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I was sent an interesting thesis analyzing Fairtrade (i.e., FLO) in coffee in Laos.

The chapter titled Economic Sustainability contains the following information:

In addition to the overload of work the farmers must invest to gain 34 cents per pound extra, they also have to pay the Fairtrade Certification fee of US$3,460 per co-op (Euro2,378) per year and the administration fee and other fees of around US$5,000 per co-op which is not paid for by buyers (Wilson, 2006; Fridell, 2007B). Moreover, to gain the 15 cents per pound extra for organic coffee, they have to pay the Organic Certification fee of US$3,000 plus other administration fees of US$6,000. There are only 500 farmers in the co-op (JCFC, 2008), hence, it costs each farmer about US$35 to keep the certifications up to date.
This indicates that regardless of the higher gross incomes that result from higher Fairtrade prices, there is no guarantee of a positive net household income for these farmers who are charged the high costs of foreign inspectors and certification.

If these figures are correct, it costs this co-op (JCFC) over US$17,000/year to maintain both Fairtrade and organic certification. At a combined premium of US$0.20/lb it means the co-op must sell about 42 tons of coffee just to recoup the cost of certification out of the premiums paid

The thesis also reports that the per-capita annual income in the region is US$580. This means that co-op members spend the equivalent of about 7% of their annual income to pay for certification. Many farmers report that they won't join, or have dropped out of, the co-op because the amount of work involved to meet Fairtrade standards for quality is not worth the extra effort involved.

Can anyone tell me how this is "Fair" trade?

Tags: FLO, Fairtrade

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Looks like this is in my neck of the woods and organic certification appears to have been paid for by NZ Aid.

 

http://cafelao.blogspot.com/ the coffee is bought by http://www.obscura.net.au/origin.html. I wonder if problems have stemmed from being spun off from http://jhai.org/successes/ http://www.cnntraveller.com/2009/11/12/laos-how-to-make-a-better-cu... "The JCFC now involves 550 households in 12 Bolaven villages, and revenues in 2008 stood at $260,000, 10 times more than in 2004. The vast majority of this money goes back to the farmers, who are able to invest in new homes, tractors and education for their children."

IB -

The problems are not from having been spun off. The challenges are inherent in the Fairtrade model.

You quote one pervasive misunderstanding of the Fairtrade process, "The vast majority of the money goes back to the farmers ... " While it is true that the co-op purchases the coffee from the farmers, paying them the Fairtrade minimum, the premium that gets paid goes to the co-op and is typically used to cover overhead and invest in infrastructure to increase production.

There are far more subtle forces at play here that rarely get looked at or reported. One thing that most people don't understand is that the amount of labor, water, and energy required to produce coffee to the Fairtrade quality standard is significantly greater than that which the farmers are normally used to.

In fact, the labor demands (as reported in the thesis) are so much greater that coffee farmers now spend a significant portion of their income on food, whereas before they would grow it themselves and hunt and fish for it. Apparently, the price of rice has trebled in the last few years. Thus, while there has been a rise in income, an unintended consequence is that now the farmers are dependent on the world food market. Whereas now they might be making more than the per capita income, they are working far harder for it and many find themselves with expenses they never faced before - and are, in actual fact, poorer for it.

There are other trade-offs - while the farming practices may be organic, the associated production practices may not be sustainable because of the increases in water usage and energy. I am sure these figures are not properly accounted for in the the ASEAN figures you link. Another way in which they are an example of poor statistics is that they don't indicate how many farmers are involved from year to year and don't include the number of dependents. So, we don't know anything about how much of the growth in sales is due to an increase in the number of farmers.

These are just a few examples of why the situation is not simple: there are no simple answers, no simple fixes. The blindness is built into the system, which is a lot about forcing western consumer culture values on to farmers in producing countries. Furthermore, the social and economic contract is essentially the same worldwide: it is culturally insensitive and therefore cannot be equitable.

