then they’d have to circulate a Request for Proposals for specific products (e.g. coffee, sugar, hot chocolate, chocolate bars, or whatever). I told these student activists that by law the university’s purchasing manager would need to reward the contract to the business with the lowest bid who satisfied all of the bid criteria, including that the product they would be supplying the university is Fair Trade Certified by TransFair Canada. I told these activists that this meant that a company that is 100% committed to fair trade might win the contract, but a company that is 5% committed to fair trade also had a chance to bid on and win the contract. I’ve been thinking a lot about that response since I posted it. I’m not satisfied with it, at all. I wonder: how much does having a policy in place shift the rules of and the ultimate effect of the local marketplace? Moreover, how can we shift local marketplaces to being instruments for a solidarity economy? And, how does “domestic” and international fair trade fit into that?


17 Comments so far
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Fantastic letter! You bring up some points that have been bothering me too, more so since I am an anthropology student. I see those terms used casually all the time and it annoys and frustrates me!

Comment by Takwana

Ian–you pose some very important ethical questions about the shifting dynamics of the fair trade movement. On the one hand, corporate involvement (such as the adoption of fair trade products by Starbucks) could be considered beneficial, as it broadens the market for fair trade goos, yet I often worry that fair trade is becoming co-opted by these companies who are essentially using it as a survival mechanism because CSR has become a strategic marketing asset. I completely agree that we need to thoroughly examine the discourse associated with the fair trade movement: I too hate the ‘H-Bomb’ and wish that it would be replaced a sense of ‘correcting’ past injustices. This directly ties into the N/S, developing/developed discourse. I have previously used the term Non-Industrial Post-Colonial (NIPC) which I think is slightly more useful, but it too can be problematic. As an IR/International development student, I constantly struggle with finding terms that are both pragmatic and that I feel comfortable with, so let me know if you eventually find one! Don’t stop believin…

Comment by Tori Clark

Your closing comments sound like a great theme for our next Ethical Purchasing Forum. I much prefer the concept of ‘solidarity economy’ to that of ‘fair trade’. I’ve been questioning the value/focus/relevance of ‘commodity fetishism’ in Fair Trade – I think it shifts attention away from Fair Trades larger contradictions – esp. in its watered-down market-driven form – and sets up the ‘helping’ dichotomy you mention above.
I noticed that FLOs 2007 Report identifies [oddly for the first time] LI’s as FLO’s ‘owners’ and Fairtrade Certified Producers as ‘members’ – is there anything constitutionally important in this semantic distinction or are these terms simply interchangeable? [Sorry if I’ve used academic jargon – I’m preparing for Qualifying Exams so my mind is full of it right now!]

Comment by Debbie Dergousoff

Hello Ian,

I actually wrote the Wikipedia definition you quoted in your letter… (I wrote in my free time the wikipedia articles on Fair Trade)

The FINE definition is a bit different:
http://www.befair.be/site/download.cfm?SAVE=1314&LG=1

So please be careful not to blame FINE for my own description of Fair Trade!

P.S. If you want to contribute to the Wikipedia articles… let me know!

Comment by Vincent Lagace

1. How alternative is fair trade from free trade as a market-based approach to business?

Unless you’re referring to “free trade” as a political agenda, then the two only touch each other tangentially.

Fair Trade (as in Fair Trade products) can exist in a strictly free trade environment, or in a much more managed trading regime.

Recognizing this post will be long, I’ll cut this response short, and only say putting free trade and Fair Trade at opposite ends of a spectrum sets us up to ask the wrong questions.

2. Can we think of more appropriate language besides “developing” and “developed”, and “North” and “South”?

Maybe, but there have been all sorts of incarnations of basically the same thing over the years. At the end of the day, will changing the language affect the paternalism you seem to be reacting against? Probably not. Given that, how much thought should be given to semantics here? Not very much, in my opinion.

3. Is fair trade about more than a supposed fair price?

Yes, it can be and it often is. Focusing on the price is ultimately what we seem to communicate most, and it’s the message most easily digested. It’s a shame though, because power, self-determination, etc. for both producers and consumers is much more profound and too frequently overlooked.

Problem is, that’s not an easy message to communicate without coming across like a self-righteous ass.

