FLO, Fair Trade USA, and Starbucks: A Critique - Part 5

May 3, 2012 4:25 PM ET

Posted by Julie Fahnestock

Note from the author: I hope you've enjoyed this series thus far. Many thanks to those of you who have posted very engaging comments and questions. It's so great to see the energy around this movement. I love being part of it and it seems that millions of others do too. And, I think the debate and disagreement is healthy. It's a good sign that fair trade matters to us. 

Part 5 of this series offers the opinions of NGOs outside of the fair trade movement. Some don't think it's having much impact. Others think it actually traps people in poverty. I personally think fair trade is having impact and that it does pull people out of poverty, but it's good for us to be challenged by those outside the movement. I hope you've enjoyed this series thus far. Many thanks to those of you who have posted very engaging comments and questions. It's so great to see the energy around this movement.We become better advocates for that which we believe!

Enjoy this posting and stay tuned for a Q &A with Fairtrade International!

Since its beginnings, FLO had sales of bananas, chocolate, coffee and other products under its banner had climbed to £1.17bn (Milmo). In general, the fair trade movement in Europe is about a decade ahead in public awareness of the label. On average, Britons, for example, on a daily basis consume 9.3 cups of tea and 3 bananas stamped with the FLO mark (Milmo). The market in the USA is much smaller as compared to the European market. The Fairtrade Foundation's Executive Director, Harriet Lamb, said,

"Sales could break £2bn next year if the momentum continues. Fairtrade is going from strength to strength because the public want it, it makes business sense, and most importantly because it's working for the millions of farmers, workers and their families who see Fairtrade as their lifeline in these tough times. They'll be cheering to know that UK shoppers and businesses still care," (Milmo).

As previously mentioned, big businesses have also caught on to using both the FLO and Fair Trade USA standards and this has given both organizations more publicity. For example, all the espresso served at the 5,400 Dunkin' Donuts stores in the United States is fair trade and the McDonald's stores in New England sell only fair trade coffee, (Downie). The impact on small farmers in developing nations is also unparalleled to the efforts of other NGO's and development agencies. New data from Fair Trade USA's recently released 2011 Almanac reveals that more than 138 million pounds of Fair Trade Certified™ coffee were imported into the United States, a 32 percent increase over 2010. According to FLO, there are now 827 Fairtrade certified producer organizations in 58 producing countries, representing over 1.2 million farmers and workers and approximately €52 million was distributed to communities in 2009 for use in community development (fairtrade.net).

The fair trade premium provided by both FLO and Fair Trade USA has created schools, water systems, new jobs and is ever so slowly pulling farmers out of poverty. According to the Fairtrade Foundation in the UK, Mali cotton farmers are earning 50% more than conventional farmers.

"Some 95% of the children of Mali's Fairtrade organic farmers go to school because farming communities receive more money. This is more than double the national average in the fourth most deprived nation on earth," (Bowers). 

No one will dispute the fact that both FLO and Fair Trade USA have made an impact because of their standards. What critics do dispute however, is the efficiency and transparency of each model and whether or not fair trade gives farmers a crutch which creates Western dependency. Is fair trade just another form of charity?  Anne Tallontire, an expert in systems of fair trade and a senior lecturer of 'Business, Environment & Corporate Responsibility' at Leeds University in the UK asks these questions:

[There are] questions about accountability, legitimacy, representation and participation and other dimensions of governance: who is accountable for such standards? What makes them legitimate? Who decides who is involved or not? What say do less powerful groups have? Do they undermine democratic governance? These models are largely untested," (Tallontire, CSR and Regulation, 779).

Tallontire also expresses a need for FLO to decide whether it wants to develop the systems of trade or provide development through trade. Through her studies, Tallontire has found that the unintended consequences of either sides of the coin are highly unknown. She states, "Dependency and the extent to which fair trade may subsidize otherwise inefficient or sub-standard producers have been raised as potential short-comings of fair trade in relations to other approaches to enabling small producers to enter export markets," (Tallontire, Challenges,3). Tallontire suggests that FLO have exit strategies and capacity building programs for all farmers. 

Oxfam, one of the first organizations in the world to participate in fair trade practices before it came formalized, did a study to see if they truly were creating a dependency from the farmers. The study showed that 44% of the groups studied sold at least half of their produce to Oxfam and where groups had become less dependent on Oxfam they tended to diversify sales to other fair trade buyers (Tallontire, Challenges, 5). Critics of fair trade agree that ultimately it makes it very challenging for farmers to become self-sustaining. Dependency on fair trade organizations, particularly FLO in this case, not only limits the farmers' ability to sell to other groups, but according to Steve Daley of the Worldwrite Charity in the UK, fair trade is a poverty trap.

""How can a few extra pennies a day from Fairtrade be celebrated as an outstanding achievement? Many tens of thousands of people escaped poverty last year, most of them in India and China, but that was done through real market developments rather than small-scale fair trade deals. They were lifted out of poverty because they could sell their products on the open global market, rather than being sectioned off in the fair trade market," (O'Neill). 

The Institute of Economic Affairs (IEA) is another, quite vocal critic of FLO. The IEA describes fair trade as "costly, opaque and substantially unproven." A 130-page report confirms their skepticism. The report states: "Fairtrade requirements [on farmers] may well reflect the subjective views of western consumers and not the real needs of poor producers," (Bowers).

The IEA believes that supporting FLO's efforts is simply supporting the work of charities, the extra $2 per pound of coffee used to build wells, for example. Other economists agree with IEA. The Adam Smith Institute says that FLO makes farmers dependent and "prisoners to our market," (O'Neill). This may be one way of looking at it, but philosopher and professor, Peter Singer, thinks that the Fairtrade premium also ensures better quality.

"The growers know that they have to provide a product that consumers like, both for its taste and for the way it is grown. If their product sells well, they can take pride in having produced something that is sought after around the world. From the growers' perspective, receiving a premium by selling a Fairtrade product is preferable to receiving a charitable handout that they would get whether they worked or not and regardless of the quality of what they produce," (Singer). 

Other supporters of FLO include Trade Aid Importers of New Zealand. They have seen, first hand, Fairtrade promote autonomy and independence among farmers in developing nations. Justin Purser, the Commodities manager for Trade Aid gives an example of Prodecoop, a coffee cooperative in Nicaragua: "Prodecoop has grown, with the aid of a longer history of fair trade sales, to the size where it is now constructing wet mill facilities for its smaller member co-ops. And to help them along, Trade Aid is supplying an additional US$7,000 in funding this year," (O'Neill). 

(To obtain a copy of the citations, please contact Julie directly)