Is Fair Trade Becoming 'Fair Trade Lite'?

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Rice, who started TransFair in 1999, disagrees. "The notion that the standards have been lowered is ill-informed," he says. "Our objective is to help the poor, whether they own a plot of land or not."

Part of the problem Rice and Wal-Mart face is the difficulty of applying the same standards of equity and economics to different types of crops. While half of the global production of coffee comes from small farms, it takes a larger operation to compete in bananas, tea, cut flowers, or sugar. "The disadvantaged majority would be locked out of the market if I were to look for only small farms for bananas and tea," says Rice.

TransFair sets different standards for plantations to be certified as fair trade. They have to pay workers fair wages, allow them to organize into unions, and have strong worker-safety measures. The workers form a group and get part of the premium price (8% to 12% of each sale) that comes with the fair-trade label, for social and business-development projects. "There is a rose farm on top of a hill in Ecuador where the workers wear protective equipment against pesticides, they have free health care, and have invested in their own day-care facility with their project money—and I am proud of that," says Rice.

Ugly Colonial Legacy

Working against Rice, however, is the perception that plantation owners got where they are by exploiting poor farmers and workers in developing nations. Some of these plantations in previously colonized countries are still owned by colonizers—rich white Europeans. And some in Latin and Central America are owned or controlled by large corporations such as Dole and Del Monte (DLM). "Plantations are the legacy of an unfair system where the elite and the wealthy classes denied small producers their land, and small farmers always got the raw end of the deal," says Jonathan Rosenthal, CEO of Oké USA, which sells fair-trade-certified fresh fruit bought directly from growers.

Also, there are questions about whether TransFair has the resources it needs to monitor worker conditions, as labor-rights groups do. Those labor groups say it's hard to keep tabs on workers in countries like Colombia, which hasn't been a friendly place for trade unions and where workers are generally afraid to speak out. Indeed, none of the flower plantations in Colombia that are certified fair trade have worker unions. "We wonder if TransFair is equipped to deal with worker-rights violations, especially as they expand and get into more complex supply-chain industries like garments," says Bama Athreya, executive director of the International Labor Rights Forum, a nonprofit advocacy group in Washington.

TransFair's Rice says he will continue his push into other areas, even apparel. He says that when faced with criticism, he likes to remind himself of his experience in Nicaragua. The cooperative he started there had grown to 3,000 families after four years. The families' lives had improved dramatically—they had electricity and water, they could afford health care, and their children were attending high school and even college for the first time. "It was a transformative experience for me," says Rice. "And I believed that globally, I could have the same kind of impact if I grow that vision in America."

Gogoi is a contributing writer for BusinessWeek.com.