4. Are we helping people or working with them?

Elements of both…. People are probably most often drawn to Fair Trade more from a sense of charity (wanting to help people less fortunate). I don’t think that’s necessarily wrong either.

However, it’s important that producers have some/equal/more(?) control in the system if it’s to be meaningful.

The problem (in my opinion) with the push to include large farms on the FT coffee registrar was that it was grounded in the logic of the consumer marketplace (tapping into where people already buy coffee) and the desire to help those screwed most royally (plantation workers).

Farmers/co-ops that were already part of the system were almost treated as obstacles to what should be done (or so it seemed to be implied by the proponents), if they were considered at all.

That said, people within the Fair Trade system like co-ops and National Initiatives (and the broader community of activists, businesses, etc) pushed back and rejected the idea.

Anyway, it should be noted here that farmers don’t all have the same understanding of Fair Trade either. For some, it’s just a good price. Others see it as something more profound, and there are even co-op driven programs to redefine Fair Trade for their members.

5. Can you empower someone or give someone power?

Who knows? who cares? I suppose so…. If you have the power to do something, and you relinquish that power to someone else, then I guess you can.

6. Do you think others besides Europeans should be involved in the discussion aimed at defining fair trade?

I think there’s too much good work being done within Fair Trade, from consumer activists, to FT companies, to co-ops, and producers to get too hung up on who should get to say what.

I personally don’t care what the FINE definition is, and there’s no saying anyone else has to either. I understand the need/desire for an established definition, and I’m sure those who created it went at it with the best of intentions (it’s probably one of the best out there).

But FINE’s not authoritative, binding, or anything… so who cares?

7. Is fair trade just about international trade or is it about trade within a nation-state as well?

As a concept, I think it’d be hard for anyone to restrict it to international trade (good luck finding anyone who would).

As a mechanism, it’s easy to put boundaries around it for practicality’s sake.

Trade, domestic, international, etc. is complex, and no single model can be applied to all circumstances. Even with international trade, Fair Trade (as in the certification system) is severely limited. Doesn’t make it wrong though.

As a concept, it plays well to most people’s values (from across the political spectrum), but it’s difficult to define in any absolute terms.

Even just saying, “people shouldn’t be shafted when producing the things we consume” has all sorts of gray areas around it.

8. Do you have other questions for the fair trade movement or other alternative trade movements?

Who is the movement?

“I wonder: how much does having a policy in place shift the rules of and the ultimate effect of the local marketplace?”

Policies can have enormous impact. Particularly when they’re well-crafted, supplemented by education, well-implemented, and flexible.

“Moreover, how can we shift local marketplaces to being instruments for a solidarity economy?”

No idea what this means. I probably could guess what you mean, but it sounds like a throw-away, navel-gazing sort of question.

And, how does “domestic” and international fair trade fit into that?

See above.😉

Comment by Michael Zelmer

Great point, Debbie. I didn’t know that. Good luck with your qualifying exams, and see you soon!

Haha, Michael. Always a pleasure. Almost everyone who quotes the FINE definition usually say it is the authoritative one and the internationally recognized one so, it seems, people do treat FINE with authority. See you in June in Vancouver, I hope. We can continue some of these conversations there over a beer, if you like. You’d better be there!

Thanks, Vincent. Someone told me you do the FT wiki page. Thanks for that work. I’ve seen the FINE definition on other websites, including an Oxfam page, not exactly written as you have it on the wiki page, but close, some times including three paragraphs, and in all cases the word “help” is used and the general slant is parternalistic toward producers. The PDF you sent is the first time I’ve ever seen it not include the word “help.” But it still includes the word “support” and that is the concept I am trying to raise a question about. Are we supporting or working with producers? Similar language can be found throughout the FLO website, too.

And, I’m not blaming anyone, just raising a few questions and hoping for a dialogue. Thanks for sending the PDF and adding to my and others’ resources to think about fair trade in particular and trade justice in general.

Comment by activistnotes

Ian,

Thanks for opening up. I had a lot of stuff to do do this morning (like cleaning up after our Earth Day activities) but crafting a response to your cry for help seemed of tantamount importance.

After your crises in confidence statement, you mention the Zapatistas. A mouse-over shows the word “army”. I think you’d be doing the fair trade movement a disservice if that idea became linked with army.

