There are, in fact, major limitations to the overall impact of fair trade coffee, and critics have pointed to numerous shortcomings. Perhaps most significant are the overall breadth and reach of fair trade, which are strictly limited by its dependence on relatively small niche markets in the North. While fair trade coffee has grown considerably since the early 1990s and now reaches over 670,000 coffee farmer families, this represents only 3 percent of the world’s 25 million coffee farmer families. The same limits exist for the fair trade price, which is not negotiated between representatives of consumer and producer countries as the ICA was, but rather is based on a guarantee that fair trade prices will remain slightly above conventional prices with an additional assured floor price. (Since 2011, the fair trade minimum price for washed Arabica coffee beans has been 5 cents above the conventional market price with a guaranteed floor price of $1.40 per pound, plus an additional 20-cent social premium and an additional 30 cents for certified organic.) Thus, while fair trade prices are guaranteed to be above conventional ones, they remain tied to a range whose parameters are set by conventional prices and are not high in historical terms. From 1976 to 1989, the regular price of conventional coffee beans under the ICA system was close to, and in some years a fair bit higher than, what is considered the “fair trade” price (see figure 5.1).15 Moreover, unlike fair trade, which reaches only a small minority of farmers, ICA-era prices reached all of the world’s coffee farmers.
A second major consideration when assessing fair trade is the extra costs associated with meeting the many fair trade standards, which have primarily been developed and managed by Northern organizations on the basis of Northern norms, and are increasingly interwoven with an array of other standards set by wealthy states and transnational companies – such as organic certification or the European-based GLOBAL Good Agricultural Practices (GLOBALG.A.P.). While these standards are generally desirable, they are also onerous and costly, imposing significant extra burdens on small farmers who often have little or no say in their development. The fair trade network has, over the years, responded to this criticism by expanding producer representation on various governing boards, but overarching concerns around producer input have remained and cannot be easily resolved. To a large extent, this is due to the very nature of market certification, which generally involves a pre-given set of standards and an outside verification body to provide reliability and transparency to ethical consumers. Producer groups, however, are often left out in the cold, which, as argued by sociologist and union activist Henry Frundt, can be seen as an affront to democratic labor principles around “freedom of association,” which at its core requires that labor conditions are negotiated and audited by producers themselves – not by an external party over which people on the ground have very little influence or control.16
Source: UNCTAD statistical database (http://unctadstat.unctad.org), accessed July 30, 2013.
Note: The fair trade minimum price is the FLO price. If conventional prices go above the minimum price, the fair trade price moves 5 cents above the conventional price plus the social premium.
Figure 5.1 Comparing fair trade and conventional coffee prices, 1960–2012.
Third, in broader developmental terms, critics have expressed concern that fair trade promotes continued dependence on tropical commodities and the vulnerability and uneven development typically associated with the regular operations of the global market. In response, defenders have correctly argued that most small producers do not have viable alternatives to tropical commodity production and that those that do still require the support of fair trade standards to assist them in their transition to other economic activities. At the same time, the overarching concern here is also true: fair trade is inherently limited by its market-driven structure and its dependence on the current, highly unequal patterns of global trade and consumption. As is the case with conventional consumerism, fair trade consumerism remains premised on the notion of “consumer sovereignty,” discussed in the opening paragraphs of this chapter. While fair trade does challenge the assumption that consumers have adequate information upon which to base their market choices, it remains rooted in the belief that these same consumers should have the final say in how goods are produced and distributed. The effect is to reproduce a world trading system in which the needs of relatively poor Southern producers remain subservient to the demands of Northern consumers.
Relying entirely on the market to mediate relations between producers and consumers in a highly uneven world significantly waters down the democratic, participatory, and redistributionist aspects of fair trade. Within the North, the consumer base upon which fair trade relies is composed of relatively well-off consumers whose income is ultimately derived from an unequal distribution globally and nationally. Ecologically, fair trade depends on existing consumption patterns characterized by “overconsumption” in the North that contribute disproportionately to climate change and global environmental stress. Perhaps most significantly, the ethical consumers that drive fair trade remain isolated individuals whose primary responsibility is to shop. Fair trade’s democratic principles stop and end with Southern producer cooperatives, leaving global linkages to be tossed and turned in the global market. Consumers are not connected with producers through a democratic or genuinely participatory process and possess only “purchasing power” to influence fair trade and global markets generally. Their knowledge of the lives of producers is limited to fair trade advertisements, mediated by the market in a manner that shields them from direct contact and from direct responsibility for the outcome of consumption choices. In this context, individual preferences drive ethical consumption, not a shared responsibility for purchasing decisions and their social and ecological impacts. This places significant limitations on the price and reach of fair trade and leaves human development for hundreds of thousands of coffee farmers dependent on an “ethical premium” that consumers – not themselves directly impacted by good or bad purchasing decisions in their daily lives – may or may not be willing to pay from one day to the next.
