The Brawl Over Fair Trade Coffee

The Brawl Over Fair Trade Coffee

Corporate sponsorship is undermining a wide network of democratic, farmer-owned co-ops.


A man holds up coffee beans above a basket for roasting at Giang Lo Duc coffee shop in Hanoi August 7, 2012. Reuters/Kham

On May 20, the country’s oldest “fair trade” coffee company, Equal Exchange, purchased a full-page color advertisement in the Burlington Free Press. It was an open letter to the CEO of the Vermont-based Green Mountain Coffee company, the world’s largest buyer of fair trade–certified coffee. “We wish to congratulate you for your past deeds,” Equal Exchange wrote, “but now urgently request that you withdraw your support for the certification agency Fair Trade USA…in light of its unilateral decision to change the rules of fair trade.”

Equal Exchange’s advertisement drew public attention to an unfolding schism in the world of fair trade coffee. The current feud, which has been gathering steam for years, erupted in September, when Fair Trade USA—the US affiliate of Fairtrade International, which governs the global fair trade system and sets labeling and production standards from its home base in Bonn, Germany—announced its decision to end its affiliation with the parent body. In fair trade circles, this was a high-level divorce, and it reverberated widely. FTUSA, which is based in Oakland, also declared that it would certify coffee produced on plantations and by independent smallholder farmers—a significant departure from a system that restricts accreditation to coffee grown on democratically run, farmer-owned cooperatives, of which there are 360, mostly in Latin America.

FTUSA’s president and CEO, Paul Rice, is blunt about his reasons for exiting the international system. In a May interview with the blogger Julie Fahnestock, Rice depicted the movement as doctrinaire and hostile to innovation. “If fair trade continues to [exclude] the poorest of poor,” Rice said, “it’s really on moral thin ice.” He went on to say: “Don’t we want to democratize fair trade? Don’t we want fair trade to be more than a white, middle-class movement?” As for innovation, Rice declared, “Everyone is innovating. Look at Apple, everyone…. It baffles me that somehow innovation in our movement is unacceptable.”

Fair trade leaders are pushing back. In a message posted on the Coffeelands blog, which is hosted by Michael Sheridan of Catholic Relief Services, Jonathan Rosenthal, a co-founder of Equal Exchange, wrote: “If you choose to look at who is making this decision to radically change the imperfect tool called fair trade, you might admit that it is nearly totally driven by well intentioned white folks in the US with lots of money and big dreams.” He concluded, “This feels like a move right out of the colonial playbook.”

Fair trade coffee has been a valuable experiment, one that has brought concrete benefits to hundreds of thousands of farmers. But it rests upon a fragile foundation, and the corporate embrace of the concept could undo decades of work by activists, consumers and farmers: democratically run, farmer-owned cooperatives may be unable to compete with corporate-sponsored plantations. “The fair trade model provided some protection from the unequal conditions of the open market,” says Nicki Lisa Cole, a sociologist at Pomona College who has studied fair trade. Welcoming large-scale plantations into the model “re-creates the problematic conditions for small producers that spurred creation of the model in the first place.”

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There is no standard historical account that explains the rise and consolidation of fair trade. In an essay he wrote for a recent collection titled The Fair Trade Revolution, Rosenthal traces the concept back to a handful of idealists, inspired by English Quakerism, who launched “Free Produce Initiatives” in 1790 to sell slavery-free cotton and fruit. The Fair Trade Resource Network, a nonprofit educational organization, credits Edna Ruth Byler, who imported needlecrafts by low-income women in Puerto Rico in 1946, as the principal fair trade pioneer. The first fair trade label, Max Havelaar, was created in 1988 under the auspices of the Dutch development agency Solidaridad. Fair trade–certified coffee (from Mexico) soon appeared on the shelves of Dutch supermarkets. Today, Britain is the world’s largest market for fair trade products; the Netherlands isn’t far behind. Fair trade sales in South Korea and South Africa are growing rapidly. In 2011, global consumers spent $6.6 billion on fair trade–certified products. Coffee represents the largest segment of the market, but one can also purchase fair trade tea, sugar, bananas, cocoa and wine, among many other items.