Clearly I’m playing devil’s advocate here. My point is that a whole shwack of people have never heard of fair trade. Our problem at the most basic level is communication – others call that PR, and it’s a billion dollar industry that we need to tap into and harness for things to really change. Adbusters has had floundering success with PR, but they know where the battle line is.

One of our volunteers posed the question to me as to how to convince the bloke in the pub to buy fair trade, and I really haven’t been able to nail down the perfect elevator pitch in that context. Everywhere I go, I ask if they have fair trade coffee/wine/tea/etc. and always have to explain what it is. So imagine you’re in a busy restaurant with the waitress standing over you asking that question. It’s a simple question. Just keep in mind that most people don’t want to hear that they are evil and just about everyone wants to do good.

SO, to your numbered questions:

Q1. How alternative is fair trade from free trade as a market-based approach to business?
A1: I’m no economist, I just play one on TV. After watching the documentary The Corporation, I learned about externalities, and it’s about time everyone did (learn about externalities, that is). Fair Trade incorporates those and is without question a more humane system then whatever past “market-based” approaches have been taken.

Q2. Can we think of more appropriate language besides “developing” and “developed”, and “North” and “South”?
A2: Yup. I use “rich” and “poor”.

Q3. Is fair trade about more than a supposed fair price?
A3: Yes. Getting those products to rich countries means transportation methods that add to the problem of Climate Change1. That’s where the Greenheart Project comes in.

Q4. Are we helping people or working with them?
A4: Are you serious? Am I working with the fair trade and organic Argentinean vineyard La Riojana in producing their wonderful 2007 Famatina Valley Malbec? Where’s my check?! I’m helping to promote them.

Q5. Can you empower someone or give someone power?
A5: If I was the mayor of Tokyo and mandated free community baby carriages and a year paid maternity leave, then which is it, empowerment or a gift? Nit enough time to go into it.

Q6. Do you think others besides Europeans should be involved in the discussion aimed at defining fair trade?
A6: Local mandates for office use of fair trade paper/coffee/tea or company CSR initiatives need to be implemented and those definitions don’t need Europeans, especially in Tokyo. How about from the point of producers in poor countries?

I’m out of time here. Talk again soon.

Chris Kozak
http://www.greenheartproject.org

1 – Formally known as Global Warming. Stronger hurricanes, flooding, and extinction are examples where the old name doesn’t properly explain the complexity or myriad of problems associated with more Greenhouse Gasses in the atmosphere.

Comment by Chris Kozak

I just finished writing a research paper on more or less these very questions.

Debbie, your point on FLO structure is very important. “Owners” and “members” is telling language.

1. How alternative is fair trade from free trade as a market-based approach to business?

I would say that in terms of the commodity chain it isn’t that different in most cases. I think that the co-op to co-op model is different and this is where I place my faith in FT.

2. Can we think of more appropriate language besides “developing” and “developed”, and “North” and “South”?

I also like rich/poor because it goes back to the issue of global inequality and class. If we are to address the paternalism in the Fair Trade network we need to move away from development speak and towards a more politicized vocabulary like rich/poor, oppressed/priviliged. This is true esepecially as workers and organizers in the North.

I aggree with Michael that there is nothing wrong with the altruistic motivations of some who are drawn to FT. What I think we do need to examine are narcissim and paternalism, which I think sometimes explain why people are drawn to fair trade.

3. Is fair trade about more than a supposed fair price?

Yes, when local level co-op development is successful it certainly is. Farmers are in FT for the access to a higher price.

4. Are we helping people or working with them?

The perogative of FT should be the development of a solidarity economy in the North and the South; solidarity and help.

5. Can you empower someone or give someone power?

No people must empower themselves, but access to more reseources and capital can certainly help people stand up for themselves.

6. Do you think others besides Europeans should be involved in the discussion aimed at defining fair trade?

The current structure of FLO generates and subsidiaries is paternal in nature due to the fact that producers do not have the same amount of influence in the governace structures as Eurpoeans and North Americans. The work of farmers through the CLAC and other organizations is attempting to address this imbalance. If we are serious about addressing paternalism we should listen to what farmers are saying in their own associations such as CLAC, which are independent of FLO.

