Trade Aid Letter to the editor in response to Fair Trade in Hot Water over Coffee - Dominion Post, 2 May 2007.

Dear Editor

Disappointingly the article by Keri Welham (Fair Trade in Hot Water over Coffee, The Dominion Post, 2 May, 2007) is an unfair piece of journalism whose statements throughout the article are aimed at misleading your readers.

A statement such as ‘fair trade retailers should not promote their coffee as helping to lift Third World producers out of poverty when the reality is some growers are still poorly paid’ is a statement that actually supports the need to increase the demand for fair trade coffee. Currently although the demand for fair trade is rising, many cooperatives still have to sell a substantial proportion of their crop at the world coffee price which reduces the effect that fair trade prices are able to have on the lives of coffee producers.

For a comparison of the difference farmers can receive for fair trade, it makes sense to look at the prices paid for the fair trade coffee we drink here in New Zealand. The average world coffee price taken over the year of 2006 was US96 cents. This compares with an average price of close to US$1.70 which was the price Trade Aid paid to coffee producers for the same year. Trade Aid imports a large majority of all fair trade coffee in New Zealand.

Another misleading statement by Welham is “small-scale farmers pay about $3500 for Fair Trade certification, making their costs higher than on the open market”. This cost is not levied upon farmers as we are led to believe, it is a cost to the cooperative. Using Will Padilla (this year’s fair trade fortnight speaker) as an example, he tells us that Coopeagri, the Costa Rican Cooperative he represents pays US$2000 per annum for fairtrade certification. Coopeagri has 12,000 producer members meaning that in effect, these small scale farmers in Costa Rica pay US16 cents each, and this amount reduces for cooperatives who have smaller scales of production. There is also a fund available for cooperatives who cannot afford the annual fee. Every certification system has a cost, the question is do the benefits outweigh the costs? In the case of fairtrade we know this answer is yes.

When the world coffee price can be allowed to fall so far below the cost of production (as it did famously in 2002) we have to ask ourselves, can a free market coffee system bring thousands of producers out of a cycle of poverty? The answer so far has been no. When asked the same question of the fair trade market – we can provide thousands of examples of instances where producers’ children are going to school, health systems have been set up, cooperatives’ capacity increased, all through fair trade support. If your readers really want to hear informative information on fair trade they should get out and hear the proof for themselves. Will Padilla is talking in Nelson, Wellington, New Plymouth and Auckland for the remainder of Fair Trade Fortnight. See http://www.tradeaid.org.nz for details.

Michelia Ward
Communications and Education
Trade Aid Importers

The following are the two articles that led to the above response from Trade Aid

Oxfam coffee 'harms' poor farmers
Caroline Overington, 28 April 2007
The Australian

TWO Melbourne academics have lodged formal complaints against Oxfam Australia over the sale of Fairtrade coffee, saying it should not be promoted as helping to lift Third World producers out of poverty because growers are paid very little for their beans.

Tim Wilson, a research fellow at the Institute of Public Affairs, and Sinclair Davidson, professor of institutional economics at RMIT University, have asked the Australian Competition and Consumer Commission to investigate Oxfam, saying it is guilty of misleading or deceptive conduct under the Trade Practices Act.

Mr Wilson said there was evidence that Fairtrade products could do more harm than good for coffee producers in undeveloped nations. He cited reports alleging producers had been charged thousands of dollars to become certified Fairtrade providers and some labourers received as little as $3 a day.

In order to lodge the complaint, Mr Wilson purchased a 250g pack of Fairtrade organic decaf ground coffee from the online Oxfam shop.

"We purchased this product in good faith, with the aim of lifting people out of poverty while enjoying our favourite brew," Mr Wilson said, in his letter to ACCC chairman Graeme Samuel.

Mr Wilson and Professor Davidson have long held doubts about whether Fairtrade products help coffee, tea and cocoa producers in undeveloped nations. Sales of such products in Australia total about $8million.

The complaint to the ACCC refers to an article published in the Financial Times last September, which said Fairtrade coffee beans were "picked by workers paid below minimum wage". It claimed workers received the equivalent of $3 a day.

The coffee is sold at a premium to people concerned about Third World poverty.

The academics quote an analysis of Fairtrade, published in the US-based Cato journal, which says coffee producers in poor nations are charged $3200 to become certified Fairtrade providers. The producers' costs are therefore higher than on the open market. The Fairtrade campaign aims to manage the international coffee trade by fixing prices at $US1.26 ($1.64) per pound (454g) and eventually fixing supply.

"Oxfam says the Fairtrade coffee allows growers in developing countries to sell coffee 'at a decent price' but we don't accept that the Fairtrade system can work," Mr Wilson said.

"Our primary complaint is that this is an unsustainable system. The only sustainable mechanism is through free trade. They are artificially cooking up the international coffee trade, to promote the interests of the Fairtrade brand and the people who sign up to it."

Fairtrade coffee is stocked by Coles and the Hudson coffee chain. Origin Energy and Orica make Fairtrade coffee available to staff in their Australian offices.

Oxfam rejected the academics' claims. It is this week promoting a Fairtrade Fortnight. To mark the event, Oxfam Australia invited Costa Rican coffee farmer Guillermo Vargas to a series of lectures on Fairtrade.

Oxfam's Neil Bowker rejected criticism of the Fairtrade coffee project, saying: "It's all audited and monitored, from beginning to end, and we've got no doubts about the effectiveness."

Fair Trade in Hot Water over Coffee - 2 May 2007
The Dominon Post

Just as Fair Trade Fortnight gets under way, Oxfam Australia faces a complaint over the sale of coffee. Keri Welham reports.

