Coffee and Fair Trade

Hello, my name is Miranda Kraus, and I’m a coffee-holic. Ever since I thought it would be “cool” and “adult-like” to start drinking coffee my freshman year of high school, I’ve developed a physical and psychological need to drink at least a cup every day. Frighteningly, I’m not in the minority. The National Coffee Association reported that 54% of Americans over the age of 18 drink coffee every day. The United States alone buys more than 22% of world coffee imports, which shows an interesting wealth polarity between the consumers and producers of coffee. Coffee is the second most valuable commodity exported from developing countries, and in many countries, make up over 50% of their export earnings, thereby being a vital part of their economy. It is important that these developing economies can expand and thrive. This is exactly how Fair Trade comes into play: “to empower family farmers and workers around the world, while enriching the lives of those struggling in poverty.”

The characteristics of Fair Trade include a price floor, a price premium, and certain environmental and structural standards. The price floor for coffee, which is currently $1.40 per pound, is meant to cover costs of sustainable production and give producers a more livable wage. At times where the market price is higher than $1.40, buyers guarantee to pay 20 cents higher than the New York market price. This promise to pay higher than market price also reduces the risks faced by producers, because not all of the coffee will be eligible to be sold as Fair Trade. In fact, in 2012, 430,000 metric tons of Fair Trade Certified coffee was produced, but only 30% was actually sold under Fair Trade conditions. In addition, coffee consumers pay 20 cents per pound higher than the natural sales price. This is a sort of social premium because that extra money is given to the farmer cooperation to democratically decide how to spend the extra money. Most is used on investments to increase farmer productivity, but the money is also often used on infrastructural developments and education within the producer’s town. In order for a producer to become Fair Trade Certified, it must adhere to a variety of labor and production standards, primarily to ensure environmental sustainability. For example, producers are prohibited to use harmful agrochemicals and genetic modification and possible and work toward more natural methods of growing. To ensure this, producers must send environmental impact statements to Fair Trade International.

Of course, there are critiques of the Fair Trade model. According to the Stanford Social Innovation Review, Fair Trade doesn’t actually alter the circumstances of the poorest producers in the community. In most developing countries, especially in South America, the poorest producers tend to be migrant laborers who do not have the resources to own land, meaning that they are unable to join a Fair Trade Certified cooperative. Many developmental economists argue that Fair Trade should expand the model to serve this population, but nobody can agree on exactly how to do so. In addition, the high cost of becoming Fair Trade Certified inhibits a less well-off farmer’s desire to sell at a Fair Trade price. Fair Trade Certification costs about 3 cents per pound, which can make a huge difference to producers that are barely getting by. Despite the flaws of Fair Trade, I believe that the model is very important in raising social and environmental awareness of the supply chain that has the potential to evolve into truly becoming an aid to alleviate poverty.