BOX 4.2  FAIR TRADE CERTIFICATION:RURAL PRODUCERS MEET THE WORLD

A coffee drinker in San Francisco has little chance of ever meeting the small-scale farmer in Nicaragua who may have raised the original coffee beans. But if the coffee drinker has bought “Fair Trade” beans, he or she has made a conscious effort to support the coffee producer with a fair wage. Goods that are certified as “Fair Trade” are priced a little higher than the market rate, with the premium routed to the small rural producer in the form of a slightly higher profit. The Fair Trade concept aims to bring small farmers a fair price for their products and to support sustainable and socially responsible production methods (FLO 2004:3-8). Fair Trade is thus one of the more benign faces of globalization, with the potential to connect poor rural producers with global markets.

Besides coffee, Fair Trade items include tea, cocoa, sugar, honey, bananas, fresh fruit and vegetables, dried fruit, fruit juices, rice, wine, nuts and oilseeds, cut flowers, ornamental plants, cotton, and a variety of handmade crafts—but coffee remains the core of the Fair Trade system (FLO 2005; Young 2003:6). Fair Trade certification—where producer cooperatives commit to a series of labor and environmental practices and social equity goals—began in 1988, when Mexican and Dutch trading partners launched the Max Havelaar Fair Trade certification, sponsored by the Max Havelaar Foundation in the Netherlands. In 1997, the growing family of Fair Trade organizations formed an umbrella organization, Fairtrade Labeling Organizations International (FLO), which standardized labeling and certification procedures. In 2004 there were some 400 organizations and more than 800,000 producers certified under the FLO umbrella (FLO 2005).

Fair Trade producers can earn more than double the conventional market price for their beans. The 2004 price for Fair Trade Robusta coffee was set by the FLO at a minimum of US$1.01 per pound, with an additional $0.15 premium for organic coffee. This compares to prices on the conventional market that averaged US$0.40 per pound (FLO 2004:11; Bacon 2005:505). This can translate into a significant income boost for farmers. In Chiapas, Mexico, farmers in one coffee cooperative have reported 100-200 percent growth in income in recent years due to Fair Trade sales (Taylor 2002:19-23).

Direct gains in income are critical for small farmers, but some of the less visible benefits of Fair Trade can be even more important for producers in the long term. Members of the La Selva cooperative in Chiapas, Mexico, cite the importance of the “apprenticeship in commercialization” they have gained from working directly with buyers and learning about potential markets (Murray et al. 2003:12). Other important benefits include greater access to credit, broader networks of contacts, and technical training and information exchanges that help farmers produce higher-quality coffee (Taylor et al. 2002:20).

Finally, Fair Trade and shade-grown coffee can significantly reduce the vulnerability of small farmers, impacting livelihood security in ways that are often overlooked. A typical shade coffee farm consists of a mixed plantation that can produce fruit, firewood, timber, and other products in addition to coffee. This allows families to be less dependent upon a single crop, and provides resources that can be used directly or sold for cash. Studies in Guatemala and Peru suggest that these noncoffee products can provide as much as 25 percent of the total value earned on a small farm (Rice 2001 in Valencia 2001:2). Fair Trade cooperatives also offer a set price for a crop—this gives farmers the ability to plan ahead, a rare luxury (Murray et al. 2003:7). A survey of Nicaraguan farmers found that farmers participating in Fair Trade and other alternative markets were four times less likely to feel at risk of losing their land due to low coffee prices (Bacon 2005:506).

Fair Trade coffee production also has important environmental benefits. While Fair Trade cooperatives do not require their members to raise shade-grown coffee, they encourage it along with organic production methods. Most training and financing are linked to sustainable production methods, and organic coffee can earn an additional price premium (Taylor 2002:3-4).

The Samyukta Vikas Cooperative: A Fair-Trade Success

While coffee is the focus of much Fair Trade commerce, villagers near Darjeeling, India, have concentrated on tea. Residents of three remote hill villages located on a former tea plantation are now successfully exporting organic Darjeeling tea to U.S. consumers. The new tea enterprise has helped the villages of Harsing, Yankhoo, and Dabaipani become economically self-sufficient. Tea income has allowed residents to construct a community drinking water supply, and the villagers are developing plans to add ginger, cardamom, and oranges to their organic exports.

Life for the villages' 483 families, all of Nepali descent, has improved significantly in just eight short years. Since the tea estate they inhabit was abandoned in 1952, the isolated communities had survived on subsistence farming, cultivating maize, millet, and vegetables, and keeping a few cattle, goats, and chickens—almost all for domestic consumption. Most families had small landholdings averaging 1.5 acres. Their soil's high acidity, the result of intensive tea cultivation, led to very low productivity. Local deforestation had also contributed to soil erosion, landslides, and the loss of forest products (RCDC 1996:5-7).

Most families lived a precarious existence, surviving on less than 12,000 rupees per year (US$275). A 1996 survey by a local development NGO, the Darjeeling Ladenla Road Prerna (RCDC), reported that the villagers “have very low self-esteem and display an attitude of despair.” When asked their views on development priorities for their communities, 30 percent replied “no idea” (RCDC 1996:4).

All this changed in 1997 when RCDC persuaded the villagers to form the Samyukta Vikas Cooperative and use their own resources to improve their livelihoods. Three community members were chosen as “animators” and trained by RCDC in participatory decision-making and co-op management. These three explained what they had learned to households across the scattered hamlets. The villagers then voted to establish a cooperative of three levels, with farmer families as the bottom tier, elected hamlet committees as the middle tier, and an elected board, with members from every village, as the highest decision-making authority (Down to Earth 2004:44). The board's first actions were to set up a milk cooperative and a small credit union through which villagers could sell milk and borrow small sums at far less interest than charged by middlemen (TPI 1999).

Once the cooperative was functioning, RCDC linked the villagers with Tea Promoters of India (TPI), a Calcutta-based, family-owned company that manages four organic tea gardens, all run according to Fair Trade standards. During a series of negotiations, the cooperative board voted that all members would convert to organic farming, while TPI undertook to buy the villagers' tea supply, distribute grasses used for soil rehabilitation to the farmers, and train them in organic techniques including composting, pruning, and use of natural pesticides. The company also supplied 4,800 tea saplings at a 50 percent discount (TPI 1999:1-2).

Tea-leaf production from the villages has grown steadily since the first collection for TPI in May 1998. Tea collectors are selected from the community by each hamlet committee, and paid a wage by TPI. Other co-op members transport the leaves to TPI's nearest tea garden, where they are processed and blended for export (Down to Earth 2004:44).

Samyukta Vikas Cooperative is the first non-plantation, cooperative tea supplier established in Darjeeling. Since 1999, organic English Breakfast, Earl Grey, and green tea sourced from its family-owned plots has been exported by Tea Promoters of India to the Fair Trade company Equal Exchange, based in Massachusetts. From there it is sold to food co-ops, health stores, churches, restaurants, and cafes around the United States. TPI, Equal Exchange, and Dritwelt Partners, a European certification organization, jointly bore the cost of the international organic certification process for the Samyukta Vikas Cooperative's tea supply. In 2004, Tea Promoters of India provided more than eight tons of tea to Equal Exchange (nearly 140,000 boxes), 10 percent of which came from the Samyukta Vikas Cooperative (Howard 2005).

While it remains a small-scale enterprise, the successful collaboration between community-owned farms in Darjeeling, local Fair Trade exporters, and overseas Fair Trade importers demonstrates one route by which global markets, when combined with fair prices and local governance over use of natural resources, can benefit poor producers in developing nations.