Fair Trade USA Splits with FLO

OAKLAND, Calif.

The long-term impact on tea producers is unclear following Fair Trade USA’s decision to split with the European-based Fairtrade International (FLO).

The breakup promises additional resources to pursuit of the ambitious goal of doubling U.S. sales for Fair Trade producers by 2015. It also introduces a new fair trade certification mark and is very likely to lead FLO to establish a rival U.S.-based certifier. There are no specifics on the cost to producers or adjustments to the minimum price (now $1.40 per pound for coffee with a premium raised from 10-cents to 20-cents of which 5-cents is earmarked for productivity and quality improvements).

Last year Fair Trade certified tea imports were up 38 percent in the U.S. with 7.3 million pounds traded since 2001. Fair Trade tea sells for $1.10 per kilo, or about 50-cents per pound more than conventional loose-leaf tea. The social premium for Fair Trade tea was $631,000 in 2010. Tea garden workers have received $2.5 million since 2002.

The new program will rely on widely accepted standards developed by Fairtrade International (formerly Fairtrade Labelling Organizations, International) but promises “to extend the benefits of Fair Trade to millions more farmers and workers,” says Stacy Geagan Wagner, director of marketing and public relations at the Oakland, Calif.-based Fair Trade USA.

Fair Trade for All (www.FairTradeforAll.com) describes a strategy of strengthening farming communities, igniting consumer involvement and innovating the Fair Trade model.

It was on this last point FLO and FTUSA could not agree. Last week the two organizations, founded independently in 1997 and 1998 and long-time allies, set Dec. 31 as the end of their relationship. In a joint release, leaders reaffirmed their commitment to assist largely impoverished third-world producers with a premium from consumers worldwide: “… as we look to the future, we recognize that we have different perspectives on how best to achieve this common mission.”

“To make Fair Trade for All a reality we need to be able to innovate in ways that work for producers and the U.S. market,” says Wagner. She says the new program will have more supply options and invest more to drive consumer awareness in the United States. The program offers a “fresh, updated, streamlined view of the world,” says Wagner.

The immediate impact of leaving is that the U.S. certifying body will no longer contribute $2 million of its $10 million budget to FLO. Territory assigned FLO-affiliated certifiers (such as Fairtrade Canada) are limited by region, the new certification mark is without borders. Up for grabs is the certification of $5 billion in global sales of fair trade certified goods.

FLO consists of three producer networks (Asia/Africa/Latin America), three marketing organizations and 19 national labeling initiatives in 18 European countries as well as Canada, Japan, Australia and New Zealand. Its two main branches are FLO International which develops standards and assists producers seeking certification; and FLO-CERT, a body that ensures compliance by 827 producer organizations (largely co-ops) in 58 developing countries.

Another fundamental point of contention is a FLO mandate that coffee producers must belong to a Democratic worker’s cooperative, a decision that excludes millions of laborers on estates and large farms. This restriction, while not universally applied, limits supply options, explains Wagner. She said Fair Trade USA is seeking a more inclusive solution. For example, Fairtrade certified tea is not bound by the rule and many large estates and farms that supply brands like Honest Tea and Twinings qualify. This is true of other agricultural products among the 105 categories represented.

In coffee the rule is rigidly enforced. This week organizations representing Fairtrade producers were quick to condemn the decision by Fair Trade USA. Red Café called the certification of big plantations “contrary to the founding principles of fair trade.”  In a press release President Merling Preza acknowledged that “the rights of workers must be defended” but the International Labour Organization and the government ministries of each country bear this responsibility.

The CAN Alliance of Fairtrade Producer Networks “are very are disappointed… all the more so as they have not been consulted prior to this decision.” In a joint release they expressed further disappointment “that Fair Trade USA has chosen to define its own orientations rather than forming part of the global vision, key principles and shared strategy endorsed by all members of Fairtrade International. The Producer Networks cannot support this unilateral action on the part of Fair Trade USA, which goes against their aspirations and interests.”

Fair Trade is well established in Europe, promoted by individual FLO affiliates and various grocery chains. Wagner points out that 24 percent of proceeds go to FLO Europe where Fair Trade enjoys 80 to 90 percent consumer awareness. In America consumer awareness of the Fair Trade program is 34 percent.

Fair Trade for All will invest more resources in promoting certified products and spend less on administrative overhead, she says, adding “We are about generating impact.”

“This all starts with consumers. They generate demand in a virtuous circle that rewards producers for improving quality,” says Wagner. In the past 12 years $220 million in additional income has got to workers at Fairtrade certified farms.

What is missing is access to capital and markets; investments to grow capacity and make quality improvements, she says. To facilitate these advances Fair Trade USA has launched Co-op Link.

“Right now we have funding to carrying out price risk management training in Colombia and Guatemala. And we have grant proposals in the hands of major funders so that we can expand to Mexico and Guatemala, and then more broadly to Indonesia,” she says.

Charitable origins

Fair trade began as a form of charity advocated by religious groups doing missionary work in third-world regimes where worker mistreatment was commonplace. Goods were sold direct to advocates of a moral economy. The first non-profits were structured alternative trading organizations, offering trinkets and crafts. In time consumer interest faded and the ATOs began shipping agricultural products.

In Europe fair trade labeling was the next innovation. It was seen as essential in differentiating conventional coffee and tea and other goods. In 2002 FLO launched the Fairtrade Certification Mark to simplify export procedures and improve consumer recognition. Significantly neither Transfair USA nor its Canadian counterpart adopted the European symbol. Both however complied with FLO requirements and paid FLO’s licensing fee.

In September 2010 TransFair USA changed its name and public identity to Fairtrade USA. Sales of Fair Trade products soared, doubling since 2007.

The World Bank estimates two billion of the world’s population live on less than $2 per day. “We find that this figure is as shocking as it is morally challenging,” asserts the vision statement on the new Fair Trade for All website. “While we recognize that Fair trade is not the complete solution for everyone who struggles with poverty, we do believe that Fare Trade can and must do more.”

Clarification: The Canadian FLO affiliate is Fairtrade Canada (formerly Transfair Canada). Transfair was one of three organizations that were unified to become FLO. The Canadian affiliate changed its name in March 2011.

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Dan Bolton

About Dan Bolton

Dan Bolton edits STiR Tea & Coffee Industry International. He was formerly editor and publisher of World Tea News and former editor and publisher of Tea Magazine and former editor-in-chief of Specialty Coffee Retailer. He is a beverage retail consultant and frequent speaker at industry seminars and conferences. His work has appeared in many beverage publications. He was a newspaper reporter and editor for 20 years prior to his career in magazines. Dan is the founding editor of Natural Food magazine and has led six publishing ventures since 1995. He lives in Winnipeg, Canada.