The real issue is that most consumers don't take the time to go an look for themselves in any depth or examine the situation with any critical facility. We want to believe that by spending a few extra bucks at the grocery store that we can make a difference in the lives of farmers. Sometimes it works that way - but many times it does not. Who benefits most from Fairtrade (in coffee)? The companies near the top of the supply chain who, between them account for more than 80% of the increase in value of the commodity once it is exported.

I maintain that while "Fair Trade" as it is currently constituted by FLO/Fairtrade, Rainforest Alliance, et al, may A part of AN answer, it is not THE answer. However, the institution of Fairtrade has garnered so much weight and prestige from unthinking adherents that other legitimate attempts to address the very real issues at stake are not given a chance in the market because of the suasion of an informal "moral mafia" that has arisen around Fairtrade and organic certification.

 

"I maintain that while 'Fair Trade' as it is currently constituted by FLO/Fairtrade, Rainforest Alliance, et al, may A part of AN answer, it is not THE answer." So what you going to do Clay be part of an answer, invent a new answer or not be part of an or the answer?

IB -

Please take a look around at my work and writings here and other places and you will know the answer to that question. But - the answer is very clearly that I am working to find alternative solutions to ethical supply chain certification in cocoa that address what I perceive to be the drawbacks in the existing Fairtrade model. I recently registered the domain name www.cocoassure.com in support of my efforts in this regard.

One of the necessary steps I see is to shake people out of bland complacency and acceptance. Most people (if you asked them) will think that "the problem has been solved" and Fairtrade is the solution.

Part of what I am trying to do is to get people to acknowledge is that there is still more work to do in finding ways to approach the issues at hand.

-- Clay

PS. Also, I find it frustrating that you know my name and I don't know yours. It's not listed on your web site that I can find and none of the articles linked to mention your name. Care to share?

 

Sounds like a really cool idea.

From what I've seen bland complacency is all that most people can manage, unfortunately. :-( Yet they are empathetic and in my experience do want to know their products, especially premium products, where they can afford to invest time and choose, and may wish to appear generous or altruistic, are sourced in an ethical, healthier and or sustainable manner.

One thing we are quite keen on is optimising labelling. Fair trade, etc. in its current guise is great for advertising raw materials. Yet for us, none of our products consist of a single certified raw material which either leads to a huge very detailed ingredients list which can be economically unfeasable due to package printing limitations (and unwieldy and failure) or failure to get leverage for a cost.

What we know is that if ingredients are presented well consumers are very interested in local sourcing, and interested in organics and fair trade. This is tempered by quality and price considerations. Local produce is usually cheaper, fair trade more expensive, and organics of variable quality, supply and more expensive.

I've found Jhai Coffee Farmers Cooperative's email address, I'll flick them and email asking a few questions and see if we get a reply on funding sources and their opinion on fair trade etc.

IB - 

Thank you for asking. I am already in touch with FLO about a far more fundamental issue. One of the supposed "advantages" of Fairtrade is traceability up the supply chain. If that's the case, it should be a simple matter of putting together a report on how much cocoa was purchased, by country, and therefore how much was paid in the way of the social premium.

I asked for this information over a month ago and am still waiting for an answer. True, I was told that they were in the process of preparing their annual report and that took precedence. However, figures like this should be readily available, IMO.

Contrary to your belief, there is no simple explanation. The issues are far more complex than most people ever stop to consider.

 

By "simple explanation" I'm referring to the set of calculations you quote and the inherent assumptions. In the public JCFC accounts 2004-2008 there is no mention of certification costs and the simple explanation looks like they have or had grants to cover those costs with no costs to farmers whatsoever. It looks extremely likely, from public documents, that NZ Aid has provided a grant for the organic certification, which appears ongoing and another unspecified US? NGO provides or provided fair trade certification. http://www.adb.org/Documents/Reports/Consultant/40105-LAO/40105-LAO... initiated by Oxfam Australia.

http://www.die-gdi.de/CMS-Homepage/openwebcms3.nsf/(ynDK_contentByKey)/ANES-7YUGRA/$FILE/Studies%2051.pdf

IB - 

The first link is to a 223 page document. Please let me know which page(s) you refer to in this document. Likewise, the second document is 210 pages long. Please provide the direct references.

