Fair Trade attempts to regulate markets in favor of the less powerful, such as small-scale farmers, their organizations, and laborers in developing countries, involving them in the governance of coffee value chains in establishing norms for conditions of production. In the case of cooperatives, farmers, and workers in Nicaragua, Fair Trade has provided some advantages, especially to cooperatives, and improvements through development projects it has financed. However, Fair Trade has brought limited possibilities for farmers or workers to participate in deliberations on altering production conditions. Although Fair Trade has been designed to offer an alternative to conventional trade, it re-creates some of the power relationships that exist in conventional trade, and therefore, Fair Trade has a limited ability to build more relational value chains, where there is close dialogue between more equal partners in trade and where coffee producers create and control value that is embedded in coffee quality. Based on experiences of farmers and representatives of cooperatives in Nicaragua, Fair Trade still seems to suffer from implementation of its system in a top-down manner. Although democratically governed NGOs in Northern civil societies may be active in promoting Fair Trade and participate in creating regulation of coffee trade, involving farmers and workers in Fair Trade governance is impeded by a weak institutional context where farmer and worker organizations suffer from limitations in their operation. In involving different actors in value chain governance, Fair Trade may be better serving the needs of downstream actors in the North rather than its intended beneficiaries, the upstream actors in the South.
This study has highlighted some of the challenges involved in establishing minimum prices and questioned how well minimum prices can improve the position of upstream actors in the coffee value chain. This study has also paid attention to the situation of hired workers on coffee farms and in coffee processing, arguing that they should be involved in governing Fair Trade and targeted more clearly as beneficiaries of Fair Trade. Fair Trade would probably benefit from focusing more on social issues, such as assistance to vulnerable members of cooperatives, hired labor, and coffee farming communities in general, and paying less attention to attempts to control coffee prices, which involves many practical challenges as well as issues in equitable distribution of benefits. In this respect, Fair Trade would benefit from lessons learned during earlier decades when the International Coffee Agreements attempted controlling prices, especially how controlling prices became increasingly difficult in a more globalized world.
The findings of this research echo those of other studies on Fair Trade coffee in concluding that the system is inefficient in transferring income from Northern consumers to Southern farmers. Inequalities in the distribution value creation are higher in Fair Trade coffee than in conventional coffee, implying that in Fair Trade value chains the control of information on production processes brings limited benefits to its intended beneficiaries in the global South (Zehner, 2002; Mendoza
and Bastiaensen, 2003; Daviron and Ponte, 2005; Kilian et al., 2006; Bacon et al.
2008a: 344–345; Roquingny et al., 2008). Although in absolute terms Fair Trade has offered slightly higher prices to producer organizations, Fair Trade has also incurred costs to them decreasing the overall benefits.
Fair Trade presents many opportunities for future research. Most research has been done on coffee production, but Fair Trade continues to expand to other products. Remarkably little research has been done so far on labor conditions in the production of various Fair Trade goods, many of which are produced on large farms employing hundreds of workers. Fair Trade labor standards have also evolved.
Although this research suggests that the ability of Fair Trade to provide improved working conditions for hired labor is limited, it will be interesting to see whether the new standards result in changes to workers’ conditions.
The higher representation of producer organizations in the FLO board presents interesting questions about how the movement might change as a result. Fair Trade USA (formerly known as Transfair) split away from FLO in the fall of 2011. Fair Trade USA received 6.7 million USD in licensing fees from sales of Fair Trade products in 2010. The same year, it paid 1.5 million USD to FLO. Fair Trade USA resented that it had to pay such a large amount for its membership, but had limited influence in governing the system, which is headquartered in Germany (Neuman, 2011). In a further complication for producers, consumers, and researchers of Fair Trade, there are now two large Fair Trade organizations, which overlap in their operations in both producing and consuming countries (in the latter, at least in the US). Fair Trade USA continues to respect FLO’s Fair Trade standards, but aims to create standards of its own as well, duplicating standard setting, certification, and implementation. One of the changes implemented by Fair Trade USA is that it no longer restricts Fair Trade coffee certification to cooperatives of small-scale farmers, but makes certification open to all coffee producers regardless of their size or involvement in cooperatives. This gives more flexibility to companies sourcing Fair Trade coffee, enabling rapid expansion of Fair Trade in the US market, and makes Fair Trade certification accessible to more farmers, but this Fair Trade model no longer favors cooperatives over other coffee producers (Fair Trade USA, 2011). This is remarkable in view of the findings of this thesis, which suggest that if Fair Trade offers some alternative to conventional coffee production and trade, it is that it has supported and provided financing for developing cooperatives.
Upgrading through Fair Trade and organic certification can function to some degree as a buffer against low coffee prices in the future. As argued by Beuchelt and Zeller (2013), from the point of view of improving the situation of small-scale coffee farmers in Nicaragua what makes more of a difference as an upgrading strategy is if cooperatives and farms can improve their operations to become well-managed rather than if they are able to acquire certifications and sell their coffee as certified.
Fair Trade and various development projects have played roles in financing the development of cooperatives and farms, but much remains to be achieved. Many farmers are currently greatly indebted. Cooperatives are indebted or have limited capital reserves, which are sorely needed just to maintain their basic operation of buying coffee from their members. Many farmers produce low volumes of coffee
Conclusion
providing very little income whether their coffee is certified or not. Stronger cooperatives and better-managed farms would be more likely to survive any future crises such as adverse weather conditions, coffee diseases, or low coffee prices.
Beuchelt and Zeller (2013) propose that cooperatives build up their reserves in a process that is made transparent to members so that they understand that their shares are increasing. They also suggest an obligatory annual external auditing of cooperatives to avoid mismanagement and corruption. These actions would improve cooperatives’ creditworthiness to banks, reducing interest rates and improving access to credit. In the future, Fair Trade could play a role in these issues by, for example, financing extension services, external auditing of cooperatives, and creation of credit funds.
Regulating globalization through private authority, consumer choice, corporate responsibility, and marketing of civic content of products places a great deal of responsibility on actors with limited experience in altering conditions of production in developing countries. Actors participating in governing certification systems, such as Fair Trade, are searching for their roles in regulating conditions of production and trade. Fair Trade has taken upon itself multiple roles in improving the situation of farmers and their organizations, regulating price floors and credit to producer organizations, setting standards for labor conditions, and other norms for production and providing financing for development of producer organizations, farms, and social conditions in coffee-growing communities. Many challenges remain in these tasks, providing opportunities also for researchers to continue finding out how Fair Trade can alter conditions of production and trade.
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