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Equal Exchange?
An analysis of fair trade coffee
. . . by Emily Pudalov
[illustration by Alison Brockhouse]

All around the Brown campus—in the Blue Room, the CIT and Rock Kiosks, the Gate, and other food outlets—you can see people sipping their morning java out of red and brown paper cups swirled with dreamy messages that their coffee is “from small farmers with love.” Brown buys this coffee from a company based in Canton, Massachusetts, called Equal Exchange.

Equal Exchange is one member of a group of companies that label their product as “fair trade” coffee. In the U.S., there are four basic guidelines for coffee to qualify as fair trade: coffee importers must buy from farmers on a registry called the International Fair Trade Coffee Register, farmers are guaranteed a price of $1.26 per pound for their coffee (compared to a normal price zigzagging between lows of about $.42 and highs of about $1.30), importers must provide advance credit to farmers on their shipments, and there are to be no middlemen between the importers and producers. The ultimate goal of fair trade and its policy is to reverse the coffee industry’s history of colonialism, oppression, and destruction.

The company’s main purpose is to build a stronger economic base in poor Central and South American and African countries. But is Equal Exchange completely centered upon its cause? What about the bottom line? “This is not a charity program,” said alumnus Erbin Crowell B’93, the Equal Exchange “farmer’s representative” who closed the deal between Brown and Equal Exchange. “We’re just trying to help [the farmers] sell more coffee.”

Altruism aside, the economic logic behind Equal Exchange’s fair trade mission is that workers who are better paid and have a higher quality of life living in democratically run co-ops will produce more. Equal Exchange also believes that sustainable farming helps build a long-term economic base for farmers by protecting their land from dangerous chemicals and over-development. The company believes that sustainable farming practices translate into greater output of product and better quality coffee, and therefore bigger sales.

Yet Equal Exchange’s mission statement is also decidedly vague—there are just enough words to satisfy the curious customer meandering through the company website. What exactly are “democratically run cooperatives,” and how can a company encourage sustainable farming practices?

Democratic co-ops
Deborah Sick defines “democratically run cooperatives” in her book, Farmers of the Golden Bean, as places where everyone is both worker and manager, thus making exploitation impossible. Unlike private corporations, co-ops allow all shareholder-members equal voting power on changes in policy and company decision-making.

In theory, cooperatives should allow small producers to compete with larger and more powerful producers by banding individual farms together as one collective, increasing their overall production and economic output. By eliminating management and bureaucratic intermediaries, small and medium-scale farmers can receive a greater proportion of the sale price of their coffee.

The cooperative model tries to resolve some of the problems of small farmers whose land holdings don’t give them the political weight to assert their civil and economic rights.

“We are always losing right off the top,” said a coffee farmer in Guatemala, quoted by Gregory Dicum and Nina Luttinger in The Coffee Book. “The rich growers finance themselves, and they can afford to buy Cherokee trucks and fly back and forth to Miami. But we [small coffee growers] can never get ahead.”

Sustainable farming
In Andrew C. Revkin’s August 2002 New York Times article, “Managing Planet Earth,” he says that most government officials and scientists define sustainability as “advancing human endeavors without diminishing prospects for future generations.” However, international movement toward increasing sustainability has been slow. Wealthy nations clean their own air and water, but they continue to destroy forests and other resources beyond their borders. This “not in my backyard” model for environmental policy perpetuates the environmental problems connected to the coffee industry, specifically the destruction of natural forest habitats and the introduction of dangerous chemicals into the atmosphere.

In 1996, coffee plants sprouted up on more than 26 million acres worldwide. Large, mechanically harvested coffee systems take up as much as 68 percent of Colombia’s permanent cropland, and 40 percent of Costa Rica’s. This “technified” coffee harvested copiously in Central and South America is best grown in areas with lots of sunlight. Shade trees need to be cut or thinned, destroying the wildlife habitats they provided. This coffee also requires more agrochemicals like pesticides, herbicides, fungicides, and fertilizers—controversial substances that have incited much debate over their benefits and harmful impacts.

