How fair is Fair Trade?


Jeff Kubina

The fairness of Fair Trade coffee is debatable.

At the core of the Fair Trade ideal is the idea that coffee farmers should receive a fair price for the coffee they grow and export, without having to deal with shady middlemen or corporations that would exploit them.

The purpose of the various Fair Trade organizations around the world–the majority of which are part of Fairtrade International umbrella organization–is to ensure that growers are paid a fair market price for the goods they provide, along with ensuring that regulations against child and forced labor are followed.

Despite the alleged good that Fair Trade organizations do, there are major downsides present within the system itself, such as what the growers actually make, what the consumers are charged, and the fact that Fair Trade is, at its heart, a marketing organization with a good angle, among other problems too numerous to discuss in a short space.

The price of a bag of Fair Trade certified coffee can range as high as $30 a pound, while a pound of coffee from Maxwell House costs about $5 a pound after sales tax. The average subsidy for a grower in a Fair Trade certified commune per pound of coffee produced is about $2.35 ($1.50 on the general subsidy, plus an extra $0.80 for the market pricing).

For an $8 bag of Fair Trade coffee (one pound), this works out to a 3.4 percent mark-up. For a $30 bag of Fair Trade certified, the mark-up is closer to 13 percent.

While the markup on the price of coffee doesn’t sound like it’s too high, other costs have to be taken into consideration: Fair Trade co-ops need a lot of money to run smoothly; infrastructure to transport the coffee is a general requirement, and Fair Trade practices require adequate housing and other standards, all of which are outlined in Fairtrade International’s 31-page book of coffee-related and general standards.

All of this adds up to a large amount of money put towards development. At the end of the day, the average take per pound of coffee per farmer works out to be closer to $0.20 to $0.30 a pound in wages.

Mark-ups and price-wage discrepancies aside, the question still remains of impact and the efficacy of fair trade. According to Fairtrade International, Fair Trade practices reduce poverty among coffee growers and reduce the negative impact of growing coffee on the environment.

Looking at FTI financial records, though, brings more discrepancies to light: for each pound of Fair Trade certified coffee sold, Fair Trade International (or the organization under their umbrella) makes $0.10 in licensing fees.

Given the already-low wages, it starts to seem as though coffee growers would be better off working with companies not following Fair Trade standards, especially given that no impact studies have been conducted with enough conclusive evidence to prove that Fair Trade standards work in even the most basic terms.

How fair is Fair Trade?