November, 2001: Cover Story

By Greg Rushford
Published in The Rushford Report

California's Thanksgiving Coffee Co. offers consumers a political agenda along with "fair-trade" coffee

ANTIGUA, Guatemala—-There are two types of coffee: “Fair trade” coffee, and “sweatshop” coffee. That’s the view of Deborah James and her activist colleagues at Global Exchange, a tax-exempt lobby with a decidedly anti-capitalist bent that is based in San Francisco. “Fair-trade” coffee — less than one percent of the U.S. market — is grown by small farmers who have banded together in co-ops, thus preventing price gouging by greedy buyers. “Sweatshop” coffee is the other 99 percent. In particular, large plantations in poor coffee countries like Guatemala are sweatshops, where $2-per day exploited employees endure miserable conditions, Global Exchange proclaims.

This assertion that the coffee industry is defined by injustice is what has driven Global Exchange — which played a key role in the rowdy protests that trashed Seattle during the 1999 World Trade Organization meetings — to target big names in the coffee industry from Starbucks (successfully) to Procter & Gamble (unsuccessfully, so far), with political protests to “demand” that they carry the “fair-trade” label.

I came to Guatemala on September 2 to see if James — who is a member of a panel advising the Specialty Coffee Association of America on how to market fair-trade coffee — was correct. I learned that the basic economic model behind organizing farmers in co-ops is a perfectly respectable one. Beyond that, however, the economic model is flawed in the same way all farm subsidies are flawed. Moreover, the manner in which fair-trade coffee is being marketed (political intimidation) will never work, big time. We are talking niche markets at best.

What about the so-called sweatshop plantations? The large coffee plantation that I visited didn’t look anything like a sweatshop. The owners brought out their books to show that they have been paying their employees more than the minimum wage. As Mark Pendergrast concluded in his exhaustive and fair-minded 1999 political and economic history of the coffee industry, Uncommon Grounds, “The coffee economy itself is not directly responsible for social unrest and repression.” Moreover, the “sweatshop” coffee that I saw is not only better quality than the “fair-trade” label that you see in your local Starbucks, it is offered at a better price.

Beyond the flawed economics and marketing plan, the radical politics that motivates Global Exchange would be considered offensive by the vast majority of Americans — the very people who are being asked to purchase “fair-trade” products from coffee to tea, bananas, and cocoa. (James declined to be interviewed.)

If you like to express solidarity with Fidel Castro’s Cuba, if you think that it is cute to tarnish an American flag with corporate logos in place of stars, if you take the Palestinians’ side against Israel, if you believe that there is no credible evidence linking Osama bin Laden to the terrorist atrocities of Sept. 11, and if you believe that America has no moral or legal right to wage war against the Al Qaeda network — then Global Exchange is your kind of outfit. You would want to buy all the fair-trade coffee you could get, to endorse the Global Exchange political agenda.

After returning to the United States on September 16 — five agonizing days away from U.S. soil after the World Trade Center and the Pentagon were attacked — the radical Global Exchange political agenda suddenly looked like a very dark blend indeed.

Few Americans would subscribe to politics, Global Exchange style:

Check out Global Exchange’s website for its “Palestinian campaign,” and you won’t find one good word about Israel. You won’t find criticism of Palestinian terrorism directed at Israel. According to Global Exchange, Israel is “an exclusionary state” that “is illegally occupying Palestine” and “trains other undemocratic, abusive regimes” around the world. Global Exchange wants an “end” to U.S. aid for Israel. “Until the US stops lending its weight to Israel through biased and unfair support, a truly just peace will remain elusive.” U.S. aid to Israel “maintains the military-industrial complex here in the U.S.,” Global Exchange asserts.

You will find nice things being said about Fidel Castro’s Cuba. Global Exchange expresses “solidarity” with the revolution. Rather than criticize Castro’s human rights record, Global Exchange is in the business of taking Americans on tours of Che Guevara’s “historical haunts,” where they get the chance to meet communist functionaries and other friends of the revolution. To Global Exchange, Cuba is not a police state.

Call up the “United States” section on the Global Exchange website, and a distorted U.S. flag pops up: The red- and white stripes are still there, but the blue stars have been replaced by corporate logos like IBM, Apple, Playboy, and Nike. To Global Exchange, America is a human-rights abuser which basically stands for corporate dollars and guns.