7. Is fair trade just about international trade or is it about trade within a nation-state as well?

Fair trade has to be both in my mind. Otherwise the whole canon of international development binaries is perpetuated.

8. Do you have other questions for the fair trade movement or other alternative trade movements?

How does FLO and subsidiaries define solidarity?

Comment by Patrick Clark

Hey Ian,
Awesome post. The intention of helping someone is definitely welcome by most people, even in a paternalistic context. Problem is, like a lot of forms of market intervention, it is often counter-productive. Off the top of my head, I can think of two potential (and possibly existing) problems with “helping” developing countries through price floors. The first is if the demand of coffee slows for any reason, fair trade producers will be stuck with over supply. Secondly, if there are better opportunities that use the advanages of their terrain better, the price floor will mask that opportunity because they don’t realize that what they are producing actually isn’t the best use of their land. For instance, there is a grain shortage – do you think coffee producers with a price floor have any incentive to switch crops? Possibly not.

It is always good to help people, I think. But China and India aren’t increasing the standards of living of their citizens through our help. Case after case after case shows that price floors and price ceilings can have devastating effects.

Comment by Chris (Igor)

Hey Chris,

Be careful not to confuse a general subsidy with a price floor on a niche market.

Fair Trade producers don’t only supply the Fair Trade market. In fact, they usually operate on several markets simultaneously.

In a situation where demand for FT would slow (presumably because the FT coffee would be more expensive), surplus products would be sold through the organic, specialty, conventional, etc. markets.

That said, there’s no reason to expect the floor price has a significant impact on retail price… at least with coffee.

If the price floor acted as a subsidy is expected to, and creates an incentive to over produce (which it doesn’t necessarily), then the surplus product would probably be sold through other markets as well.

With respect to crop switching, you need to keep in mind that switching crops isn’t as easy as it sounds. It requires inputs, good market knowledge, time and money. With coffee, there’s a three year time delay between planting and harvest… that alone is a significant disincentive to radically alter a coffee plot.

Also, it’s not quite appropriate to treat small scale agriculture as following a production logic similar to a factory. Economic models usually do this, and it’s more appropriate for larger farming, but not smaller.

Small scale farmers often balance a number of things on their farm, at least where they can. Coffee farmers don’t just grow coffee… rather, they may grow crops that have different harvest times to provide them with different income streams (and reduce economic risk).

They also use their farms to balance their income needs with their own food security.

I’ve heard a number of economists (particularly profs) who make predictions about the impact of FT price floors. But they’re really just applying general economic concepts that aren’t particularly grounded in the actual relationship between farmers and markets.

Comment by Michael Zelmer

Hey Michael,

Thanks for your comments.

You mention that in the event that FT demand slows, the surplus would be sold on organic and specialty markets. I was actually talking about if the entire coffee industry slows, but let’s say it is the FT market slows and they have to sell onto the organic market. I think dumping onto the organic market is even worse! Both are fairly niche… you’ll end up with the dumping of beans onto the already small organic market which would force the price down for everybody.

I was talking about a slowdown in the entire industry and in such an event the members will be worse off due to the fair trade movement for two reasons: first, the members could blame the movement for keeping them in an industry that wasn’t the best use of their land and time and they weren’t aware of this fact because the price was hidden from them. Say they were in the industry for five years and they could see that the price was going down every year (or at least not up), that’s a clear signal to exit but they would have missed that because you kept giving them a “fair” price. Second, they could blame the movement because it would have kept more coffee growers around the world than was necessary, so the effects of dumping their coffee onto the market will be even more devastating.

Crop switching, although it takes three years to harvest, is not at all an excuse not to switch. It is a disincentive, granted, but can’t be an excuse. I agree that it requires time, money, information. To add to this list of disincentives is access to the technology, distribution channels, skilled labour, special government policies, and of course the risk involved in switching. If we really feel inclined to help, I think we shouldn’t inflate the prices, which adds yet another disincentive to switch, but rather create incentives for them to seek out other opportunities or improve their productivity or differentiate the product by quality. I really don’t think that in the long run we are helping them by inflating prices.

