Fair Trade follow-up

Following up on last month’s post about libertarians and Fair Trade coffee, it’s worth noting that leading roaster Counter Culture Coffee has released its annual transparency report for its Direct Trade certified beans. It’s available here in PDF format and is very cool. For every coffee in the program it tells you which employee visited the farm, when they last visited, the price paid for the beans, the beans’ cupping score, the number of years CCC has been buying from that farm, and a paragraph-length description of their work at each location. You really can’t beat that level of transparency.

To put the numbers in context, here’s a quick summary: The minimum price required for Fair Trade certification is $1.26 per pound. Counter Culture’s Direct Trade certification has a minimum of $1.60. The actual lowest price the roaster paid last year was $1.65. They paid as high as $4.45, with many coffees falling somewhere above $2 or $3.

As I said before, I’m not reflexively against Fair Trade, but I don’t want consumers to think it’s the best or only game in town. When you put that program up against the Direct Trade programs of the best specialty roasters it’s easy to see why many coffee lovers prefer the latter model.

[Via @CoffeeGeek.]

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Libertarians and Fair Trade coffee

Henry Farrell asks:

[…] why are so many libertarians opposed to fair trade coffee?

It would seem to me that fair trade coffee is fairly hard to argue with on the principles of consumer sovereignty (i.e. the claim that consumers know their own interests best, and are able to realize them through the market mechanism). If consumers want to pay a premium for coffee that has been produced ‘fairly,’ then this should be no more troubling for libertarians than consumers wanting to pay a premium for e.g. luxury chocolate (which often is made from the same basic material as very-good-but-not-horrendously-expensive chocolate), and arguably less troubling.

Then Jim Henley piles on too:

Where I was going with that when planning out the post is, if one isn’t careful, the appreciation of the ironic power of self-interest to fulfill social needs can slide into, first credulity – there’s got to be an irony in here somewhere! meaning, almost anywhere – and then decadence: mere contrarianism. At worst, contrarianism that isn’t just sloppy but smug: proud of itself for asserting ironical, “politically incorrect” claims that widely recognized beliefs and decencies are actually myths and vices. Tee hee! Look how upset everyone gets when I tell them how wrong they are to hold their comforting nostrums!

They’re both right that Fair Trade is just another form of voluntary free trade and that the hostility some libertarians express toward the idea of paying more for coffee to help poor farmers is distasteful at times. However at the risk of being one of those smug contrarians Henley dislikes so much, I’m going to defend the libertarians on this one. Partially, anyway.

The simplest reason to object to Fair Trade coffee is that it’s just a stupid name. It suggests that all other coffee is unfair and exploitative. As a sign at one coffee shop I visited put it, “Fair or Unfair? It’s that simple.” Well, it’s not that simple. And if, as I do, you think the insights of Adam Smith, David Ricardo, and other economists are hard-won intellectual achievements, then a label that implicitly opposes those ideas is going to rub you the wrong way. This could have been avoided if we labeled Fair Trade as something like “Charity Coffee” instead, which would be more accurate and avoid disparaging any economic theories. But then it might not have caught on as well because buying it wouldn’t let people signal their opposition to globalization, which brings us back to why so many libertarians dislike Fair Trade in the first place.

That’s probably as far as your average capitalist goes in his reasons for disdaining Fair Trade coffee. But if you’re actually into coffee, you know that some of the smartest critiques of Fair Trade are coming from good-hearted liberals working in the industry. They’ll tell you that Fair Trade is out of step with the current market for specialty coffee.

The first complaint you’ll hear about Fair Trade is that it doesn’t do enough to encourage quality. I’ve had some very good Fair Trade coffee and I’ve had some that’s terrible; the label doesn’t promise anything. It sets a price floor without any real link to cultivating better beans or promise that the roaster knows how to handle them. Even worse, by mandating a co-op model of production, Fair Trade can reduce incentives for individual farmers to improve their crops. This may not matter if consumers are buying Fair Trade coffee just for charity, but over the long-term they may not continue paying more for the label if they’re not perceiving higher quality in the cup.

