Coffee growing and drinking originated in Kaffa Ethiopia, and spread throughout the world. It is a widely grown cash crop especially in Africa and is responsible for a substantial percentage of most developing countries’ foreign incomes. However coffee growers continued to suffer losses in spite of coffee’s ready market and in an effort to change this situation, a couple of non governmental organizations have come up with the fair trade movement.
Fair trade is a global movement aimed at alleviating poverty and empowering farmers through creating sustainable market opportunities for them in developing countries. For a long time now farmers have suffered from fluctuating low market prices in the agricultural market leading to fluctuating low incomes for producers. Fair trade aims at stabilizing agricultural products’ farm gate prices in order to stabilize farmers’ income and to protect them from unfair losses. Farm gate prizes are defined as the value of an agricultural product the first time it is introduced to the market.
This global network of nongovernmental organizations seeks to certify and label products such as coffee, tea and chocolate in pursuit of their agenda. As a result of this movement the income of most coffee farmers has been stabilized. This is achieved through the fair trade minimum price which sort of acts as a floor price to protect farmers in times of downturns in the market. The fair-trade premium is an additional financial amount above the fair trade minimum that has enabled farmers to invest in modern agricultural technology and improve their living standards. Fair trade provides farmers with pre-financing to enable them get the product into the market and to cater for production costs.
Fair trade movement has had a positive effect in that it has led to improved product quality, stable market prices and empowerment of farmers through education and training. The fair trade market model represents an organized and formal trade setting where the aim is to alleviate poverty and provide sustainability by offering fair conditions for trade to producers.
The free trade market model however, does not involve government intervention and there is free flow of goods and services dependent on the market forces; demand and supply. It is characterized by high and fluctuating prices.
I have used fair trade coffee before because it is a quality product availed at a fair price. I also realize local farmers benefit when their products are supported domestically. Fair trade coffee if not well embraced by consumers will force farmers to opt for cheaper production methods compromising on quality. Fair trade coffee is purchased directly from farmers at a higher price compared to standard coffee with the objective of providing economic incentive for farmers and improving their working conditions.
Tackling Poverty through Trade
Coffee growers are facing a major problem due to unstable market prices and unfair competition. They compromise on quality in order to take advantage of cheaper production methods. They lack enough finances to package their products and end up selling the coffee as a primary good for far much lower prices than it is really worth. The retailers make too much profit from the coffee they sell while the growers make little or no profit and in some cases losses.
Fair trade movement aims at enabling farmers to package and certify their coffee in order to enable them present it as a finished product. This however can only work if this move is supported by local consumers. If they can find a ready local market it makes it easier to sell it to international markets.
Long term contracts create a level of stability and reduce the uncertainty of suffering from fluctuating market prices. The fair trade network enables farmers to access export markets therefore improving their market conditions. This has enabled lots of coffee growers who had left the field during the international coffee crisis to reconsider growing coffee again for a living.
Most people do not really think about the effort behind the manufacture of the coffee they drink. When they purchase coffee their decision on what coffee to purchase usually is based on the price, quality and taste of the consumer. They are almost ignorant of their effect on the well being of the coffee growers. Farming practices have improved, farmers have been empowered and become skilled and their incomes have generally increased improving their living standards all as a result of fair trade coffee.
The reaction towards fair trade was different. However most of the population believes that it is a commendable move. The argument is we are the consumers and we have the potential of making this movement a success or a failure. Consumers who go after quality especially agreed that it was better to avail expensive quality coffee than cheap non quality coffee. They therefore support the movement’s principals of fair trade premium and the opportunity for pre financing. It ensures that enough finances are available to use modern production technology hence produce quality coffee.
Most of the population supported the fair trade movement’s move to purchase directly from growers eliminating middlemen and hence saving the consumer from paying high prices to cover transaction costs. The consumer is therefore able to consume quality coffee at pocket friendly prices without really hurting the grower’s incomes. The middlemen however lose out in this arrangement because they are not needed to transact between producers and assemblers and consumers.
Labeling the product helps the consumer realize the origin of the product as local and rids them of the mentality that local is not quality. Most of the individuals who had not tried free trade coffee had the misconception that locally produced products do not meet the right quality standards. In earlier times coffee was sold as a primary product then packaged by foreigners and there was the general misconception that the companies responsible for this packaging somehow improved the coffee’s quality.
Local labeling changes this mindset and increases consumers’ confidence in locally produced goods. While most of the local population is open to the idea of supporting local production there is a percentage of them that are totally indifferent. This group does not make a deliberate move to choose locally produced products over imported products. Their argument is that the local producers have to up their game enough for their products to be quality as the international goods. They have nothing against the origin of the product but they will choose quality anytime regardless of whether or not these products are locally produced.
Criticisms against the fair trade area have been brought up. Critics claim that this movement still benefits retailers more by offering them a higher markup while only providing farmers marginally higher prices. The movement also aims at cost reduction and profit attainment yet it is pretty obvious to consumers that corporations that make large profits by selling free trade products do not pay their workers as well as the profit margins would imply. It therefore may cause the misconception that this movement has been put in place to benefit the implementers rather than the farmers.
Another criticism is that farmers mark up price is very low at moderately above the cost of production and hence coffee growers do not make as much profit as the final sellers. The general feeling is that fair trade movement has improved farmer’s welfare to an extent that is obviously better than before, but their condition can be made better. Fair trade encourages farmers to form cooperatives which some criticize as encouraging the very level of bureaucracy they try to eliminate through middlemen. Creating standards in these cooperatives has not been observed and this causes critics to question whether they are a good idea. Cooperatives can be just as corrupt as other organizations and there is no guarantee that they will refrain from corrupt and unethical practices.
In conclusion the outcome of this movement will be profitable for farmers and hence for the economy as a whole. Continued locally produced quality products will not only increase the domestic market but the international market too. Fair trade also brings with it a level of security especially for farmers due to the level of organization unlike free trade which is characterized by constant price fluctuations and uncertainty.