Global Exchange believes that the World Trade Organization “only serves the interests of multinational corporations” and that “the WTO is killing people.”

After the Sept. 11 terrorist attacks on New York and the Pentagon, Global Exchange’s website immediately went into anti-war mode. “While the perpetrators of the horrible attacks in New York and Washington, D.C. should certainly be brought to justice, the US has not yet offered any evidence that Osama bin Laden was actually responsible for the attacks.” The U.S. military actions that were launched last month in Afghanistan, in Global Exchange’s view, were mainly to “boost President Bush’s already-sky high public opinion ratings” and “ensure a continued military presence in the Middle East?” Global Exchange calls it “George W’s war.”

“The twin pillars of U.S. power in the world — money and weapons — have spawned many enemies,” Global Exchange co-founder Kevin Danaher, wrote in an Op-Ed column in the Washington Post on September 29. Danaher is an important player in the fair-trade coffee world. In his Op-Ed, Danaher wrote that the United States should not be “relying on the money values and weapons that got us into this trouble” by going to war against bin Laden and the Taliban, Danaher wrote. The United States should seek “justice” not “violence,” Danaher concluded. The “justice” that Danaher seeks would be applied by an international court, not a U.S. court (Danaher did not volunteer to personally serve bin Laden with a subpoena.) The Post identified Global Exchange as “an international human rights organization.”

Guess it depends upon what you mean by human rights — and violence.

Violence in the name of non-violence is never too far from Kevin Danaher. He played a leading role in the protests that turned violent in Seattle at the 1999 WTO ministerial. He blamed the police. In April 2000, I saw him on a Sunday morning in Washington, D.C., when the protestors used force to try to shut down the World Bank and International Monetary Fund. They surrounded the Bank/Fund office buildings and physically prevented journalists and anyone else with business with the two international financial institutions from going inside. The freedoms of speech and assembly did not extend to anyone outside the circle of protestors for several hours that morning. Make no mistake: Danaher’s view of free speech is that it gives anti-capitalist protesters the right to deny by force the free-speech rights of the rest of us.

Danaher was in Genoa, Italy in July 2001, when protesters rioted at the so-called G-8 rich countries’ economic summit. When police shot and killed one of the rioters, Danaher released a statement saying that “democracy has reached a new low.” The shooting was “a tragic testament to how upset people are with a global economy that permits thousand (sic) of people to die needlessly each day because of lack of access to food, basic healthcare and clean water,” Danaher declared. Violence is always the fault of the police in the “non-violent” Global Exchange world.

A visit to a “fair-trade” coffee co-op

When American consumers seek out the “fair trade” brand in their favorite gourmet coffee house, they are encouraged to believe they are helping better the lives of some poor farmers in coffee-producing countries like Guatemala. Sometimes that’s true. The farm co-op that I visited in the remote central highlands near Lake Atitlan, for example, is associated with the kind of generous people who support Habitat for Humanity, supporters of which range from Jimmy Carter to George W. Bush.

Fair-trade coffee, which has been in Europe for about a decade, came to the United States in 1999 when an Oakland non-profit named Transfair USA began certifying the fair-trade label that you see in your local Safeway or Starbucks. (Kevin Danaher helped launch Transfair as a member of its board. He has since left the board, apparently in an effort to distance Global Exchange’s rowdy style from boardrooms.)

Transfair officials put me in touch with Jeroen Bollen, an idealistic thirty-three year old man from the Netherlands. Bollen came to Guatemala seven years ago, and fell in love with the country and one of its women, now his wife. He manages several co-ops in Guatemala for Manos Campesinas. The friendly Bollen doesn’t wear his idealism or his politics on his sleeve, or gripe much about the IMF or WTO. He doesn’t indulge in the false distinction between “sweatshop” and “fair-trade” coffee. Bollen is too busy trying to help Mayan farm families for posturing.

[Café Campesino, which is run by Bill Harris in Americus, Georgia, gets coffee from another Manos Campesinas co-op that Bollen is helping in San Marcos. Harris learned of fair-trade coffee in 1997, when he was in Guatemala building homes for Habitat for Humanity.]

The co-op that Bollen took me to was near San Lucas, Toliman, near the shores of the scenic Lake Atitlan, high in the central highlands. This is a beautiful corner of the world, and the Ija ’tz co-op (after the Mayan word for seed), has been busy harnessing natural beauty.