I don't think that it is necessarily a good thing that an NGO pays for certification ... even when there is a commitment to cover the cost of certification in perpetuity. This is rarely the case (in my personal experience) as most NGOs project time horizons are very short, often only two years, with the stated goal of improving things to the point where the co-op gets to the point where it can cover those costs on its own. Then the NGO leaves, usually taking the market/buyer with them along with the $$ and technical support necessary to sustain progress. To be truly effective, program support has to last at least a decade and preferably longer - not just "appear" to be ongoing.

What the short term commitment to pay for certification does is create artificial, unsupportable, conditions. At the end of the commitment period the co-op must either be in a position to cover the costs themselves, lose their certification, or go begging for further subsidies.

I can also argue that having NGOs cover the cost of certification is anti-competitive because the certification bodies see no need to lower costs. Creating a culture where the answer is NGO support is not a good solution, IMO.

Hi Clay, 

Having been involved in coffee certification for quite some years (various schemes) and not having found THE solution yet, I was wondering if you could share some of the concept you're developing under the cocoassure domain. In coffee, companies also have developed their own approaches, Starbucks, Nespresso, Intelligentsia coffee etc. Some have blended existing systems (like Fair Trade) with personal believes and arrangements with suppliers (Dean Bean, Uncommon Grounds, George Howell and many others). All off them have developed specific relationships with their suppliers. This relationship building in cocoa seems to be more complicated, perhaps because traders don't want to disclose the exact origin of the cocoa bean? What have you identified as the core elements to make the cocoa market more fair for farmers and their families? 

Best regards

Rodney Nikkels

 

 

 

Hi Rodney,

Many would argue that cacao is lagging behind coffee in many ways... certainly the kinds of specific relationships you are talking about with coffee suppliers/farmers is also happening with cacao. Shawn Askinosie of Askinosie Chocolate is a great example. He works directly with the farmers, profit shares with them and has other associated projects and commitments to farming communities from whom he buys. Taza is also using Direct Trade as are many other artisan makers.

My hope is that in ten years, these kinds of models and others are taking up more space and accounting for the purchasing of more and more cacao. Unfortunately right now, the makers who are doing the right thing for the farmer and the farming communities are barely a drop in the bucket when it comes to overall chocolate production, but the trend is hopefully in the right direction. This is where education comes in and this is where people who understand some of the complexities and difficulties inherent to Fair Trade *must* speak up and explain what Fair Trade does and does not do.

This kind of education is something I am passionate about doing and currently am doing in Silicon Valley. People are ready for it, and those who are adamant about Fair Trade and third party certification (this was me five years ago) will slowly start to see that there are other ways to address the very real problems they are concerned with and that there are many other models that are doing a better job than Fair Trade (IMHO).

Tip for effective chocolate education: People are more receptive to chocolate education when you also feed them (what I call) "Happy Chocolate". I start with the theoretical and move into the applied in the same session, this keeps people's attention and really has a positive and lasting impact. ;)

Hi Sunita, 

Thanks for sharing your vision, you're right, interesting things are happening in cocoa as well. To be clear, I'm not against Fair Trade, I think the principles are great, but it lacks a quality focus and a pricing mechanism. With all solution built in the "systems" world, you'll start to loose the human connection, and perhaps that is the biggest problem, when trying to solve social and invironmental issue. A value chain so be a chain of values, broader than only financial value. 

I've been organizing tastings in the past and sure, people are more "open" with a piece of chocolate. It seems to affect the brain function! 

Best regards and success with the tastings (I really like the name: chocolate garage!)

Rodney Nikkels

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