But what exactly is fair trade? As Equal Exchange wrote in its advertisement: “The objective [is] to remove the exploitation from international trade and build a new system to ensure fairness and market access” for small-scale farmers and workers. A milestone was achieved in 1997 with the founding of Fairtrade International in Bonn, which served to unify global fair trade organizations under a single rubric and a single labeling system. Under this regime, producers in developing nations receive a minimum price—a safety net to cushion farmers and producers against market fluctuations—as well as a premium, a separate payment (for example, 20 cents per pound for coffee) that workers and farmers can invest in environmental, educational or infrastructure projects. The Fair Trade Resource Network estimates that more than 1.4 million people in more than seventy countries directly participate.

In the realm of fair trade, Paul Rice has been a controversial and dynamic presence. “Paul is not afraid to think and act on a big scale. That’s one of his great gifts,” says Jonathan Rosenthal, who has known Rice for decades. “And he’s willing to cut any corners to get there. That, to me, is one of his great faults.” Educated at Yale, Rice moved to Nicaragua in 1983, when the Sandinista revolution was in full bloom. He stayed for eleven years, living for most of that time near the Honduran border. In a recent phone interview, he told me that he worked in the fields, helped to create the country’s first fair trade cooperative (PRODECOOP), trained farmers and managed aid projects. Rice was guarded discussing his experiences in Nicaragua, but his old friends (including Rink Dickinson, co-president of Equal Exchange) insist that he was utterly committed to the revolution and even risked his life for it. Indeed, some of Rice’s friends—including the young American engineer and solidarity activist Ben Linder—were murdered by the US-backed contra rebels. Rice downplays his youthful leftism, saying only, “I’m not going to talk about the Sandinistas. I was committed to social justice, and still am.”

In 1994, Rice left Nicaragua and enrolled in the MBA program at the University of California at Berkeley. Four years later he helped to found Fair Trade USA, which was originally a project of the Institute for Agriculture and Trade Policy in Minnesota. (The IATP strongly opposes Rice’s new initiative to certify plantations and small farmers.) The Ford Foundation, which gave FTUSA $1 million in its early years, also provided it with a long-term, low-interest loan of $2 million. In subsequent years Rice worked indefatigably to build the fair trade brand—not only among consumers, but also among corporate and business leaders. As a result of its partnership with FTUSA, Dunkin’ Donuts uses 100 percent fair trade–certified beans in every espresso drink it sells. Today, Fair Trade USA, which is a 501(c)(3) organization, is robust: it works with 740 companies, including Starbucks, Costco, Sam’s Club, Whole Foods, Ben & Jerry’s and Green Mountain Coffee. In 2010 the organization earned $6.7 million in certification fees, an income that many nonprofits would envy.

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For a long time, Rice has felt constrained by the rules of the global fair trade system. At a conference in Boston in 2003, he was booed for suggesting that plantations should be incorporated into fair trade. He believes the current model is antiquated and inefficient, and that opening the sector to corporations will usher in a rising tide that will lift all boats. “We’re all debating what do we want fair trade to be as it grows up,” Rice told William Neuman of the New York Times in November. “Do we want it to be small and pure or do we want it to be fair trade for all?” “For Paul, it’s all about volume,” says Jonathan Rosenthal. “And that means getting the big guys on board.”

It’s a strategy that raises many questions and warrants close scrutiny. Owing to the limited global market for fair trade coffee (which accounts for about 4 percent of coffee exports to developed nations), the 360 farmer cooperatives sell only a portion of their crops—estimates range from 30 to 35 percent—to fair trade networks; the rest is sold to commercial networks at commercial rates. In my interview with Rice, I asked him why he wasn’t focused on perfecting the current system—which would mean bolstering the farmer co-ops by raising the percentage of coffee they sell to the more equitable fair trade networks—instead of bringing in new supply networks from plantations and small farmers.

