Coffee Controversy

from The California Catholic Daily

Fair Trade may be an answer to illegal immigration, but, say critics, it does not address the underlying problems of poverty.

Ten years ago, Daniel Cifuentes left his coffee farm in the Chiapas region of Mexico because of a severe drop in coffee prices. The farm, he told the Los Angeles Times (March 12) could no longer support his family.

But Cifuentes did not cross the border into the United States. Instead, he opened a coffee roasting plant in Agua Prieta, a town on the Mexican side of the border with Arizona. With help from the Presbyterian Fronteras de Cristo group, he not only opened the plant, employing six families in Agua Prieta, but has organized a coffee trade cooperative in Chiapas, providing a living for another 35 families in that southern state.

Cifuentes’ businesses operate under what is called “Fair Trade.”

Fair Trade refers to arrangements made between importers in “first world” countries like the United States and farmers’ cooperatives in the “third world.” It seeks to address injustices flowing from free trade that force farmers to accept very low prices for their crops and often forcing them to sell their land to large corporations and seek employment in the cities or across the U.S. border. Fair Trade importers help farmers form cooperatives and assure them a certain base price for their products, often twice the market price. The price is paid directly to the cooperative, which distributes it to its farmer members. The cooperative, however, may vote to use the money to build schools, clinics, and other projects from which the members benefit.

Fair Trade products include not just coffee but chocolate, pineapples, tea, bananas, and other products. These are marketed through groups like the Massachusetts-based Equal Exchange and Catholic Relief Services. A California-based Fair Trade company is Integrity Express of Gilroy, which calls itself a “faith-based, family business ... working within the free enterprise structure to build awareness in our local communities of the realities hardship and poverty in many developing countries and offering the alternative of Fair Trade....”

Several studies of Fair Trade since 2002 have been mostly positive. It has, according to the studies, strengthened producer organizations, improved returns to small producers, given them greater access to credit, strengthened families (by giving them greater stability and increased access to education), and led to a significant drop in infant mortality.

Fair Trade, however, has critics on both the “left” and “right.” Groups like the libertarian Cato Institute say Fair Trade “subsidies” lead to price distortions which encourage farmers to produce more coffee, leading to excess supplies resulting in even lower prices for conventional producers. In the long run, say such critics, Fair Trade could end up hurting all producers by removing price signals and encouraging inefficient practices.

Other critics, however, say Fair Trade prices are not high enough. The scheme, too, they say, working within the current “free trade” economic system, hinders the development of a more fair, more truly autonomous system of trade. Broader trade policy changes are needed, they say, to improve the lives of all poor producers.