Consume This! What Economists Get Wrong about Fair Trade Coffee

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Happy Fair Trade Month!  In October’s Consume This! blog, Keith Brown and Sarah Lyon contextualize the bigger picture behind being an ethical consumer.  Taking on economistic detractors of fair trade in the market for coffee, our authors carefully trace the sociological factors that make ethical consumption worthwhile.  Their essay is a reminder of the richness of sociological explanations and the work that we do.  Enjoy.

– Ashley Mears 

What Economists Get Wrong about Fair Trade Coffee

By Keith Brown and Sarah Lyon

October is Fair Trade Month. Many local coffee shop owners will talk about how fair trade contributes to sustainable development by offering better trading conditions and some environmental benefits for disadvantaged farmers. They will emphasize that fair trade is best understood as a trading partnership based on dialogue, transparency, and respect, that seeks greater equity in international trade.

Inevitably, however, October will also attract the disapproving glare of some well-intentioned, but somewhat misguided, economists who have critiqued fair trade for not living up to its promises of alleviating poverty among coffee farmers.

As scholars who have worked alongside fair trade farmers, lived in their communities, and who have interviewed fair trade advocates and consumers, we know that this form of trade is not perfect. In fact, we have both written elsewhere about the many problems associated with fair trade. Nevertheless, fair trade is still more sustainable than the status quo. We seek to clarify five myths that economists perpetuate about fair trade.

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Family members pick fair trade coffee in Guatemala.

 Myth #1 – Fair Trade certification costs too much for farmers – Economists frequently critique fair trade for promoting a certification system that adds extra costs for farmers. Certification may only cost on average $.03 per pound of coffee, but those costs are significant for farmers who earn a mere $1.60 per pound for fair trade coffee certified by Fair Trade International. However, unlike corporations who might self-certify products using their own, internal standards, fair trade certification is independently regulated according to requirements that are regularly revised to adapt to the changing realities of agricultural production. This is why it costs more. In exchange, certified producers gain access to a consumer market that recognizes and trusts the fair trade mark. Further, organizations like Fair Trade International help subsidize certification costs for the smaller landowners who are new to the fair trade market. And some progressive fair trade organizations such as the Small Producers’ Organization are able to pay $2.20 per pound of fair trade coffee, thus making the certification costs even less of a burden. Global demand has not yet met supply, and this is a problem within fair trade, but farmers continue to seek fair trade certification because they feel it is in their best interests.

Myth #2 – Fair Trade does not help the poorest of the poor – Economists correctly note that most fair trade coffee is grown by small-scale farmers. This means that migrant workers who pick coffee by hand and who often do not own their own land are not guaranteed any fair trade benefits. However, there are two problems with this critique. First, research shows that migrant workers benefit from the increased economic activity (jobs, pay increases) generated by fair trade, producer-owned cooperatives. Second, members of farmer-owned cooperatives still experience food insecurity and often struggle to keep their children in school. Fair trade is part of a multi-faceted fight against rural poverty that aligns with the efforts of more traditional international development agencies.

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Coffee beans that are being processed and washed in a pulping machine that was
funded with fair trade premiums in Matagalpa, Nicaragua.

Myth #3 – Fair Trade creates incentives for farmers to grow too much coffee – Economists hate price floors, and often argue that fair trade minimum prices create incentives for farmers to grow more coffee for an already saturated market. Given that coffee is historically one of the most volatile global commodities, this critique is potentially devastating. Coffee’s boom and bust cycles wreak havoc on farmers’ daily lives; they are hesitant to plan for the future and wary of investing in farm improvements that might increase their coffee quality and help them to earn higher prices. However, most fair traders who we have met (farmers, importers, retailers, and advocates) are aware of this issue and strongly encourage income diversification. Furthermore, this argument is based largely on modelling that ignores the lived reality of small coffee producers, most of whom are unable to simply increase production in response to price floors because they lack sufficient land and resources to plant new coffee trees. In light of the current outbreak of coffee rust which has caused more than $1 billion in damages and is decimating coffee farms across Central America and Southern Mexico and the projected future shortage of Arabica beans due to climate change, these fears of overproduction are divorced from reality.

 

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Myth #4 – Fair Trade “dupes” consumers into thinking they are changing the world – Economists and cultural critics often claim that fair trade consumers develop smug notions about their ability to lift farmers out of poverty. They argue that gullible consumers look at fair trade advertisements of smiling farmers and internalize the notion that they are somehow “saving” these farmers from poverty. But these critics have it all wrong. In fact, most fair trade consumers are aware of this critique, acknowledge that fair trade is just one tool to eliminate poverty, and even joke about the fallacy of trying to save the world through buying a cup of coffee. They don’t view buying coffee as an alternative to charitable giving or volunteer work. Rather, since they are going to buy coffee regularly anyways, they might as well choose the type that does some good, however limited.

Myth #5 – Fair Trade certification is not an efficient way to eliminate poverty – Economists seem to assume that fair traders are only working to eliminate poverty through certified trade. However, fair trade is better understood as a social movement that encompasses a broad array of sustainable, poverty-alleviation strategies. Most of the leaders of the fair trade system are aware that certification alone will not immediately eliminate food insecurity or dramatically increase the income of most fair trade coffee farmers. But there is strong evidence that fair trade increases farmers’ incomes, improves local ecosystems, allows farmers to keep their children in school longer, and increases access to health care. Fair traders know that certification is just one tool among many for reducing poverty and empowering producers. Thus, some are increasing consumer demand by certifying fair trade towns and universities, others are improving the standards for fair trade certification so that farmers receive more income, and still others are enhancing coffee quality so that farmers can be paid more than the minimum fair trade prices.

 

Keith Brown is an associate professor of sociology at Saint Joseph’s University. He is the author of Buying Into Fair Trade: Culture, Morality, and Consumption (New York University Press, 2013).

Sarah Lyon is an associate professor of anthropology at the University of Kentucky. She is the author of Coffee and Community: Maya Farmers and Fair Trade Markets (Colorado University Press 2011) and the co-editor of Fair Trade and Social Justice: Global Ethnographies (New York University Press 2010).

Both authors contributed equally to this post.

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