Formerly a small Army base until Guatemala’s long-running civil war ended in 1996, Ija ’tz has 15 hectares for coffee growing, which are divided into 83 family plots.

Nothing is wasted at Ija ’tz. Besides coffee trees, there are vegetables, bananas, and medicinal plants — 200 different varieties of plants and trees in all. Mango trees surround and protect corn in a circle. I saw one tree that is poisonous (useful for insect repellant). Rainwater running down the mountain is collected, as is human waste that is mixed in with banana leaves and black earth for compost. There is a small botanical garden.

The co-op’s board of directors has seven members, of which three are women, which I was told is unusual for Mayan cultural reasons. Ija ’tz women also run a catering service.

“To produce organic coffee is a way of living,” Bollen told me. I asked one of the co-op’s leaders if he wanted his children to stay at Ija ’tz, or seek out the attractions and opportunities of the city. “We are a little more free here,” he replied in Spanish. “Our way of life is the farmer way; cities have problems.”

Explaining the economic benefits of the co-op is best summarized roughly. I was told that Ija ’tz works at two different levels. Of the 130,000 pounds of coffee expected to be produced this year, Manos Campesinas will help the co-op export 64,800 pounds to the Netherlands. The co-op is guaranteed a fixed minimum price of $1.26 per pound for the exports. Of this, 26 cents is deducted by Manos Campesinos for export-related costs. That still leaves the farmers with $1.00 per pound, at a time when the world market price has collapsed to some 43 cents because of the current worldwide coffee glut. The local Catholic parish buys some of the remainder — again at higher than market price. Clearly, the members of the Ija ’tz co-op are better off thanks to their participation in the fair-trade program.

Ted Lingle, the executive director of the Specialty Coffee Association, explains why farmers are better off to form co-ops. “When you ship coffee in global commerce, you need a full container, which would be 250 bags. A farmer by himself never produces 250 bags so his coffee never reaches the world markets.”

We are “lucky” to have Manos Campesinas help us, one member of the Ija ’tz co-op told me. Bollen added that perhaps 5,000 out of some 60,000 Guatemalan coffee farmers are members of fair-trade co-ops. A lucky few indeed.

A visit to a “sweatshop”

I also visited a “sweatshop” plantation near Antigua. It turned out that this 100-plus hectare farm happens to sell the famous Guatemala Antigua to gourmet coffee enterprises like Starbucks. Because of the angry reaction of the fair-trade activists when I told them what I saw, I have decided to withhold the name, nor publish the pictures I took. Starbucks — a favorite target of the protestors —never seems to do enough to satisfy the activists.

The first thing one notices at this plantation is that not all environmentally friendly coffee is from the “fair-trade” model. The plantation had shade-grown coffee, grown under gravilea trees to protect the beans from the sun, the occasional frost, and even volcanic ash from the nearby volcano.

Some forty-five families live on the farm year-round, with up to 300 people brought in during the harvest season from mid-December to March. The year-round families are given land to grow corn and beans for themselves.

Minimum wage is about $2.00 per day, but my hosts got out their books. I was shown documentation that most workers on this plantation make perhaps twice that. During the harvest, some pickers can be paid three times the minimum.

“We pay fair wages,” one of the owners proudly told me. The owners also told me that they pay social security for their employees, and also contribute to a nearby local school.

Even at a $2 per day minimum wage at six days a week, that comes out to $48 per month. It appears that that the coffee workers on this plantation are better off than doctors in Cuba, who make some $20 a month. Certainly they have more political freedom.

My neighborhood Starbucks in the Washington, D.C. area is currently selling Guatemala Antigua for $10.50 per pound. This compares to $11.45 for a pound of fair-trade coffee. While fair-trade coffee is of high-enough quality to get into a gourmet outlet like Starbucks, nobody pretends that it is as good as Guatemala Antigua.

The bottom line: buy Guatemala Antigua instead of fair-trade coffee, and you get a better cup of coffee, at a better price.

Why the fair-trade coffee model is flawed

Manos Campesinas’ Jeroen Bollen told me that it would be “very difficult” for fair-trade coffee to hope to dominate the coffee business.

In my view, this is because the fair-trade model is flawed.

The problem isn’t the co-ops, but the guaranteed $1.26 minimum floor price, which is not harnessed to market forces.

Paying $1.26 for coffee that is currently worth less than 50 cents in the marketplace is a nice subsidy for some lucky farmers. Subsidy is the operative word.