I see no reason why a society based on poor, small-scale farmers can’t improve their standards of living without our help. In fact, the historical evidence conclusively shows that it is best done without our help.

Comment by Chris

Hi Chris,

I think you’re off on a few points.

First, the organic market is considerably larger than the Fair Trade market (speaking of coffee only at this point because I know it best).

Second, it’s not uncommon (in fact it’s smart) for Fair Trade certified farmers to operate on both markets, plus the specialty market, simultaneously anyway. When I said the farmers would sell to the other markets in the event of an FT slowdown (in response to the price floor; which I said is unlikely to happen), it means the mix they’d sell to each market would change.

“Dumping” isn’t the appropriate term to use because it carries different connotations.

Third, all commodity markets experience cyclical price fluctuations. The most recent dip for coffee was from 1999-2003 (known as the Coffee Crisis), which, according to the International Coffee Organization, had world prices (commodity grade, “C” market) at their lowest point in 100 years (in real terms).

Rather than hold people in a market in which they didn’t belong, the Fair Trade floor price enabled farmers to weather the storm until the Crisis ended .

Keep in mind that the Fair Trade coffee market is only supposed to be accessible to small scale producers (through co-operatives/producer associations). This is significant for two main reasons:

First, as I mentioned in my previous post, small scale farmers aren’t usually in the business of strictly producing coffee. Rather, coffee is one part of an overall mix to balance cash income and food security.

From what I’ve observed, this tends to limit the extent they’re willing to expand their coffee during high prices, and the amount of coffee they sub out during poor prices (or if they find a better use for that land generally).

Second, it’s the well-financed coffee operations that work in the manner you suggest. They’re just like normal investments where people see the prices are high, and they expand their holdings by purchasing more land and planting more coffee. When coffee prices drop, they try to hang on (and possibly go out of business) or they eat their losses and move on.

It’s these farms, the ones on the “factory logic” I mentioned before, that have a significant impact on world coffee prices and are a big part of the cyclical nature of the markets.

Prices are high, so there’s a bunch of new planting (often supported by governments and international lending agencies). Three years later, all of their harvests start coming online and the prices plummet to the point that their costs exceed revenue and they have to close up shop.

These larger operations account for about 50% of the world’s production of coffee (only about 10% of the producers), and they are the ones that make the waves in the coffee markets. The small scale farmers are the millions of small rowboats that have few options but to ride those waves.

As for the three-year delay in harvest not being an excuse, note that the most recent period lasted four years. Switching out of coffee (which is expensive due to the investment they forgo by tearing out the coffee trees) would have them harvesting their new crop just about the time coffee prices rebounded (assuming a one or two year lag before they made the decision, and a one or two year harvest delay in the new crop).

Given there often aren’t many alternatives to coffee (even during poor prices; basic grains prices, except recently, are perpetually in the toilet), a small scale farmer ripping out a coffee farm during a cycle is like you now selling off mutual funds that you bought a year ago to purchase gold. It’s too little, too late, and a bad financial decision.

Of course, this discussion has so far focussed only on appropriate response to coffee prices, which doesn’t consider the full ramifications of small scale farmers switching out of coffee.

Coffee (and cocao) have the enviable potential of being grown in a mixed plot using multiple biotic strata. Large farms almost never take advantage of this because they’re trying to pack as many coffee trees in as possible, and the practice works against mechanization (which only applies to some large farms).

Small scale farmers typically rely on this potential though, because it allows them to bolster their own food security and diversify their income.

Tearing out their coffee during temporarily low prices would likely come at the expense of the other crops in that system, unless there’s an alternative crop that can be subbed in. Cacao can be grown alongside coffee, so I don’t know of any other crop that could slot into the role coffee plays in that agro-ecosystem.

Lastly, I’m intrigued by your claim there’s historical evidence that conclusively shows societies of poor, small-scale farmers can improve their standards of living on their own. I’m not disagreeing with this outright, but what evidence could possibly show this conclusively?

Comment by Michael Zelmer

Whoa Michael and Chris, thanks for the great discussion.

Michael, you point out that food security is an important part of producers’ decision-making around what crops to farm, diversity of crops, etc. This is a great point that doesn’t seem to get brought up enough in the Fair Trade movement, in my mind.

