A brief history of Fairtrade

“Fairtrade” is often spoken about without much understanding. This article talks about the history and becoming of the Fairtrade movement and what it means to be certified as a fair trade coffee cooperative. The next article talks about the pros and cons of the Fairtrade movement.

Volatile coffee prices

In an effort to stabilize volatile coffee prices, the International Coffee Agreement was established in 1962. And from 1962 to 1989 through various measures such as quotas (where countries limited the amount of coffee that entered their markets, thereby sheltering them from an influx of imported coffee) and buffer stocks (where countries control the demand and supply of commodities-coffee, through intervention buying and selling) country’s were able to shelter their economies from the international market.

Neoliberalism, the free market and coffee

But in 1989, as Neoliberalism took the reins and the quota system was emphasised as being inconsistent with the “free market” – negotiations of the International Coffee Agreement crumbled.

Consequently the push for Neoliberalism/deregulation of state regulated industries meant the coffee sector was open to the “free market.” The free market, and the increase of coffee flooding the market, meant that the supply for coffee far outweighed the demand, and thus the price of coffee dropped to an all time low of 80 cents per pound.

It was only until 1994 that a new ICA was negotiated and, it didn’t get far. Coffee prices were no longer going to be regulated and controlled. In the same year, as Brazil (the largest producer of coffee) suffered from the threat of frost, leading to the price of coffee per pound rising to US $2.80.

In late 2001, the “Coffee Crisis” hit – where the oversupply of Vietnamese and Brazilian coffee to the market- sent coffee prices tumbling down (more supply than demand pushes prices down). Along side economic devastation, this pushed many producers out of business. Over 100 million people involved in the supply chain were directly affected.

The creation of Fairtrade

It is from the above events that the Fairtrade organisation/movement was established. Fairtrade’s vision is ‘a world which all producers can enjoy the secure and sustainable livelihoods, fulfil their potential and decide on their future.’

Its mission is to ‘connect disadvantaged producers and consumers, promote fairer trading conditions and empower producers to combat poverty, strengthen their position and take more control of their lives.’

Essentially from the volatility of the coffee market, Fairtrade certifications were established to ensure that producers would receive a “fair and stable price for their coffee that would cover the cost of production.” That is not to say they are not eligible for higher prices for high quality coffee. (More on this in the next article)

Eligibility for Fairtrade certification

Eligibility for certification is only open to democratic small farmer organisations (ie cooperatives) and by definition these small scale producers must not depend on hired workers all the time, but run their farm mainly using their own and their family’s labour. In a democratic manner, these smallholder producers must also own and govern the organisation; thus in “theory” the profits are to be equally distributed among the producers.

Under the fairtrade system, Fair trade certified co-operatives are paid at least US $1.40 per pound of washed Arabica coffee beans. The co-operatives are also given an additional 20 cents per pound, where 15 cents can be invested as they fit, with 5 cents having to be put towards improving productivity and/or quality.

The arrangement of such prices – is intended to support producers to budget for the next coffee harvest, support their families and prop up development in the coffee communities.

 

The next post will talk about the pros and cons of fair trade (if you would like to contribute – please get in touch karyan@beanmarket.com.au). If you would like to receive the next newsletter post – sign up here.