Is Fair Trade Becoming 'Fair Trade Lite'?

Some proponents say the adjustments needed to bring companies like Wal-Mart and P&G aboard warp the goal of helping small farmers

by Pallavi Gogoi

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When TransFair CEO Paul Rice sits across from Wal-Mart (WMT) CEO H. Lee Scott, the differences in their backgrounds couldn't be more stark.

Scott has spent nearly his entire adult life working at the retail behemoth, with a mandate to increase sales and profits and keep costs as low as possible. Rice, after graduating from Yale University in 1983, spent 11 years working with peasant coffee farmers in Nicaragua trying to squeeze higher prices out of coffee buyers. He set up one of the first cooperatives, with 24 coffee-growing families, who sold their first batch of fair trade product to Europe in 1990 for $1.26 a pound, compared with the 10¢ a pound coffee was selling for in Nicaragua then. "It was an overnight legend in Nicaragua," recalls Rice.

At one time, that gap might have made it easy to place Rice among Wal-Mart's detractors, considering the criticism of the chain's treatment of its own workers, its anti-union stance, and the sweatshop issues it has faced for years. Yet these days, Rice is finding a lot of common ground with Scott—especially since Apr. 1, when Wal-Mart launched three house-brand coffees certified as "fair trade," meaning they provide a fair price to small farmers. It was a crowning achievement for Rice, now chief executive of TransFair, the U.S. fair-trade industry's labeling organization. And it was a sign that the fair-trade movement has truly arrived in the U.S. mass market. After all, Wal-Mart is not only the world's largest retailer but also the one with the broadest reach.

Same Old, Same Old?

For some proponents of fair trade, however, that endorsement of their cause feels more like a co-opting. In trying to boost the participation of Wal-Mart and other large companies such as Procter & Gamble (PG), they fear the whole idea of helping small farmers is getting warped. Many of the beneficiaries, critics say, wind up being the same type of big operations that prospered under the old system.

Take Wal-Mart's warehouse-club division, Sam's Club. When Sam's started offering fair-trade tea, bananas, and roses earlier this year, it seemed like a huge win for the movement, which had already seen sales of fair-trade coffee grow tenfold from 2001 to 2006, to $730 million. "The idea of bringing high-quality items to our members at a great value that were produced in an environmentally and socially responsible way was just too compelling to pass up," says Gregg Spragg, executive vice-president for merchandising at Sam's Club, who replied to questions via e-mail.

But all the fair-trade cut flowers and a large quantity of tea, bananas, and sugar imported to the U.S. come from big plantations in places such as Ecuador and Colombia. "The large companies want to continue working with mass producers like plantations rather than going the tougher route, which is identifying small farmers and buying from them," says Carmen K. Iezzi, executive director of the Fair Trade Federation, a trade group of companies that say they are 100% committed to fair trade.

The Difference Between Coffee and Tea

Wal-Mart officials declined further comment about their fair-trade practices. Iezzi and others aim much of their criticism at TransFair USA, which is expanding fair-trade certification at a frenetic pace. They say that to keep up the pace of expansion, the organization is taking shortcuts that compromise the original concept. "When large, conventional plantations get fair-trade certified for improving practices, we consider that 'fair-trade lite,' " says Rink Dickinson, president and co-founder of Equal Exchange, a West Bridgewater (Mass.) company that is committed to buying only from farmer-run cooperatives. "There may be reforms, but it is a kindler, gentler version of the same old thing and falls short of what some of us are advocating."