The localization / local food / domestic fair trade movement (whatever you want to call it, if those terms in some fashion point to the same political organizing; I know they aren’t mutually exclusive) are more and more using the frame of “food security.” One might say food security is one of the founding principles of this organizing. It seems obvious for these “movements”.

It is a bit surprising, to me at least, that fair traders (I mean advocates in “the North” ) don’t talk about food security more – I’m not saying it doesn’t happen at all. One of the basic reasons for Fair Trade, the movement says, is to alleviate poverty. Poverty is often linked to food, shelter, health – i.e. the most basic security issues (I mean “health” is a very wide and general way).

Sure, I guess one might argue that people who have access to land and relevant resources can grow their own food, or some of their own food and barter for other stuff, or sell some of their crops for a little cash. So though they might not have a lot of cash money, they’ve got some food. Hence, living on a couple bucks a day takes on new / different meaning than it is usually ascribed. Franscisco VanderHoff has argued this before in the couple occasions I’ve heard him speak and had the chance to hang out with him a bit. (He says “don’t blame poverty”, and in that I agree with him. Affluence does more “damage” in society than poverty). VanderHoff’s argument has some validity.

Anyway, fair traders of “the North” encourage producers to plant a diversity of crops, if the producers aren’t doing so already, which often they are, or so many reports indicate. Fair traders also encourage and try to work with producer groups to enable farmers to have the technical skills, if they don’t already have them, to manage a diversity of crops. So Fair Trade is about food security.

I just wanted to emphasize my agreement with your point, Michael. Thanks again for the great insights.

Ian

Comment by activistnotes

Hi Michael,

Thanks for your awesome comments. Ian, thanks for this awesome forum. And yes, I still buy FT coffee – call me a Slacktivist.

Michael – You mention that the organic market might be larger than the FT market, but they are still both niche markets, and so their prices are sensitive – that was my point. Secondly, while current size of the FT market has minimal impact on the commodities market, we have to consider the supply side effects of the concept should it prove more widely successful in alleviating poverty. The inherent problems with price distortion don’t often manifest itself right away, but FT should consider the effects if you want to grow the FT initiative.

If I understand what you write, you mention that the FT floor price enabled small-scale farmers to weather the storm of fluctuating prices and therefore you conclude that small farmers are actually well suited to be in the industry in the long run. Short of natural disasters, I don’t feel that the price of coffee will spike any time soon. My argument is that global output is expected to rise from countries like Vietnam and Brazil. The industry is maturing, and cyclicality is a natural outcome of it, as is decreasing margins, overcapacity, and falling prices. So I maintain that less-efficient farms are not suited to compete in this mature industry. You mention that 10% of the producers account for 50% of production and that creates waves in the industry. That is just industry maturation and unfortunately, the evolution generally won’t go backwards. It is painful for small producers, always.

You also mention that farmers diversify their crops which limits their expansion capabilities during boom years. Again, this isn’t an excuse for them why they need our help. If anything, it’s another reason it is undesirable for them to be in a mature industry because if they do turn a profit during boom years, they will be unable to capitalize on it by expanding. If anything, the fact that they’re diversified is beneficial to their being able to react to the free market because if they voluntarily decide to exit the coffee industry, they would still have income from their other crops.

You also talk about “factory logic” and large mechanized operations. These obviously are more efficient and can still operate at a price that is above the small farmer’s costs. Again, this is a natural progression and I feel that FT causes small-scale farmers to always rely on the benevolence of its consumers in order to operate at a profit. Basically, we are making these farmers dependent on our benevolence (and natural catastrophes that cause the prices to spike). It is unsustainable for a farmer to rely on our benevolence to stay in business, and in fact, as I’ve stated many times before, it is actually harmful.

You mention the difficulties in crop switching as a reason to promote inaction. No one is suggesting to the farmers to rip out their coffee during a cycle. If they voluntarily decide to exit coffee because the industry is no longer growing perhaps they can harvest the last batch and then switch. Or maybe they could pursue a non-agricultural activity. Perhaps they can relocate to the city. Perhaps they can differentiate with quality. Your analogy suggested selling mutual funds that you bought a year ago to purchase gold as a ludicrous investment. You posted on May 7, and since then, the Dow went down and the price of gold has since gone up. This is a typical example of us thinking we know what’s best when we don’t.

