Retail

A Furor over Fair Trade


Fairtrade International brings together retailers and other marketers in wealthy countries with small-scale producers of foods in the developing world. The organization’s goal is to ensure the ethical treatment of workers. Retailers in the U.S., Europe, and elsewhere can then sell these products as Fairtrade-labeled. Small farmers find affluent customers, who reap the satisfaction of knowing their purchases are helping a person, not an enormous, faceless agro-corporation. Last year $6 billion worth of Fairtrade-approved goods were sold globally, up 27 percent from 2009.

There’s trouble in this utopia, though. Fair Trade USA, the largest American group, announced on Sept. 15 that it would split off from its international peers and Fairtrade International in Bonn, which coordinates groups worldwide and imposes the standards that make fair trade such a powerful force. Fair Trade USA has started a separate label that retailers can use to boost sales of coffee, chocolate, and fruits worldwide.

That’s sparked an uproar as fair-trade advocates claim Fair Trade USA Chief Executive Paul Rice is putting standards at risk just to boost sales. Maria Louzon, national coordinator of United Students for Fair Trade, vows to boycott goods bearing the Fair Trade USA logo, including popular Green Mountain Coffee: “Lowered standards undermine the fair-trade values producers, activists, and consumers have advocated.” Rice rejects the suggestion that he’s undermining fair-trade standards. “We are after results,” he says. “We want to get things done.”

Fairtrade International CEO Rob Cameron has been more restrained in his response. Cameron wrote in an open letter on Sept. 16 that he and his colleagues “sincerely regret” Fair Trade USA’s decision.

Some of this may be attributed to growing pains as the movement, which started more than 20 years ago, expands. “Fair trade has caught the interest of big businesses, and that makes it possible to move large volumes of product,” says Jonathan Rosenthal, a fair-trade pioneer and co-founder of the Massachusetts-based cooperative Equal Exchange. “The risk is that fair-trade standards fall to the lowest common denominator,” says Rosenthal, who supports the original vision for fair trade.

Rice is breaking away after 13 years because he says it will be easier to make business-friendly decisions and double U.S. fair-trade sales by 2015. “Historically, so many folks in the movement saw fair trade as a partnership between producers in the developing world and consumers in the global north,” Rice said in an Oct. 12 conference call with fair-trade advocates. “Companies were kind of a necessary evil to make that partnership possible.” He sees the capitalist appetite for more fair-trade products as something to encourage. “Competition is not a bad thing,” says Rice, who earned an MBA at the University of California at Berkeley after founding a coffee cooperative in Nicaragua. “Companies like Wal-Mart (WMT), Costco (COST), Green Mountain (GMCR), Starbucks (SBUX), and Ben & Jerry’s are expanding their offerings in terms of fair-trade products.”

Rice would like to award the fair-trade label to coffee grown on larger estates: At present, only small-scale coffee farms qualify under Fairtrade International standards. He’s also testing fair-trade certification for cotton clothing even though the Bonn organization does not certify apparel yet. And Fair Trade USA got a commitment from Ben & Jerry’s to use non-fair-trade ingredients only if their fair-trade equivalents were not available by 2013. A spokeswoman for the ice cream company says, however, that the agreement with Rice’s group may be implemented “a little later.”

Rice’s moves are straining his relations with other fair-trade groups, too. Portland (Ore.)-based Fair World Project, which campaigns for transparent fair-trade and organic standards, says Fair Trade USA is going “rogue.” Rice has approved using the Fair Trade USA label on chocolate bars with approved cocoa even if the sugar isn’t fair trade. “We decided to not sacrifice the livelihoods of cocoa farmers on the altar of some misguided principle,” Rice said in the Oct. 12 conference call. “We decided to be flexible.”

Flexibility looks like hypocrisy to the purists. Says Luzon, “It is unacceptable that a company be allowed to produce a fair-trade chocolate bar with non-fair-trade sugar when such sugar is available.”

The bottom line: After building a market worth at least $6 billion, fair trade is undergoing a schism, with Fair Trade USA splitting off.

Clark is a reporter for Bloomberg News.

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Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $76.12 USD
    • -0.35
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  • COST
    (Costco Wholesale Corp)
    • $124.76 USD
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