Article: Fair Trade – Leadership vs. Ownership

Written by Cafe Campesino on Oct 7, 2010 in Article, Editorial, NEWSLETTER |
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By Tripp Pomeroy

At various points over the past several years, we have talked about Fair Trade being at a cross-roads.  In fact, Fair Trade seems to be passing through cross roads continuously, but that is to be expected given the scope of the problem the movement is seeking to address, along with the fact that the movement in the US is relatively young, and the sad reality that the main certifying agencies – FLO and Transfair USA – prefer to assert their ownership of Fair Trade rather than participate in the movement’s leadership.  Without a doubt, Fair Trade is a work in progress and still has a long way to go to achieve its goal of transforming trade into a vehicle for sustainable, meaningful development. Multi-stakeholder leadership, collaboration, and not just consumer confidence, but also small-scale producer confidence (which at present is on the wane) in Fair Trade are critical if Fair Trade is to right itself.  At present, Fair Trade is not an integrated, unified, cooperative movement of traders, small-scale producer groups, and certifying organizations.   This reality presents a real challenge to the movement, and more importantly, the prospect for universally bona fide fair trade.

In September, Bill and Tripp each spoke on panels at the Fair Trade Futures conference and, along with our Atlanta dynamos Nema Etheridge and Almeta Tulloss, participated in an extraordinary two days of dialogue about the state of Fair Trade at the 2010 Fair Trade Futures Conference.  Co-organized by the Fair Trade Federation and 11 other deeply committed organizations, the conference brought together 760 folks from five continents – from producer partners, to importers, to wholesalers, to consumers along with representatives of various certifying agencies and sustainability advocates.  The conference made it clear that the principle-based, mission-driven camp of the movement understands that there is a critical need for an ongoing forum for committed Fair Traders to work with each other to ensure that Fair Trade’s bedrock principles are honored and its commitment to small-scale producers upheld.  Further, the FTF and the many other organizations that help make the conference happen clearly understand the difference between leadership versus ownership… a distinction that all of us should keep in mind as we build our business models and develop our respective approaches to Fair Trade and expanding its presence throughout the US market.  It is a distinction that neither FLO nor Transfair USA have yet to fully grasp.

One of the most important themes that emerged from the conference was the acknowledgement that two significantly different camps have formed in the Fair Trade movement: 1) the certification folks – best exemplified by FLO and their US initiative Transfair USA (recently “re-branded” as Fair Trade USA) and 2) the principle-based, mission-driven 100%-commitment-to-fair trade folks, best exemplified by the members of the Fair Trade Federation, Café Campesino, Sweetwater, and the 22 other members of Cooperative Coffees.

What is critical about this deepening division is that both approaches are needed if Fair Trade is to become a reality.  But in order for both approaches to coexist and mutually reinforce each other, these two camps must share the same commitment to the core principles (and best practices) that lie at the heart of the movement’s commitment to small-scale producers.  At present they don’t.

So why do we need a viable certification system?  Well, in the case of coffee, for example… generally speaking, in order for coffee to be traded directly – between small-scale producer cooperatives and US importers – a producer group needs to be able to pull together roughly 40,000 pounds of export grade coffee and, likewise, the importer needs to be able to purchase and resell that 40,000 pounds.  This is why producer cooperatives work so well – because small-scale coffee farmers who otherwise are forced to sell their maybe 700 hundred pounds of annual production to a local broker can instead pool their individual annual production of coffee together with the coffee of other small-scale coffee producers in their region and in so doing, become part of an organization that they own and that enables them to trade directly with US importers.

Unlike most coffee roasters, Café Campesino and Sweetwater are able to purchase coffee directly from the producer cooperatives because we are part of Cooperative Coffees, a cooperative of coffee roasters throughout North America that mirrors the coops of our producer partners and which serves as our collective coffee importer.  Neither Café Campesino nor Sweetwater is large enough to buy 40,000 pounds of coffee directly from one producer group as we work with some 15 producer groups throughout the world’s coffee lands.  But as part of Cooperative Coffees, we can pool our annual consumption with that of the other 23 roaster members and together, we are able to buy coffee directly from producer groups in the key 40,000 pound increments.  Cooperative Coffees and its members are firmly in the principle-based, mission-driven 100%-commitment-to-fair trade camp.  Fortunately, the Fair Trade Federation’s principles and code of conduct are an excellent fit with our collective approach and core commitment to making trade fair for the world’s small-scale coffee producers.

But given that the majority of coffee roasters in North America are not large enough or organized in a collective manner with other coffee roasters that enables them to buy coffee by the container load directly, there needs to be another system that enables them to participate in the Fair Trade movement.  The way that these roasters buy their coffee is through an importer (and there are some good ones out there like our friends at Royal Coffee).  The current means by which they are able to participate in Fair Trade is by purchasing coffee that has been “certified” by FLO, which in turn can then carry the Transfair USA Fair Trade Certified sticker on the bag… if the roaster signs up as a licensee of Transfair USA and pays a royalty to the non-profit for each sticker affixed to the roaster’s coffee bags.