Historical evidence shows that societies of poor, small-scale farmes can improve their standards of living on their own. Most objective analysts would credit foreign investment as an overall contributor to Latin America’s postwar prosperity. Not benevolence. China is another good example. Then there is Malaysia, Singapore, Korea, Taiwan, Japan, and Hong Kong. Japan, after the Meiji restoration, is the best example. There were no grants or low-interest loans. On the other hand, if we look at india during the first 30 years after it achieved independence in 1947, we see a country that has received vast resources from the rest of the world, mostly as gifts, that continue to this day. The comparison between Japan during this era and India after independence are as close an example as you can get.

In reading over our last discussion, a lot of what we talk about is whether or not a particular disincentive is an excuse for inaction, or a temporary evil that can be overcome through benevolence. We also talked about whether economic principles apply to FT or not. I don’t see an end to this debate really. I think many people have the same noble objective – to increase the standards of living of the poor. It’s just that our methodologies differ perhaps.

Comment by Chris

Hi Chris,

I appreciate your comments too. I think you’ve raised the level of discussion tremendously, which is good for everyone.

On to the business at hand…. So I’ve come back to this several times because my responses keep mushrooming into big essays, which probably isn’t appropriate here. So I’ll try to contain myself as best as I can.

First, so there’s no misunderstanding, I think Fair Trade should grow, but I don’t think it should/will ever be more than a niche market. It’s a particular structure that’s rooted in some pretty specific market/production conditions.
If it ever becomes a significant percentage of the coffee market, it’ll have to change because it would become too cumbersome in its current form to suit anybody. At least, that’s my opinion.

It’s also my opinion that you’re mistakenly treating the FT floor price as a subsidy, which sends you down the wrong road.

Fair Trade is an alternative market in coffee that is made such by its certification system. Provided there is demand for coffee that internalizes social and economic costs, it doesn’t matter how cheaply Brazil can produce on its big farm… that’s just not what the (Fair Trade) consumer is looking to buy.

Unless you can demonstrate an effect on production, then I don’t think you can bring up the spectre of “inherent problems with price distortions”. Otherwise it’s just a boogie-man argument.

Considering the supply-side effects is important, but I don’t think that’s what you’re doing. Rather you’re predicting effects using a general macroeconomic model, which is another beast entirely.

It’s also not appropriate to look at the entire coffee market as one thing. Most of the commodity-grade coffee Brazil and Vietnam churns out will never touch the specialty market (about 25% of the overall market, as I recall), which is where Fair Trade and most of the organic market is.

Prices within the specialty market can, and often do, exceed the Fair Trade floor… even during price slumps. The issue for small-scale farmers is how they access the higher value specialty markets, and that’s really where Fair Trade comes in.

I’ve met farmers who were selling their coffee at commodity grade prices (only option) who then joined a co-op that was connected to the specialty, Fair Trade, organic, etc. markets and was selling for five times as much with the next harvest. Small-scale farmers can’t access the high value markets on their own… they must organize into firms.

Fair Trade supports producer organizations, which I’ll just call co-ops from now on, though it’s only a subset. Yes there’s a price floor (that’s paid to the co-op, not the farmer), but more importantly Fair Trade reduces the number of intermediaries between co-ops and the roasters who already pay big money for specialty grade coffee.

Through these relationships, co-ops gain valuable market information and resources that help them to make strategic decisions. This includes quality improvements, access to other high value markets, improvements to business capacity, vertical integration of supply chain functions, direct marketing to specialty roasters and traders, etc.

In short, it provides support for democratic, farmer-controlled firms (co-ops) to become powerful economic actors. In the region where I did my own research, a co-op of (now) 2500 small-scale farmers that purchased a dry mill and export license, and was the first to get it all certified organic. This made them the only channel through which organic coffee (which was about to explode) could be channeled in the region.

On a side note, it was mostly the medium and large farms that were forced out of the market in Nicaragua (from what I saw) during the Coffee Crisis, not the small-scale producers. There are a bunch of reasons for that that I won’t get into here, and that’s not to say the small-scale farmers didn’t suffer terribly. But they were more resilient on the whole than the larger producers.