Rice’s response was that large coffee companies are determined to mix beans from plantations and fair trade farmer cooperatives in order to label the resulting blend “fair trade.” In order to do so, plantations (Rice prefers the term “estates”) must be brought into the fair trade system through the back door by certifiers like Fair Trade USA—which, since its break from Fairtrade International, is free to do as it wishes. Explains Rice: “The fair trade default response to this was, ‘Can’t you just take the estate coffee out and replace it with co-op coffee?’ Well, that, my friend, is the height of arrogance.” Arrogance toward whom? Toward the professional roastmasters at the major coffee companies: “They’re like alchemists, and they are masters of their universe,” says Rice. “No one tells them how to put together the perfect French roast.” Rice poses a question: Should a roastmaster “listen to some NGO dude who tells him to rejigger his business and re-engineer his blends? No.”

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The response from the fair trade activist community has been fast and furious. Equal Exchange has been at the forefront of the charge, in ways both strategic and pedagogical. The company’s full-page ad in the Burlington Free Press, which urged Green Mountain to stop doing business with FTUSA, was a quixotic attempt to deprive Rice of his biggest customer. Equal Exchange says Green Mountain is FTUSA’s “largest single source of revenue and a critical pillar of support.” (A Green Mountain spokesperson told me that the company will maintain its ties to FTUSA.) Equal Exchange is also circulating a petition in support of “authentic fair trade,” which at press time had garnered more than 8,000 signatures and backing from 550 organizations. (Like many in the fair trade activist community, Equal Exchange is worried that consumers will be misled by a “fair trade” seal that masks corporate involvement; hence its desire to highlight farmer co-ops.) Meanwhile, Rice is circulating his own petition in support of his initiative, which is called “Fair Trade for All”; signers include John Mackey, the CEO of Whole Foods, and Arturo Rodriguez, president of the United Farm Workers of America.

Much of the anger directed at Rice emanates from his unilateral decision to exit the global fair trade system, which prides itself on its democratic, inclusive structure and its historical roots on the left. Indeed, fair trade producers will soon occupy half the seats on Fairtrade International’s rulemaking general assembly. (Rice’s split with the parent organization has been messy: Fairtrade International claims that FTUSA still owes $1 million in membership fees; Mary Jo Cook, chief impact officer of FTUSA, says the fees were too high and that “our fees for 2011 are still under discussion.”)

Rice’s critics say they were taken by surprise when FTUSA left the parent organization: Merling Preza, who helped to found PRODECOOP along with Rice, told Coffeelands blogger Michael Sheridan, “It hit us like a bucket of cold water.” Says Matt Earley, co-founder of the cooperatively owned wholesaler Just Coffee in Madison, Wisconsin: “The way that FTUSA did it was absolutely undemocratic, and it just flies in the face of what we all consider a broader fair trade movement.”

For Rice’s critics, extending certification to plantations and small farmers is tantamount to a betrayal of core principles. “Cooperatives cannot compete with plantations on the economy of scale,” says Earley. “They can’t compete with them in terms of what they are paying their workforces.”

Rice insists that he cares deeply about the fate of the 360 farmer cooperatives. “I am not going to be the guy who abandoned co-ops,” he told Sheridan. Rice’s effort to expand the fair trade model is currently limited to three pilot projects—two of which, in Colombia and Costa Rica, involve small farmers who are not in cooperatives, while the third, in Minas Gerais, Brazil, involves an estate. Rice is quick to defend that estate, Fazenda Nossa Senhora de Fatima, which has between seventy-five and 110 workers on 568 acres. “It has two amazing owners who are pioneers of organics,” he says. “Those owners have demonstrated a deep commitment to sustainability and to their workers. Fazenda is a natural fit for us.” (Rice is planning other pilot projects as well.)

Moreover, Rice has rolled out a proposal to protect at least some of the co-ops that could suffer under an expanded system that includes corporations and plantations. It’s called Co-op Link, and the goal, he says, is to fortify some of the larger cooperatives—the ones that are likely to sell beans to Green Mountain, Starbucks and Costco. Several of these projects are under way in Latin America, Africa and Asia, and over the past five years, Rice has assembled powerful institutional actors to co-sponsor them: the US Agency for International Development, the Clinton Global Initiative, the Kellogg Foundation, the World Bank and Walmart. But what about the 300-plus farmer co-ops that are not a part of his Co-op Link scheme? Rice doesn’t say, though he admits that many of them are in precarious shape.