[continued from newsletter:]

  • Develop Transparent and Accountable Relationships
  • Build Capacity
  • Promote Fair Trade
  • Pay Promptly and Fairly
  • Support Safe and Empowering Working Conditions
  • Ensure the Rights of Children
  • Cultivate Environmental Stewardship
  • Respect Cultural Identity

Café Campesino and Sweetwater are members of the Fair Trade Federation and as such join the nation’s association of companies who are 100% committed to Fair Trade – from coast to coast.

Direct – A critical component of principle-based Fair Trade, buying directly from small-scale coffee farmers is our goal.  At Café Campesino, all of our coffee is purchased via our active membership in the world’s only Fair Trade green coffee purchasing collective of its kind, Cooperative Coffees.  At Sweetwater, all but a small percentage of our coffee is purchased directly via our membership in Cooperative Coffees.  The coffee that is purchased indirectly is Rainforest Alliance Certified coffee that is required by a large institutional customer of ours.  The quantity that of that coffee is too small to be traded directly.

To maintain and deepen our direct trading relationships, our cooperative’s staff and members are committed to visiting our producer partners at least once a year but in reality our trading partner visits are more frequent than that.  Our cooperative approach allows 23 companies to share the responsibility for visiting and working with our producer partners throughout the year.  So, while Café Campesino may only be able to visit 2 or 3 producer partners a year – say in Guatemala and Peru – another member of our cooperative like Higher Grounds in Michigan takes on visiting our producer partners in Ethiopia and Mexico that same year.  Together, we maintain deep and meaningful relationships with our producer partners and share with the coop’s staff and members the information and insights that we gather during each visit.  Add on to this that we serve as representatives of our coop for farmer-to-farmer workshops and trainings at origin as part of the Catholic Relief Services Café Livelihoods and USAID Farmer-to-Farmer programs and, well, we can substantiate our direct relationships.

Transparent – We encourage scrutiny and doubt… not just to be transparent but also to make sure we never rest comfortably on our past achievements.  Transparency provides for accountability – which is not just about how our producer partners are behaving but also about how we, as the buyer, are behaving… and how we are conducting our trading relationships.  Cooperative Coffees maintains a document trail of our coffee purchases at www.fairtradeproof.org so that you can see all the transactional documents associated with each lot of coffee that Café Campesino and Sweetwater purchase from our producer partners.  We also do our best to maintain up to date profiles of our producer partners’ organizations.  Finally, we ask folks to doubt us and to question us – it’s our job to respond and if we’re missing the mark, it’s our job to fix it.

The following are a few examples of best practices that our cooperative employs in the purchase of coffee from our producer partners:

Minimum Price – we recently raised it to $2.00 per pound (FLO’s is $1.61 per pound) because we know that the industry standard is not sufficient.  This is only an insurance policy if coffee prices drop – right now prices are at a 12-year high and we pay well-above the minimum anyways.  Nonetheless, the higher minimum provides access to more pre-financing because it is the minimum value lenders assign to a particular contract.

Fair Price – we work with our producer partners to negotiate a price that both we and they feel is fair.  Fairtradeproof.org shows all the prices paid to our producer partners for each lot of coffee.

Open Contracts – unless our producer partner prefers a closed contract, we only use open contracts, which provide our partners with the opportunity to garner a higher price if market conditions and pricing change subsequent to the initial preparation of the contract.

Pre-Financing – we pro-actively discuss it with all of our producer partners and facilitate access to pre-financing via third party lenders for producer partners with whom we have an established relationship.  There are instances when a new relationship with a young farmer organization might make pre-financing via a third-party lender impossible.  In some cases, we will try to offer some pre-financing internally but often the risk (approximately $48,000 for an $80,000 contract for example) is simply one that our cooperative cannot afford to take.  Usually, with the evolution of a direct relationship, these young organizations become credit-worthy to one of the third-party lenders we work with.

While our internal systems are well documented, we need to continue working on improving the documentation of our practices and methodology for the public domain.  Our practices, though, are solid, which is why we have been successful at sustaining long-term relationships like those we enjoy with our friends at Maya Vinic in Mexico, CAC Pangoa in Peru, and APECAFORM in Guatemala… to name a few.  Ultimately, the best proof of our principle-driven approach to Fair Trade is the approval of our producer partners.

If you enjoyed this article we would like to thank you (with an extra discount) for taking the time to learn about the issues facing Café Campesino and other fair traders. Follow this link for details.

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2 Comments

Kevin M Roth
Oct 7, 2010 at 11:37 am

Tripp,

Great article. This really goes a long way in helping to bridge the divide between fair trade advocates. This is very informative and should help provide a dialogue for those interested in making fair trade what it should (or could) be.


 

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