How Fair is Fairtrade?(coffee industry)(Statistical Data Included)

The coffee farmers of the Marmas Valley in northern Peru are overcoming a crisis of historic proportions. In fields dotting verdant hillsides near the border with Ecuador, some old-timers remember lean seasons when they allowed the dark red beans to rot on the branch because prices had fallen so low. These days, however, 7,000 Peruvian growers are guaranteed premium prices for part of their crop by Fairtrade, a network of European and North American activists. The scheme has enabled farming cooperatives to cut out middlemen and sell their beans directly to importers willing to cough up the "fair trade" price of $1.26 per pound, more than double the current world market price. "Without Fairtrade we wouldn't have survived as farmers," says Isidro Guerrero, a wiry 53-year-old farmer. "We're grateful that there are people in other countries who've given us a helping hand."

The help could not be more timely. In just four years, prices for a pound of beans have fallen from a peak of $3.18 per pound to a 30-year low that is hovering beneath the 50-cent threshold. The Association of Coffee Producing Countries abandoned its bid to become the industry's equivalent of OPEC and closed down operations two weeks ago. Tens of thousands of small farmers in Latin America, Asia and Africa have abandoned their plots, and in Colombia and Peru, some have switched to other crops like bananas or coca as a last resort. "People aren't taking care of their coffee farms anymore," says Raymond Kimaro, the head of a coffee cooperative representing 100,000 Tanzanian farmers. "All their lives they have been depending on coffee, [but] they say it doesn't pay."

The Fairtrade movement began in the Netherlands in 1989 with a simple idea: target socially conscious consumers who would be willing to pay a bit extra at the supermarket in exchange for the assurance that Third World farmers receive a reasonable return for their labor. Organizers have developed marketing channels for seven food products ranging from orange juice and honey to sugar and cocoa, but they focused most of their efforts on coffee as the second most heavily traded commodity in the world after oil. In the rallies that upset world-trade talks in Seattle three years ago, one of the few protest slogans that represented a solution to the problems of globalization--not just a complaint--was "Fairtrade not Free Trade."

So far, however, the ambitions of the Fairtrade movement fall well short of a global alternative to free trade. Activists have recruited gourmet-coffee importers and roasters in more than a dozen European countries, and more than 130 brands of coffee bearing the Fairtrade seal of approval are now sold in more than 35,000 European supermarkets. Fairtrade sales reached $212 million in Europe last year, just a tiny fraction of the market. Four million pounds were sold in the United States, less than 1 percent of the total.

The obstacles to wider sales for fair trade beans are numerous. The price is too steep for canned coffee companies like Nestle, which rely on high volume. Specialty coffee roasters targeted by the movement account for less than 5 percent of the industry. A 500-gram bag of Fairtrade coffee beans costs an average $5.60 at German supermarkets last year, nearly $2 more than regular beans. And it's not clear whether even rich consumers, accustomed to high prices for specialty coffee, will pay the same markup for politically correct tea or bananas.

In effect, the ...