To encourage sustainable farming practices, Equal Exchange uses the power of the dollar. A Greenwire newswire said that Equal Exchange offers small, organic growers up to twice as much money for their coffee beans. By paying organic farmers more than the demanded price for their coffee, Equal Exchange supports a system of agriculture that improves the environment. Instead of clearing the forest, organic coffee farmers can grow their beans among the various plants and animals that already live in the local ecosystem.

This “shade-grown coffee” preserves biodiversity by leaving the forest canopy intact, and for farmers, biodiversity means stability. For example, if a large field produces coffee alone, one coffee-chomping insect could knock out the entire ecosystem. But with shade-grown coffee, even if the coffee plants were wiped out, the ecosystem would still be kept rich by the other species living there, and coffee could be replanted in the soil. Shade-grown coffee demands fewer chemical pesticides because it naturally combats pests and diseases, while also providing more sustainable agricultural conditions naturally.

Supply and production predicaments
Despite its virtues, the fair trade movement does not always attract your average Joe and his cup of joe. In 2000, Equal Exchange sold 1.5 million pounds of their fair trade beans, only .01% of annual worldwide consumption. Most consumers don’t want to pay more for a basic cup of coffee. Dunkin’ Donuts recently offered an organic coffee blend catering to environmentally concerned customers. But a Dunkin’ Donuts sponsored study showed that only 17% of their customers were willing to pay $1 more per pound for fair trade coffee, so they abandoned the product. The supply for fair trade coffee, it seems, always exceeds its demand.

The production side of fair trade coffee has had its difficulties as well. A growing number of co-ops operating within the fair trade market have run into financial trouble despite being paid higher-than-market prices. The detailed economic and organizational knowledge needed to run an export business lies far beyond the scope of most small coffee farmers. Though Equal Exchange only works with farmer co-ops, Transfair USA, the third-party U.S. fair trade certification organization, maintains guidelines for fair trade coffee that allow for producers with business structures “that are transparent and democratically controlled by their members” to manage the farmers. Farmers, then, may have to rely on hiring managers over whom they have little control. A “transparent” and “democratically controlled” system cannot always protect farmers from a bad manager who can ruin a co-op’s credit and loan rating, and its commercial liability.

The decision to create coffee co-ops in the first place was to help the farmers, and occurred long before fair trade coffee companies even existed. The idea of introducing managers to control the co-ops conjures up images of the historical coffee trade that fair trade supposedly rebels against. Do fair trade companies still treat farmers like colonialists did, even if they pay farmers better wages?

Consumer control
If only a small percentage of consumers are willing to buy fair trade coffee, but it’s one of the most accessible and powerful ways to support coffee farmers and sustainable agriculture, then perhaps laws can be made to promote its sale. In Berkeley, California, law school grad Rick Young proposed this solution. In his proposed Measure O, the city of Berkeley would have required all cups of coffee sold to be fair trade, organic, or shade-grown. The proposed punishment for breaking the law? Fines up to $100 and up to six months in jail.

Young said that there is not enough demand to buy all of the fair trade coffee already produced and Measure O could boost the demand. He was inspired to put the measure on the ballot as a citizen’s initiative after seeing a TV ad for Equal Exchange that showed a diner in a restaurant saying, “Excuse me waiter, there’s the blood and misery of a thousand small farmers in my coffee.” Ironically, Equal Exchange did not endorse the measure. “You can alienate some people when you make them do something,” said company rep Rodney North. The law came up for vote on November 5, 2002 and failed.

For the most part, the fair trade coffee system works—it increases the financial stability, and thus the quality of life, of farmers and it supports farmers who grow their coffee in natural shade and without chemicals. To address its problems, fair trade coffee producers can close the management gap if they take greater responsibility by keeping a tab on managers and disseminating market information.

However, because only a small fraction of coffee drinkers have the education and the disposable income to want to buy fair trade coffee, the fair trade market cannot thrive. The coffee industry’s exploitive practices would only really change if consumers voiced a clear opinion about how they wanted their coffee grown, processed, and delivered to them, and whom they wanted to profit from the trade. So far, this hasn’t happened. But on the Brown campus, where Equal Exchange coffee is everywhere, students, faculty, and staff can take the first small sip.

Emily Pudalov B’03 is swirled indreamy messages.

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