A bigger objection to Fair Trade is that it’s no longer the best deal for farmers. The Fair Trade minimum of $1.26 per green pound is often higher than commodity coffee prices but well below what premium coffee roasters will pay. For example, Counter Culture’s Direct Trade program pays a minimum of $1.60 per green pound with additional incentives for exceptional crops.

There’s much more one could say in criticism of how Fair Trade certification works; there’s no need to repeat them here but see this recent Guardian article or Kerry Howley’s excellent piece from Reason a few years ago if you’re interested.

What’s frustrating about the successful branding of Fair Trade is that it’s used as a cognitive shortcut by consumers for what qualifies as an ethical coffee purchase. I speak from experience selling coffee in Washington’s Georgetown neighborhood. The type of customers some libertarians enjoy mocking would often come in asking for Fair Trade beans. Sometimes I could engage them and explain that what we were offering was better than Fair Trade, that farmers got more money for the beans and the quality of the coffee was outstanding. Other times I couldn’t and they walked out for another shop, likely ending up doing less good for farmers and with a worse cup of coffee. Customers’ loyalty to Fair Trade can be just as uninformed as some libertarians’ knee-jerk opposition to it.

Here’s Jim again on why Fair Trade seems like such a bad idea to people who’ve taken to heart Adam Smith’s lesson that following one’s self-interest is often the best way to do good in the world:

[…]something like Fair Trade will seem like it should be the kind of thing where there must be a catch. Here are people trying to act out of benevolence and still getting dinner! It would make perfect sense – and be a lot of fun! – if these do-gooders were actually doing harm.

But by this point, you can start getting lazy. Like, assuming that fair-traders must be screwing up “price signals” that are the market’s way of telling poor foreign farmers to stop farming.

I’m not convinced that buying Fair Trade actively does harm, though excess production is a legitimate concern. If you’re shopping at Costco and debating between a big bag of Procter and Gamble’s regular coffee or their Fair Trade beans, you’re probably making some farmer marginally better off by choosing the latter. Fair Trade may play a useful role in mass market coffee. However if you want to pass the maximum of your purchase price onto coffee farmers, your best bet is to buy the highest quality coffee you can from roasters like Counter Culture, Intelligentsia, or Stumptown (to name the usual three, though there are many others).

In fact, it doesn’t even matter whether you care about coffee farmers or not. If you selfishly pay for quality in the cup you’re very likely buying beans that brought more revenue to them than Fair Trade would have. Adam Smith was right and so, sometimes, is the libertarian’s ironic intuition.

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Counter Culture unveils Direct Trade

Today Counter Culture Coffee unveiled it’s new Direct Trade program, which they say is the first third-party certified direct trade seal. Counter Culture will partner with Quality Certification Services to guarantee that the company’s selected coffees meet the following standards:

1. Personal & Direct Communiction:
Counter Culture has visited grower partners on a biennial basis, at minimum.

2. Fair & Sustainable Prices:
Counter Culture has paid at least $1.60/lb. for green coffee. This exceeds the Fair Trade Certified floor price by at least 19%, not including quality-based financial incentives paid to growers.

3. Exceptional Quality:
Coffees have scored at least 85 on a 100-pt. cup quality scale.

4. 100% Transparency:
We take a transparent approach to everything we do and are committed to sharing our financial information with everyone from growers to consumers. Counter Culture maintains direct communication between buyers, sellers, and any intermediaries. All relevant financial information is available to all parties, always.

As Fair Trade certification, while well-intentioned, is limited by lack of incentives for quality and its requirement that participating farmers work in co-ops. CCC’s Direct Trade is more flexible, rewards quality, builds long-term relationships, and pays higher prices. CCC and other top roasters have been working along these lines for a while, but without outside certification. Hopefully this step will help promote the direct trade model to consumers and other roasters.

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