As a final consideration, critics have raised growing concerns that the growth of fair trade since the early 1990s has been driven increasingly by powerful institutions that use mild support for fair trade to obscure their wider devotion to “free trade.” The World Bank, for example, has given increasing support to fair trade – in policy documents, but also by serving fair trade tea and coffee to its employees in Washington, DC – while continuing to push ahead in international affairs with a free trade agenda that has generally had destructive impacts on small farmers and rural workers. Similarly, Starbucks attains positive public relations for selling 8.1 percent of its coffee beans fair trade certified, even while over 91 percent of its beans are not fair trade certified and the majority of its Northern workers are non-unionized and less job-secure than non-retail sectors. This contrasts with the traditional fair trade organizations that originally built the network. In Canada, for example, three original fair trade leaders, Planet Bean Coffee, La Siembra, and JustUs! Coffee, are all worker-owned cooperatives devoted to selling 100 percent fair trade certified products, generally pay farmers above the fair trade minimum, and are often dedicated to promoting fairer labor rights in both the South and the North and to educating consumers about the inequalities in global trade.17 Alternative trade organizations such as these, while they continue to do well on their own terms, are being increasingly crowded out by conventional corporations that are emerging as the dominant players in fair trade and other forms of ethical consumerism.
Corporate social responsibility and fair trade: who is changing whom?
Fair trade coffee certification over the past few decades has proven to have a meaningful but at the same time limited impact on global coffee markets. It is limited by its relative inability to directly influence the decisions of states that manage the global coffee economy – while many fair trade groups have organized themselves to put pressure on national governments to respond to th
eir needs, the fair trade system overall is not devoted to this end and is increasingly evoked by powerful institutions as evidence that voluntary, consumer-driven action can replace state social regulation. No doubt many fair traders would agree with this critical assessment, seeing the turn toward ethical consumerism as a strategic necessity in a world where states have continued to carry out neoliberal reforms and abandon social reform.
Perhaps more surprising than fair trade’s limited impact on states, however, has been its still highly limited impact on corporate behavior. Since the emergence of fair trade labeling in the 1980s, one of the key goals of the network has been to change corporate behavior by demonstrating that real ethical markets exist and that, should corporations want to maintain or gain access to them, they had better get on board with fair trade certification. To some degree, this has occurred, as seen by the blossoming of countless new ethical and sustainable trade initiatives, often developed in response to the fair trade network, which has raised the ethical bar for the entire industry. At the same time, much of the new corporate “buy in” involves ethical initiatives that are either weaker versions of fair trade or have the potential to water down fair trade certification itself.
Starbucks perhaps best represents this complicated scenario, having adopted fair trade while at the same time limiting fair trade’s broader vision and standards. While purchasing 8.1 percent of its beans certified as fair trade, Starbucks has devoted significantly more attention to its own Coffee and Farmer Equity (CAFE) program, through which it has essentially self-certified the vast majority of its own coffee beans – playing roles as both a key participant in fair trade and its major competitor. While not without its positive aspects, Starbucks’ CAFE is essentially a weaker version of fair trade certification: whereas fair trade involves genuine independent third party certifications, Starbucks has developed its own standards, in consultation with Conservation International, and hand-picks and trains its own verification agents; whereas fair trade involves a guaranteed minimum price, CAFE offers a less clear commitment to a higher price and preferred access to sell to Starbucks; whereas fair trade coffee certifies only small farmers, Starbucks’ CAFE includes giant coffee plantations that already possess significant advantages over small farms; and whereas fair trade requirements include minimum standards that all certified partners must meet, Starbucks’ CAFE offers a grading scale based on how well a partner scores in meeting basic standards. The last of these is highly significant, as it means that CAFE includes as “certified” any farm that meets only basic initial requirements. Thus, while Starbucks claims that 84 percent of its farmers in 2010 were CAFE certified, nearly 60 percent of them had attained only “verified” status, meaning they had scored less than 60 percent on their CAFE evaluations. One could thus ignore any number of standards – collective bargaining, freedom of association, worker safety and training, access to education and medical care – and still be considered a “verified” participant of the CAFE program.18
In addition to its role as a fair trade competitor, Starbucks has also impacted fair trade standards from within. While purchasing only a small portion of its beans fair trade certified, this amount has made Starbucks the largest single seller of fair trade in North America, giving it significant influence over the network’s future direction. The impact of this influence became extremely apparent in 2011 when TransFair USA renamed itself “Fair Trade USA” and split with FLO, widely regarded as one of the world’s most rigorous and legitimate international fair trade umbrella organizations. The biggest issue of conten-tion between the organizations was the role of giant coffee plantations in fair trade, which FLO does not certify. Although it is not clear how much of a role Starbucks played in the actual split, Starbucks and other corporations have long pushed for this rule to be eliminated so that they can expand certification with traditional established partners, giant coffee plantations. FLO has resisted these demands for years, insisting that there are millions of small-scale coffee farmers who desperately need the support of fair trade. In breaking with FLO, Fair Trade USA declared its keen readiness to certify coffee plantations. Whether explicitly or implicitly, Starbucks’ influence played a major role on these events and on the gradual watering down of fair trade standards that they signify.