Anyway, the price floor is an important aspect of Fair Trade. But, at least for coffee, the bigger story is support for producer organizations. You mentioned the “Asian Tigers” as part of your historical evidence rural societies improving their standards of living on their own. While I think attributing it all to foreign investment is grossly reductionist, I’d suggest the support Fair Trade gives co-ops in a semi-protected market is not unlike the approach taken by Korea, Taiwan, etc. when developing their own firms.

I completely disagree with your claim that comparing India, a huge, multi-ethnic, newly post-colonial country, with Japan, a then recently defeated, imperial power, is proof of any general development theory. The confounding factors in that comparison are absolutely mind-blowing.
But I’ll try to wrap up quick, because I see I’ve already gone on long.

Your analysis also relies on an immediate time horizon, and externalizes the environmental and social costs of the agricultural model you suggest is inevitable. Fair Trade consumers don’t want these costs externalized, because they have the good sense to know this is short-sighted.

The efficiency of large scale farms drops dramatically well within a decade (sooner in a climate of rising/high oil prices). By contrast, well-managed small-scale plots of the type I previously described can actually improve soils over time. This means an efficiency/productivity comparison between the two varies widely depending on your time scale.

In fact, I’d argue the large scale farming in Brazil and Vietnam is considerably subsidized by factors that are unaccounted for. After all, destruction of productive land is by its definition a squandering of capital.

Not to belabour the point, but I think the equity-gold metaphor is indicative of our differing approaches. Your conclusion was based on short term data and didn’t consider the initial investment nor expected trends (based on investor behaviour). In my opinion, short time horizons and de-contextualized data make for pretty questionable analysis and predictions.

Anyway, as I said before, I think you’ve raised the level of the discussion considerably, and I really appreciate it. There’s a tendency for any group of people (not just Fair Trade advocates) to become insular and self-congratulatory. This is exactly what’s needed to shake the complacency and get people thinking.

Comment by Michael Zelmer

Hey Michael,

Thanks for your comments. I agree that groups tend to become insular and self-congratulatory and I think I’ve learned a lot from our discussion.

For instance, I really had no idea that some people never envisioned FT to grow beyond a niche market. That’s a very important distinction. I also think that under such circumstances, you are correct that many economic principles won’t apply, just as fundraising by selling cookies will never disrupt the baked goods market, nor will the producers need to worry about causing over-supply of cookies as a result of charging consumers 100% more than price that they could buy the same cookie from Nabisco.

I’ve also learned the many difficulties in switching crops and industries and it’s not as easy as many westerners envision it to be. But also, switching businesses in Canada isn’t as easy as many economists imagine it to be, because many aren’t themselves businesspeople. I think it’s fair to say that regardless of industry or geography, it’s a burden to change.

One thing in particular that I admire about the movement is, as you say, it removes the number of intermediaries between grower and roaster. I think there’s a lot of people along the supply chain that have made livings off of their Rolodexes, and aren’t really adding that much value to society.

I guess the discussion on foreign aid, investment, etc. is a completely separate discussion. I will say that subsidies are a sad part of our global competitive marketplace and as you pointed out, Brazil and Vietnam are hardly exceptions (direct or indirect). The United States and Canada are anything but operating in a free trade environment. One of the ideas of FT that I buy into is that it exists within free trade – that it’s an alternative, but we are not forced to buy from fair-trade co-operatives if we choose not to.

The equity-gold metaphor is indicative of our differing approaches but not because we see it from short time horizons and de-contextualize data and you see it from long term horizons. I was just saying that no one has the magic ball to know where the markets are going, and I certainly wasn’t implying that a three-day trend would continue indefinitely.

In fact, again, I don’t think there is a “we” and a “you”. We both have similar objectives for the coffee growers, and we both have objectives for our personal lives. There are no saints among us, and so we can’t see the other side as “sinners”. But humility isn’t an excuse for inaction, and on that note, I applaud anyone who steps out of their boundaries to dedicate their talents and resources towards extending compassion to everyone, especially those who need it the most.

Comment by Chris (Igor)

Hi Chris,

Thanks again for another excellent and well written post!

I couldn’t possibly add anymore, nor have said it better than you already have.

Comment by Michael Zelmer




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