KUBO !

Torin Kubo
THEP 482
September 15, 2015

Dark and Rich

The Problem with Free-Trade Coffee
With its blend of flavors, dark rich color and an aroma that tingles your senses, coffee is a
product that is revered and consumed throughout the world. Coffee exportation is a $20 billion
dollar business (Business Insider) and the United states alone imports more than 22 percent of
the worlds coffee. More than 75% of Americans consume at least one cup of coffee each week.
(NCA) So as you are reading this, there is a good chance that you might even be peering over
your own steaming cup of coffee. But have you ever wondered where your coffee comes from or
how your purchase impacts the people who grow it?
Well to truly see the whole picture you need to understand how your coffee is imported and
exported and it all begins with Free-Trade coffee. Free-Trade coffee production, otherwise known
as Fair-Trade coffee production is the act of producing coffee to the standards of Fair-Trade.
Fair-Trade is a trading partnership between Fair-Trade organizations and small coffee bean
farmers to provide better trading conditions. These organizations are active in supporting the
producers as well as maintaining sustainable farming practices.(Fair-Trade USA 2015) Beginning
in 1988, Fair-Trade was the new way to import and export coffee beans. This new system was
introduced after the coffee crisis of 1988 in which the supply of coffee was higher than that of
the demand. It began as a movement in Europe by progressive church-based constituencies
linked to liberation theology-inspired cooperatives.(Equal Exchange 2015) They believed that
the current system for coffee trade was detrimental to the small coffee farms causing them to
become destitute. This new system would allow for the poor farms to earn wages that would
ensure a profit. However, as the times changed so did the system.
Currently there is a lot of debate on whether or not Fair-Trade coffee works. As a whole,
this system is meant to provide a positive economic impact for growers. However, strict
certification requirements are resulting in uneven economic advantages for coffee growers and
lower quality coffee for consumers.(Haight 2011) But what does this really mean? Well it means
that the system has evolved. No longer is it an economic or social justice movement but rather a
model of ethical consumerism. As for the commodity of coffee, it is broken into grades and

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within these grades the coffee is standardized. Specialty coffee is of a higher grade and is sold at a
higher cost. Fair-Trade coffee, can come in any quality but is stuck in the speciality coffee
structure because of its production requirements and pricing. In essence it becomes an ethical
conundrum. For example, imagine a farmer with two bags of coffee. One of them is of high
quality the other is of lesser quality. The bags of coffee are worth $1.90 and $1.25 respectively.
Now imagine the selling price given by the Fair-Trade organization is $1.35 and they will only
buy one bag of coffee.(Haight 2011) As the farmer, what would you do in this scenario? Both
provide an ethical dilemma and it becomes hard to justify how this system would even be
considered as ethical. On the one hand the farmer could sell the high quality beans to the FairTrade organization, thus providing them with the higher quality beans but would receive a price
that does not justify its quality. On the other hand, the farmer could sell the lower quality beans
at the higher set price which would allow the farmer to gain a profit but provide the organization
with poor quality beans. Both situations are unethical and thus provide us with a flawed system.
Ethics aside, in terms of economics, the system still remains flawed. The system works as
follows. The Fair-Trade organizations decide on a minimum price per pound which is called the
price floor. All of the coffee that is exported is bought at a market price that is at the minimum
price floor or higher. For the growers to receive this price they must pay a fee to become
certified and a member of this organization. This membership/certification places a standard
that must be followed by the growers in terms of sustainable practices and labor laws. From an
environmental point of view this is a great system. Since the growers must follow certain practices
it reduces their environmental impact in terms of pesticide, chemical and fertilizer use. However,
from an economic view it becomes a flawed design. A recent study by economists Craig
McIntosh of U.C. San Diego and Alain de Janvry and Betty Sadoulet of U.C. Berkeley found
that the Fair-Trade system is offset by the price the growers have to pay for fair-trade
certification.( Wydick 2014) In other words the long-term benefit is non-existent. (Janvry,
McIntosh, and Sadoulet 2014) But what does this really mean. Well it means that the fee to
become a member does not get compensated over time. Rather it becomes a financial burden for
the smaller farms. This is a problem because the whole point of the Fair-Trade system is to help
the impoverished coffee bean farmers.
As for a theological view on this system the same can be said. The system of Fair-Trade is
meant to pay a just price for products. In other words they must demonstrate that the products

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do more good for the communities in which the products come from. This means that if we buy
a product from a Fair-Trade organization we know that the money that goes towards that
product is helping out the community in which it came from. If we are to except this condition
based on Christian morals then we would find that we would, in effect, be accepting that the
Fair-Trade organization have a a perpetual monopoly in labelling. (Booth 2008) Not only that
but there becomes an issue with what Christians deem as the just price. For Christians, a just
price is based upon the effort put in and the costs that incur during the production of a product.
However, for others the same might not be true which creates a divide in what we would pay on
the basis of a just price.
So what can we say about Fair-Trade coffee production. Well from an economic,
theological and ethical point of view the system is flawed. As it currently stands, its goal of
helping the impoverished farmers achieve wages that would ensure a profit are not currently
being met. Instead it is causing detrimental effects and providing the more wealthy farms to
trade in a market that is unethical and corrupt. However, even though the system is flawed, the
base values for the system and what it is trying to achieve environmentally is still very relevant
and the best way to empower growers and drive sustainable practices. Without its prior attempts
we would be left with lower quality coffee, even poorer coffee farms and potentially a higher cost
of coffee for the consumer. However, the system hasnt had a big enough impact to change this.
Unfortunately for the consumer and the growers we will have to wait and see if things change but
only time will tell.

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Works Cited
Booth, Philip. "The Economics of Fair Trade." 16 July 2008. IEA Current Controversies Paper.

13 September 2015 <http://www.iea.org.uk/sites/default/files/publications/files

upldbook437pdf.pdf>.
Equal Exchange. "History of Coffee in Nicaragua." 1 January 2015. Equal Exchange. 13

September 2015 <http://equalexchange.coop/history-of-coffee-in-nicaragua>.
Fair Trade USA. "About Fair Trade USA." 1 January 2015. Fair Trade USA. 13 September

2015 <http://fairtradeusa.org/about-fair-trade-usa/mission>.
Haight, Colleen. "The Problem with Fair-Trade Coffee." 1 July 2011. Stanford Social Innovation

Review. 11 September 2015 <http://ssir.org/articles/entry

the_problem_with_fair_trade_coffee>.
Janvry, Alain de, Craig McIntosh and Elisabeth Sadoulet. "Can a Disequilibrium Market Serve

as a Development Tool?" 1 January 2014. Fair Trade and Free Entry. 12 September 2015

<http://gps.ucsd.edu/_files/faculty/mcintosh/mcintosh_research_fair.pdf>.
Wydick, Bruce. "10 Reasons Fair-Trade Coffee Doesn't Work." 7 October 2014. Huffington Post.

12 September 2015 <http://www.huffingtonpost.com/bruce-wydick/10-reasons-fair

trade-coffee-doesnt-work_b_5651663.html>.
Business Insider. "11 Incredible Facts About The Global Coffee Industry." 11 November 2014.

Business Insider. 14 September 2015 <http://www.businessinsider.com/facts-about-the

coffee-industry-2011-11>.
NCA. " Coffee Is Americans Favored Daily Beverage Next To Water.

13 March 2015. National Coffee Association USA. 14 September 2015 <http:/

www.ncausa.org/i4a/pages/index.cfm?pageID=1062>.