Finally, Starbucks’ impact on fair trade extends also to the wider political vision traditionally associated with fair trade. The fair trade network was originally constructed by a diverse array of social justice and development organizations that viewed fair trade consumerism as part of a wider political project to raise awareness around the injustices of global trade and promote an alternative trading system. Starbucks, in contrast, has adopted fair trade as only one component of a wider CSR agenda that is far removed from the moral and political mission of fair trade and in many ways obscures the injustices in the global trading system. Despite promoting fair trade and a variety of market-driven sustainable coffee initiatives, the necessity of putting shareholder value and corporate profits first has often pitted Starbucks against the broader needs of poor coffee farmers and workers.
One of the most notable examples of this took place from 2005 to 2007, when the Ethiopian government took measures to trademark its high-quality coffee beans to bring a greater share of coffee value to Ethiopian coffee farmers. This effort was met with resistance from the US National Coffee Association (NCA) and other industry lobbyists, which put pressure on the US Patent and Trademark Office to reject or delay approval of the patent. Some industry critics suggested Starbucks played a role behind closed doors in pressuring the NCA to adopt such a tough stance, given its reliance on the sort of high-quality beans grown in Ethiopia, a claim that Starbucks denied. Starbucks did initially reject the idea and publicly renounced it through a media campaign. In response, Oxfam International launched its own campaign in support of the initiative, persuading over 96,000 people to contact Starbucks through e-mails, faxes, phone calls, postcards, and in-store visits. Feeling a mounting threat to its brand image, Starbucks gave in and in 2007 signed an agreement that it would use and promote Ethiopian coffee beans in accordance with agreed terms and conditions of the trademarking initiative (discussed further in chapter 6). After that, Ethiopia successfully registered its trademarks in the United States and around 30 other countries. While the full extent of Starbucks’ resistance to the initiative may never be clear – whether it involved their publicly stated reluctance or additional efforts through corporate lobbying – the overall scenario may give us pause in considering Starbucks’ claims of global social responsibility: the patent, at the most, can offer Ethiopian farmers only an additional few cents of the final sale price of a bag of coffee, and Ethiopian farmers are among the poorest in the world – Howard Schultz’s total compensation as CEO of Starbucks was $29.73 million in 2011, equivalent to the annual income of over 83,000 Ethiopians.19
Conclusion
In the end, Starbucks’ commitment to fair trade and “social responsibility” entails relatively modest, top-down initiatives entirely within the control and oversight of the corporation itself, while it continues to oppose wider socially responsible activities, whether they involve coffee farmers in the South or unionization efforts among Northern employees. In this, Starbucks is not unique and, in fact, compared to other coffee giants, it is deserving of the title of leader in CSR. The problem is CSR itself, which is not designed to meet the needs of a broad public for universal social programs and policies, but rather to offer the most minimal form of social protection possible to stave off criticism and protect or enhance corporate brand images. This should raise major cautionary flags for fair traders given the growing convergence between CSR and fair trade. The vast majority of Northern consumers do not know the difference between fair trade and other ethical consumer projects, corporate-driven or not, giving corporations considerable flexibility in their CSR strategies and allowing them to offer modest or token support to fair trade while developing their own pro-corporate initiatives a
nd putting pressure on fair traders to weaken their standards. As more and more corporations buy in to fair trade coffee – now being sold by an array of transnational companies, including Wal-Mart, McDonalds, Dunkin’ Donuts, and Nestlé – fair trade’s wider political vision gets lost and replaced with a narrower form of corporate giving within the confines of the existing global coffee industry. This pulls fair trade further into corporate dependency, to subsuming the demands of poor workers and farmers to the profits of wealthy shareholders, and to accepting the dominant consensus around the “market” as the only solution to poverty and inequality, with the “state” receding ever further into the background. The effect is not merely to overlook the power of states to confront long historical patterns of poverty and inequality in the coffee industry, but to let states off the hook for their central role in creating and reproducing these patterns and allowing them to persist in new and varied forms.
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