CLAIMS that fair trade initiatives can cause more harm than good for coffee producers in developing countries have resurfaced to collide with the launch of Fair Trade Fortnight.

As coffee addicts around Australasia reach for their favoured designer decaffeinated vanilla latte concoction this morning, the fair trade industry is again defending itself over claims that fair trade coffee plantation workers remain on wages as low as $3 a day and small-scale farmers pay about  $3500 for Fair Trade certification, making their costs higher than  on the open market.

Melbourne academics have lodged a formal complaint against Oxfam Australia over the sale of fair trade coffee. Drawing on research first published  in a Financial Times expose last year, the academics say fair trade retailers should not promote their coffee as helping to lift Third World producers out of poverty when the reality is some growers are still poorly paid. The complaint has gone to the Australian Competition and Consumer Commission (ACCC).

Fair trade products are sold at premium prices to the socially aware consumer; the same consumers targeted in the Fair Trade Fortnight launched on Saturday. The two-week event is run in New Zealand by Oxfam NZ, Trade Aid and the Fair Trade Association of Australia and New Zealand, with support from the Government's international development agency, NZAid.

Will Padilla, a Costa Rican coffee co-operative member, will speak in Wellington this week about the benefits of fair trade for his community, and various New Zealand workplaces have signed up to introduce fair trade produce into their offices and celebrate with New Zealand's Biggest Coffee Break this Friday, May 4.

Fair trade coffee is served at dozens of Wellington outlets, and in cafes nationwide. In 2006, $4 million worth of products labelled fair trade were sold in New Zealand.

But Australian academics Tim Wilson, from conservative think-tank the Institute of Public Affairs, and Sinclair Davidson, from RMIT University, say fair trade is an unsustainable system and consumers are paying more for a product that could actually be harming coffee-producing nations.

A Financial Times article last September said fair trade coffee beans were ``picked by workers paid below minimum wage''. It claimed workers received the equivalent of $3 a day. Oxfam NZ executive director Barry Coates said the Financial Times research the academics quote in their complaint was thorough but concluded there was nothing of substance in the allegations. Mr Coates said the criticism was unfair, and the complaint to the ACCC was timed to derail Fair Trade Fortnight.

Trade Aid commodities manager Justin Purser said many consumers wanted to make conscious choices without needing to be fully versed in international trade, which was a complex area.  It was easy to sow doubt in these consumers' minds, and he conceded there were problems with ensuring fair trade. It was an area of international trade in need of constant refinement.

The following are responses from Oxfam NZ and The Fair Trade Association of Australia and New Zealand

Subject: Letter from Oxfam New Zealand to the Dominion Post

Dear Editor,

We are disappointed with the article by Keri Welham (‘Fair Trade in Hot Water over Coffee’, The Dominion Post, 2 May 2007), which misquotes me and recycles old allegations that have been refuted in the past.

To set the facts straight: Fairtrade works. It benefits poor producers. And it also tastes good.

The article referred to allegations in the Financial Times last September. A thorough investigation found that the Peruvian coffee farms in question pay workers 25% more than they can get elsewhere, even though they are only able to sell 10-15% of the crop to the Fairtrade market due to lack of demand. Far from being an indictment of Fairtrade, it is a compelling reason to buy Fairtrade.

Reputable international studies have demonstrated the benefits from Fairtrade. For example in 2002, research by the University of Sussex found significantly higher prices for coffee farmers in Fairtrade cooperatives in Costa Rica and concluded that, ‘Fairtrade can be said to have accomplished its goal of improving the returns to small producers and positively affecting their quality of life.’

The real scandal here is that the right wing think tank IPA and Ms Welham are denying members of the public the full story. Over the next ten days, you can find out how Fairtrade is helping over a million farmers in the developing world by coming to hear the facts from a Costa Rican coffee farmer or by taking part in New Zealand’s Biggest Coffee Break. See www.oxfam.org.nz for details.

Barry Coates
Executive Director
Oxfam New Zealand

Subject: Letter from FTAANZ to the Dominion Post

Dear Editor,

Thankfully New Zealanders are making their own informed choices when it comes to Fairtrade coffee, rather than relying on misleading and incorrect information such as that provided by Keri Welham (Fair Trade in Hot Water over Coffee, The Dominion Post, 2 May 2007).

Fairtrade appeals to those who believe in fairness and increasing opportunities for people who work hard to produce our basic commodities, whilst at the same time appealing to those who just love a really good cup of coffee. The Fairtrade Labelling and certification system complies to ISO65 and provides a third party audited guarantee that a Fairtrade labelled product has been traded to international Fairtrade standards.

The aim of Fair Trade Fortnight is to enable people to make their own choices, for their own personal reasons. We are asking New Zealanders to find out more about fair trade and to challenge them to think about where their coffee and other purchases really come from.

By providing people with the opportunity to meet and speak with Will Padilla, visiting New Zealand from a fair trade coffee cooperative in Costa Rica and our speaker for the fortnight, we are demonstrating the success that fair trade can bring to communities in developing countries in a personal way. So rather than spending time reciting incorrect information, Ms Welham should come along to one of the many Fair Trade Fortnight events happening over the next ten days and ask Will, or some of the many Kiwis who are involved and dedicated to fair trade, why it is so important to them. Perhaps she may even join those of us that enjoy our fair trade coffee once she has done so.

For information on all Fair Trade Fortnight's events, and where Will Padilla is speaking about his first hand experience of the impacts of fair trade, please visit; www.fairtrade.org.nz

Stephen Knapp
Director FTAANZ

Interested in reading other responses to questions or criticisms of fair trade? Check out our FAQs