Fairtrade － a brief introduction.doc

Fairtrade － a brief introduction

1. Coffee, big business but poor grower

Every year generating $18 billion in sales, coffee is the world’s second-largest legally traded commodity after oil. And most coffee consumers are in such rich countries as the United States (US is the largest coffee importer, consumes about a fifth of the total). However, the US and Europe – the main market of coffee consume – do not produce coffee.
Coffee comes from three major growing regions, Latin America and the Caribbean Islands, Africa and the Arabian Peninsula, Vietnam and Indonesia. Coffee is grown mainly by poor, small-scale farmers in developing countries.

In recent years with the dramatic fall in coffee price, many of these farmers have been forced to sell their coffee beans for less than they cost to produce. For example, in Vietnam’s Dak Lak province, only 60% of farmers’ production costs were covered. For some countries, coffee is their main export product (in Ethiopia it is 60% of its export)
About 125million people depend on coffee and most of them live below the breadline, so it is very important, that the trade must be fair.

2. Coffee price

 `1/coffee export value fall
Ten years ago producer-country exports captured one-third of the value of the coffee market. Today, they capture less than 10 per cent. Over the last five years the value of coffee exports has fallen by US$4bn; compare this with total debt repayments by producer countries Honduras, Viet Nam, and Ethiopia in 1999 and 2000 of US$4.7bn. In December 2001, the international coffee price crashed to a 30-year low. The impact on small-scale coffee farmers has been devastating.
 `2/coffee giants profits
Profit margins of the world’s biggest coffee companies are high – Nestle has made an estimated 26 per cent profit margin on instant coffee. Sara Lee’s coffee profits are estimated to be nearly 17 per cent – a very high figure compared with other food and drink brands.

Coffee giants include Kraft, Nestle, Proctor and Gamble and Sara Lee, which buy almost half the world’s coffee every year.

3. Coffee crisis

 `1/farmers getting poor
Cause of low price the families of coffee farmers dependent on the money generated by coffee are pulling their children, especially girls, out of school. They can no longer afford basic medicines, and are cutting back on food.
In addition, for a farmer to turn his back on the four years spent waiting for coffee trees to start bearing fruit is a highly risky strategy. And the instability of price is a huge problem for poor farmers. They hope for higher price, but higher prices will lead to increased production and then, send prices falling once again.
 `2/coffee paid for by poorest
Beyond farming families, coffee traders are going out of business. National economies are suffering and some banks are collapsing, forcing some governments of coffee-export countries further into debt.
In Ethiopia Coffee is at the heart of its economy. Of its $11.2 billion gross national product, 54 per cent is produced by coffee. Ninety per cent of the country’s exports comprise coffee.

Coffee is the world’s most popular beverage after water, with over 400 billion cups consumed annually. If everyone in the coffee supply chain were benefiting this would not matter. As it is, farmers are getting a price that is below the costs of production. In the end, according to Oxfam, 90 per cent of the price of coffee goes to processors and retailers in rich countries. In fact, those coffee companies’ booming business is being paid for by some of the poorest in the world.
 `3/No aids, just Fairtraide
In the late 1980’s Mexican farmers make a campaign on the failing coffee market. They declared that they’d rather want fair trade than pure human aids.

The average coffee farmer earns around $640 a year in producing-countries. If the international nonprofit organization, such as BuyWell International, pays that same farmer $1.71 per pound for their coffee crop, that is up to six times more than they usually get. Other big international nonprofit organizations, for example, Cafédirect, Traidcraft, Equal Exchange and Twin Trading, pays on average three times the world price to growers.
In the face of human misery, there have been many words yet little action. Fair Trade is Existing market-based solutions.

4. Fairtrade

 `1/links between consumers and farmers
Fairtrade is a voluntary model of trade that brings consumers and companies together to offer small-scale farmers a price for their coffee that covers the cost of production and provides a sustainable livelihood so that they can send their kids to school and pay their bills.
As a movement, Fair-trade have many forms which aim to help disadvantaged small-scale coffee farmers. For instance, Oxfam, BuyWell, UTZ kapeh.
 `2/root of Fairtrade
Fairtrade’s roots can be traced to the 1940s when churches in North America and Europe provided relief to refugees and poverty-stricken communities by selling their handicrafts to northern markets.
In 1988, the Max Havelaar convention in Holland established international standards as to what constitutes a livable wage, and what constitutes safe and healthy working conditions.

 `3/the FLO
The Fairtrade labelling organisation (FLO) is the international certifying body for Fairtrade labelled products. It guarantees a fair price for products in the Third World. Fairtrade products must meet a strict set of criteria guaranteeing, for example, decent wages, a fair price, credit terms, good environmental standards, no child or forced labour and worker representation in trade union activities.
There are now 19 national Fair Trade Labelling Initiatives that work under the international umbrella of Fairtrade Labelling Organizations International (FLO).
The first Fairtrade label was launched in 1988 in the Netherlands and applied only to coffee.
The list of Fairtrade products is growing, there are now over 100 including: coffee, tea, chocolate, bananas, sugar, etc.