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Datamyne Blog

Covering trade & transport, with tips on using import-export data to advantage

Fair Trade: Sustainable Trend?

Category: Trade Policy

Consumers are willing, but divorce divides the movement

by Bill Armbruster, blog anchor

Poverty has historically been the lot of small-holding farmers in developing countries. The fair trade movement seeks to change that by appealing to global consumers to pay a premium for some products with the promise that the extra money will go to the workers at the bottom of the supply chain. Generally, this means better wages and working conditions and/or funding for development projects in the producers’ communities.

“Fair trade at its core is about using trade to help people lift themselves out of poverty in ways that are economically, socially and environmentally sustainable,” says Mary Jo Cook, chief impact officer for Fair Trade USA.

The fair trade movement began in Europe in the late 1980s. The US organization began in 1999. Premium payments by US companies were a piddling $102,612 that year. In 2011, they totaled $21.9 million, with coffee beans accounting for $17 million, or 78%, followed by produce, cocoa, sugar, and tea. These figures and more are in the Fair Trade USA 2011 Almanac.

The five countries with the greatest number of fair trade producer organizations are Peru, Colombia, India, Kenya, and Mexico.

Companies that buy fair trade certified products pay community development premiums on top of a fair trade minimum price (or, if higher, the market price). The premium for coffee is set at 20 cents per pound, for instance, with an extra 30 cents for organic coffee. The premiums provide producer organizations – usually farm cooperatives – with funds that they invest as they see fit in such projects such as schools, healthcare facilities, and clean drinking water.

Fair Trade USA’s Cook acknowledges that anybody can use the words “fair trade” together.  However, Fair Trade USA and its international counterparts can sue companies that claim to be fair trade but are not selling products that have been certified. Its website lists scores of companies that use certified products, from tiny brand holders to giant retailers.

Alas, the fair trade movement is now coping with a messy divorce: Fair Trade USA withdrew from Fairtrade International last December 31, due in part to the US organization’s decision to offer licenses to large coffee plantations. The international organization works only with small farms.

Also at issue is Fair Trade USA’s decision to lower the threshold to products with just 10% certified ingredients, compared with the international group’s 20% minimum.

Fairtrade International uses a third-party group called Flo-Cert to certify that farms meet its standards. Fair Trade USA still accepts Flo-Cert, but has a new partnership with Scientific Certification Systems. The international group is creating its own legal entity in the US that will begin operating later this year. Meanwhile a North American fair trade stakeholder council has formed to clarify the movement’s common vision.

Theoretically, companies could register with both organizations, although they would have to pay two licensing fees.

Starbucks, which last year purchased 34.3 million pounds of fair trade certified coffee, 8% of its total, says it is in active conversation with the leadership at both groups “to better understand the implications of the split and evaluate any potential impact on our business relationships in order to best support our goals.”

Sean Greenwood, spokesman for fair trade booster Ben & Jerry’s, considers both sides: “FTUSA is looking to bring more businesses into the fold. The criticism is that if you open to a broader audience, do you weaken the model?” he says. But, he adds, “lowering the threshold so you can triple the amount of businesses that can be involved … isn’t that better for farmers?”

Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.

Date posted: May 3, 2012

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