Jan 21st 2010 Issue
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Selling Fair Trade: Pros and cons

Charles Cain - Jan 21st 2010

Picking Tea

In recent years we've seen an explosion of claims and certifications in the tea industry. It is important for those in the industry, and those who care about the industry, to understand and communicate the pros and cons of any particular certification or quality control approach. A few days ago I shared my thoughts on the pros and cons of marketing Organic teas. Today I'm turning my attention to Fair Trade.

On a personal level, let me say that I believe, without reservation, in the concepts and theories behind movements like Organic and Fair Trade. At the same time, I believe that each of these certifications (and a host of other competing programs) are not yet perfect. I was encouraged by the debate on TeaChat following my Organic article. Too often these issues are treated more as religion than policy, and any attempt to view them with a critical eye is seen as heresy.

I tend to be a realist, and am a bit cynical about the long term effectiveness of many non-profit organizations. I pursued a degree in Economics, not because I don't care about people, but because I believe that the best way to help the poor is not to give them someone else's fish but to create the circumstances in which they can consistently catch (or earn) their own. Fair Trade is an interesting hybrid because it focuses effort both on artificially increasing the wages of the workers in the short run, and also on investing in local infrastructure and community development to create long-term, environmentally and economically sustainable circumstances.

Let's pause for a moment to better define the Fair Trade movement and Fair Trade Certification process as it relates to tea. Fair Trade is based on the assumption that the market price paid to tea growers/laborers is not "fair" and does not promote sustainable living environments. In this way, Fair Trade is to the local economy and the worker what Organic is to the environment and the plants. (To be fair, some Fair Trade organizations also focus attention on environmental sustainability but their mission is primarily social and economic.)

A Fair Trade premium of between $0.50 and $1.50 per Kilogram (2.2 lbs) of tea is charged by the grower. In addition, the growers pay a certification fee in order to gain Fair Trade status. These premiums and fees go directly into the pockets of the laborers, towards developing programs at the local level, and towards funding the certification process, the Fair Trade bureaucracy, and marketing the Fair Trade brand internationally. For comparison purposes, the "Fair Trade" premium on coffee is $0.05 per pound.

Producers must apply for certification through one of several Fair Trade Organizations (FLO, IFAT, NEWS, EFTA, etc.) which require adherence to the following criteria:
1. Fair Labor Conditions: wages, working conditions and living conditions
2. Direct Trade: no middlemen adding unnecessary costs
3. Community Development: investment in services and/or infrastructure to aid the community
4. Environmental Sustainability: agricultural methods that are "healthy"
5. Transparency: free association of workers and farmers and democratic decision-making

Because many tea gardens are small, family affairs without the means to participate in community investment or adhere to extensive bureaucratic documentation and auditing rules, the vast majority of specialty tea producers are not "Fair Trade" certified. In truth, these programs and processes are best suited for the giant tea estates that produce the 97% of global tea supply that is commodity grade and harvested and processed by machine. In some countries, like Japan, no Fair Trade teas can be found because the tea workers are already paid far above the poverty level. This would be akin to demanding a Fair Trade wine from France.

"Fair Trade" sourcing options have expanded in recent years, but they are still are very limited in the world of premium loose tea. As a result, Adagio prefers to get involved directly at the source. While we support the IDEAS behind Fair Trade, we believe that, currently, the best way for us to raise the living and working standards of the growers is to introduce Americans to premium loose leaf teas. Premium teas fetch premium prices AND require significant additional human involvement. The result is higher wages, more employment, and better tea for all of us! In addition, we buy all of our teas directly and choose our producing partners based, in part, on their business practices. Finally, we contribute directly to the well-being of the farmers through programs like our Roots Campaign. As Adagio grows, our purchases result in meaningful changes in the lives of our producing partners and their employees.

I'll close with a brief personal story. A couple years ago I had a conversation at the World Tea Expo with the owner of a very large and very prominent tea estate that has been a long time proponent of the Fair Trade movement. This gentlemen is well known, very prominent in the tea industry, and VERY wealthy. He insisted that Americans unwilling to buy Fair Trade teas and pay the small Fair Trade premiums were cold and heartless. He said, without a hint of irony, that the laborers on his estate NEEDED that premium to put bread on the table and provide for their families. Given that he's in a region that is internationally renowned for fine tea, and that the tea business has been a perfectly profitable, self sustaining, and vibrant engine of economic growth for many generations, I couldn't help but wonder if Fair Trade wasn't simply a marketing advantage for this man, and a way for him to push the burden of paying his employees a living wage onto the consciences of the American consumer.

Fair Trade is a noble and valuable movement. It has been effective in driving change in a number of industries including mass market coffee and tea. But I can't help but question if Fair Trade certification is the best approach to today's premium loose leaf tea market. If the consumer were to insist tomorrow on buying only Organic and Fair Trade teas, the immediate impact would be the destruction of the small tea farmer and the shift in production to large corporate conglomerates with much larger volumes and the resources to handle the administrative auditing and documentation burdens.

Adagio Teas