In this case, the subsidy is paid by consumers in gourmet coffee shops, not by governments. But all farm subsidies — whether the consumer or taxpayers pay — encourage more production. At a time when world coffee markets are already glutted, and prices have plunged, one thing that the coffee industry doesn’t need is more subsidies.

Gourmet coffee enterprises already pay more than $1.26 per pound for the highest quality coffees that can reach more than $16 per pound at retail level. But that’s not a guaranteed minimum price — it’s a guarantee of value based on the cost of production. Big difference.

Of course, it is perfectly respectable economics to market “causes” — from Girl Scout cookies to buying food for the homeless — that consumers are willing to pay more for.

But the tone of the fair-trade coffee marketing is set by political protestors at Global Exchange with their “demands” on retailers to carry more fair-trade coffee. That isn’t economics, it’s (radical) politics.

And when you use political pressure as a marketing tool, sales are bound to suffer.

“Even though we have a distribution channel in the United States that has by my count some 4,000 outlets, we still are not moving fair trade coffee in sufficient volume,” says Ted Lingle, the executive director of the Specialty Coffee Association of America. “We have not been able to connect with consumers,” Lingle adds.

The activists don’t seem to understand that it is unsound marketing to tell consumers they have a choice between “sweatshop” and “fair-trade” coffee. “We have never seen a coffee that could be marketed under purchase of penance because of the conditions in the industry,” Lingle explains. “We ask consumers to buy the product because of pleasure, not because I feel guilty about where the product is from.”

The view from Transfair

I called Paul Rice, the executive director of Transfair, the Oakland-based non-profit that certifies the fair-trade label from co-ops like Manos Campesinas. Rice reacted strongly to the suggestion that the large plantation that I visited treats its workers decently.

“I think it is naïve, a certain impossibility that anyone in Guatemala is paying above minimum wage,” Rice asserted. “I would be willing to pay you my last dollar that you were lied to.” Rice said that “I know for a fact” that Starbucks has no code of conduct.

Rice said that “the difference with fair-trade co-ops is that there is an international certification mechanism [Transfair] that requires the co-ops to open their books to outside inspection.” Transfair gets 10 cents a pound from roasters, which amounted to $250,000 last year, Rice stated.

Fair-trade coffee is only “at the beginning of its growth curve,” Rice reasons. “We started three years ago in the U.S., but in Europe fairly traded coffee is between four- and five percent market share in the UK and the Netherlands, and six- to seven percent in Switzerland.” Rice likens fair-trade coffee’s future to the growth of the organic-food industry in recent decades, and envisions retail outlets like Fresh Fields devoted to fair-trade products. “To the extent we can build a broad based consumer demand, the potential is that fair-trade could move beyond a niche,” Rice asserts.

“Consumers are paying more for the coffee because they are deriving the specific benefits, not only the taste but also the social and environmental benefits,” Rice declares.

“I was CEO of a coffee export co-op in Nicaragua for four years, 1990-1994. We helped 3,000 farmers and had $5 million in sales by the time I left,” Rice adds.
Fair-trade coffee, Rice maintains, offers impoverished farmers a business model instead of charity to rely upon.

I asked Rice if he was embarrassed about his close association with Global Exchange? Does it offend you, I asked, that Global Exchange has nothing good to say about Israel but plenty of good to say about the Palestinians, that Global Exchange takes Fidel’s side against America? Are you offended when Global Exchange activists go to cities from Seattle to Genoa trying to prevent others from exercising their rights to free speech? Are you willing at least to say that it was wrong when activists formed human chains in Washington in April 2000, relying upon force to prevent journalists and others with business inside the World Bank and IMF from going about their business?

The answer was No.

Rice refused repeated entreaties to criticize Global Exchange for any of the above.

“We don’t consider ourselves an activist organization,” he said. “Global Exchange is an industry butt kicker. We don’t share agreement with tactics or strategy or any group that does negative campaigning,” he added.

“If you are trying to ask if we are wild-eyed activists, the answer is no and I resent the question.”

Rice finally said, “I have no interest in their ideas on Fidel.”

Asked if he worries that after Sept. 11 Americans might link their purchase of fair-trade coffee to helping fund the antiwar movement, Rice responded, “If folks associate fair-trade coffee with Global Exchange, I think that’s unfortunate.”

Unfortunate…but for the educated consumer, an entirely reasonable association.

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