Not everyone in the fair trade world is resolutely opposed to expanding certification to plantations and small coffee farmers. Some prominent fair trade actors—who won’t speak on the record—share Rice’s concern for the millions of small farmers whose beans cannot be certified because they are not organized into cooperatives. But those same people are skeptical about Rice’s ties to large corporations, and they recoil from his sharp-elbowed tactics and relentless demeanor. Their skepticism is warranted: in his zeal to push ahead, Rice has sent misleading signals about his timeline, implying that his pilot projects are simply experiments and that they’ll be monitored and assessed by various stakeholders. “I think it will work, I hope it will work,” Rice told the blogger Julie Fahnestock. “But if it doesn’t work, we won’t continue it.”

But Rice is moving fast, and the train has left the station: Whole Foods is already purchasing beans from FTUSA’s Brazil pilot project for one of its espresso blends. (Rice hastens to point out that Whole Foods is paying the fair trade premium, which he says enabled Fazenda’s workers to obtain dental and eye care recently. Indeed, FTUSA insists it will uphold the Bonn standards in terms of a minimum price and premium paid to farmers.) Green Mountain Coffee, which prides itself on its social and environmental responsibility, has adopted a more cautious approach: it, too, will buy beans from the pilot projects but, in the words of its fair trade coffee buyer, Ed Canty, the company won’t label the beans as fair trade–certified “until we have evaluated the impact of these pilots at origin.” That is to say, until the dust from the current brawl has settled.

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Some fair trade experts, such as the Washington State University sociologist Daniel Jaffee, see parallels between the organic agriculture movement of the 1960s and ’70s and what’s taking place in fair trade today. In both cases, standards were lowered or altered to pave the way for corporate involvement. Jaffee notes that what happened to organic agriculture is “a cautionary tale of label dilution and corporate capture,” and it could happen again to fair trade coffee.

Observers predict a protracted struggle ahead. “I don’t see Fair Trade USA caving in,” says Michael Sheridan, whose Coffeelands blog has become a vital forum for discussion on this topic. “It is very committed to its ‘Fair Trade for All’ vision. I don’t think surrender is in Paul’s DNA.” Equal Exchange and its allies are also determined to press on and articulate why they believe a model built on democratic, farmer-owned cooperatives is vastly preferable to one based on privately owned plantations.

The current controversy amounts to a “battle over the soul of the seal,” says Jaffee. Indeed, shoppers will soon be confronted with a plethora of labels. In the past, there was a single certification label for fair trade coffee in the United States, that of FTUSA. Soon there will be at least four labels (and possibly more): Fair Trade USA’s; a label that Fairtrade International has introduced into the US marketplace; a label from the Institute for Marketecology in Switzerland; and a “small producer’s symbol” organized by the Mexico City–based nonprofit FUNDEPPO, which represents the old-line cooperatives in the fair trade system, and which Equal Exchange and other progressive companies have agreed to use.

Further splintering the fair trade coffee scene in the United States is the rising number of progressive companies that have chosen to bypass certification altogether. Some are building their own fair trade brands and posting the relevant information—about the prices they pay and the co-ops they work with—on their websites in an effort at transparency.

Matt Earley and his colleagues at Just Coffee in Madison ended their relationship with FTUSA in 2004: “We saw almost all of this coming nearly ten years ago—the pandering to corporate coffee, them wanting to change their rules to dumb down standards in order to get the big boys more involved.” Earley is fervently devoted to fair trade, but he’s decided to do it on his own terms, outside the certification model. His website lists eighteen coffee cooperatives with whom he has a business relationship. Among them is the Yachil Xolobal Chulchan cooperative in Chiapas, Mexico, which has 1,552 members in seven autonomous municipalities run by the Zapatista revolutionary movement, and which has endured repression at the hands of government security forces and paramilitary groups. Just Coffee pays the cooperative $3.03 a pound for its beans—nearly double the floor price guaranteed under the fair trade system. “We are committed,” Earley says, “to paying farmers a better price than they would receive almost anywhere else.”

In solidarity with the farmer cooperatives, Earley has also decided to embrace the small producer’s symbol—yet another reminder that politically conscious consumers had better scrutinize the fine print on the label. A precarious but worthy experiment is now under threat. Bring your reading glasses to the supermarket.

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