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Critics Contend Fair Trade Labeling Group, TransFair, Cozying up to Big Coffee Buyers

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Paul Rice heads an organization that gives many of the poorest people in Third World countries hope for a better life.

Rice's TransFair USA, a nonprofit based in Oakland with 53 employees, certifies fair trade products -- that is, products grown by Third World country farmers who are paid living wages, work under safe conditions and are allowed to organize into cooperatives.

Importers who purchase from fair trade producers are committed to ensuring economic justice for the growers and seek certification from TransFair USA that they do so.

TransFair USA audits the supply chain from the farmer or co-op to the shelf.

"By virtue of that service we can guarantee consumers that their coffee or bananas are fair trade. This is one of the most extensive global certification programs around," Rice said. "No money flows through our hands, and we don't buy or sell."

For his work in the fair trade movement, Rice, 47, has three times been honored with a Social Capitalist award from Fast Company magazine and has been lauded by humanitarians and captains of industry alike.

But his critics charge that he is subverting the aims of the movement by including large retailers -- including Wal-Mart and Starbucks -- under the TransFair USA aegis. Some say TransFair USA has become too powerful and several small importers have left the organization.

"The little producer has felt neglected against all of the attention TransFair USA is giving these producers," said Mark Inman of coffee roasting company Taylor Maid Farms of Sebastopol, a TransFair USA member. "Their inclusion waters down the fair trade message, which is a living wage and equal opportunities for growers. McDonald's and Wal-Mart, for instance, are notorious in their underpayment of workers."

Proponents say the fair trade movement has raised the incomes and prospects of countless farmers in the world's poorest countries.

"We serve the poor and those are folks who have land or who don't," Rice said. TransFair USA-certified products might come from single-farmer acreage or large plantations, he said.

TransFair USA launched in 1998 by certifying coffee, and the organization is constantly expanding the number of commodities it will certify, which today includes coffee, tea, herbs, cocoa, chocolate, rice and fruit.

"Last year we certified 150 million pounds (of coffee) and that has generated in turn about $100 million above what farmers would have received at the local market," Rice said.

Coffee roasters pay from 5 cents to 10 cents a pound for TransFair's auditing fee. While total retail sales of all fair trade products in this country were almost $1 billion last year, the fee coffee roasters alone paid TransFair was about $4 million last year, Rice said.

Rice did not invent the concept of fair trade but adapted it from the European model. The movement has been growing since the 1940s.

In the last six decades, consumers have become more aware that their shopping choices affect the quality of life of workers many time zones away.

The Fairtrade Labelling Organizations International, the worldwide umbrella for certifying organizations such as TransFair USA, said the global network's traded commodities sold for $1.1 trillion in 2005, up from $220 million in 2000. At the same time, a multiplicity of nongovernmental organizations has blossomed to support fair trade commerce.

On a recent visit to Nicaragua, Rice recounted how he ran into his friend, Santiago, a coffee farmer.

"His co-op is one of the luckiest," Rice said. "They sell 100 percent of their fair trade coffee."

Santiago has even more to cheer about. His income over the past decade has risen from $600 annually to $2,000, allowing him to buy a mule so he doesn't have to tote 150 pounds of coffee on his back down the mountain.

He also feels fortunate because his daughter Yolanda is the first person in his village to finish high school, thanks to the scholarship fund set up by his co-op, Rice said.

Rice said future generations in towns like Santiago's need not be locked into poverty thanks to the support the farmers enjoy with fair trade prices.

However, just because a farmer becomes fair trade certified doesn't mean he's going to make a sale. "We have more certified farmers in the system than we have buyers," Rice said.

Rice, whose charming and open manner makes him easy to like, is president and chief executive officer of an organization that speaks to the hearts of increasingly conscientious and informed consumers. What's not to like?

In fact, all is not perfect in paradise. In 2000, when major coffee roasters such as Tully's, Starbucks, Emeryville-based Peet's Coffee & Tea, and Green Mountain Coffee Roasters won TransFair USA certification, to be followed in a couple of years by major retailers such as Dunkin' Donuts, McDonald's, Costco and Wal-Mart's Sam's Club, the small importers felt betrayed.

They were also upset when they found out the big guys could negotiate a smaller auditing fee with TransFair USA.

Critics say that certifying large retailers, many of which don't have the best corporate reputations, undermines the fair trade movement and undercuts small growers, but Rice counters that new members -- of any size -- ultimately further the goals of economic justice for all.

Furthermore, TransFair USA certifies the corporate giants even though only a small proportion of coffee they buy from growers meets the fair trade criteria, said Inman, who is on the board of the Specialty Coffee Association of America.

But it's all to the good, Rice contends.

"Any company willing to step up and meet the fair trade gold standard -- corporate responsibility in the supply chain -- should be encouraged to do so," he said. "We want to encourage such companies in incremental growth."

But small importers and growers do not take this long view. They resent that the big retailers underprice the small fair trade buyer.

Instead, several small importers are cutting side deals, conforming to fair trade ideals and practice but avoiding TransFair USA certification. A number of small importers have defected from TransFair USA, Inman said.

For instance, Inman said Taylor Maid Farms deals with growers in Mexico "who are earning well above the TransFair USA price. But we are not selling under TransFair USA terms. We do it directly."

Inman said while he remains a member of TransFair USA, he has lost faith in it and its certification process.

Dean Cycon of Dean's Beans in Massachusetts said, "TransFair is crumbling."

He was a member until three years ago. He and several others formed a working group with TransFair to establish more "transparency and honesty" in the certification process. After a year of fruitless negotiations with Rice, Cycon said he and the others gave up in disgust.

"Licensees make egregious claims (about how much of their coffee is fair trade) under the banner of TransFair," Cycon said. "We wanted to create a grid of the total amount of coffee each licensee purchased and the percentage of it that was pure fair trade and from which country."

Rice said he would create such a grid if he could, but his hands are tied. The amount of fair trade coffee Starbucks combines in its blends is proprietary, something like Coca-Cola's recipe, Rice said, and such members will not divulge that information.

Dean's Beans is now using Quality Assurance International, an independent certification program for organic products, to certify his company's adherence to fair trade. Others have gone the same route, he said.

Cycon claims that not only are importers disgruntled with the organization but so are farmers.

"Farmers from Nicaragua, Mexico, Costa Rica, Indonesia and Ethiopia have told us they have fought with TransFair for several years for higher prices, but Rice would not agree because the large licensees would not go along," Cycon contended.

Rice says this is clearly untrue since Fairtrade Labelling Organizations International, the world's pre-eminent standard setting and certification body for fair trade goods, controls the price paid to coffee farmers.

In fact, the international body has recently approved an increase. On June 1, market coffee will rise by 5 cents to $1.31 a pound and fair trade by 10 cents to $1.51. While this is the first time the price of coffee has been raised in a decade, the price of other fair trade products goes up annually.

Copyright 2007 MediaNews Group, Inc.

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