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Bob Thomson, Fair TradeMark Canada, August 1995
See also BITTERSWEET: As competition brews among coffee fair traders, a movement comes of age, as well as "Ben's Big Flop", an article about the failure of Ben & Jerrys Community Products/Rainforest Crunch social enterprise.
Recent discussions about the relative merits of the fair trade labels TransFair and Max Havelaar at the Fairtrade Federation conference in San Francisco indicate that a written summary of the issues involved would be helpful. I have prepared my own unauthorized history of the development of fair trade labels in Europe as a contribution to putting concrete, objective information into the 'public' domain.
To begin, I openly declare my particular position and bias as a member of the TransFair International Executive Board. I have spent a lot of time in Europe, have met many Max Havelaar, TransFair, Fairtrade Foundation and coffee producer representatives, and have learned much from all of them. I have found that any differences between the various label organizations are minor in the context of our shared commitment to increasing fairly traded coffee sales on behalf of disadvantaged producers.
I don't pretend that this history is complete or accurate in all aspects. It is the result of many conversations and interviews I have had with many actors in the movement over the past nine months. I take full responsibility for its content and hope that any comments, especially from our European colleagues will be constructive.
The first fair trade label, Max Havelaar Netherlands (MH-NL) was initiated in 1988 in response to the lack of direct access by small coffee growers in Mexico to international coffee markets.
The International Coffee Organization (ICO) marketing system at that time required that producers have export quota certificates in order to sell coffee. These certificates were held largely by large producers, state agencies and intermediaries who had little interest in helping small coffee farmers get more money for their product.
The collapse of the ICO managed market in 1988, with the subsequent decline of world prices from around US$1.30 per pound of green coffee beans to US$0.70/lb. (and eventually below even US$0.60/lb.), created a crisis for most small coffee growers since their cost of production according to ICO data was around US$1.10 or more.
Dutch NGOs working with small coffee growers and their co-operative representatives in Latin America switched their efforts from advocacy for access to export certificates for the co-ops to new market mechanisms which would benefit them directly. At one point, the development of a Dutch NGO coalition coffee brand was considered, but circumstances resulted in a fair trade label being promoted instead.
The label was instantly successful and moved Dutch 'alternative' trade coffee sales from less than 0.3% of Dutch coffee consumption in 1988 to around 2.5% today, a difference of millions of dollars. In addition, through the elimination of intermediaries, even more of the higher fair trade price reached the farmers and their co-operative organizations learned how to export coffee directly, giving many of them significant empowerment in the marketplace.
One element in the politics of this process was the dynamic between the alternative trade movement in Holland (and Europe) and the new fair trade label. Dutch alternative trading organizations (ATOs) feared that they would lose coffee sales since commercial coffee appeared in thousands of easy to reach supermarkets with a fair trade label. In addition, the ATOs were backed by a large network of hundreds of Dutch Third World shops which formed the backbone of Dutch international solidarity and was largely suspicious, if not hostile, to business.
As it happens, ATO coffee sales grew significantly as a result of the huge public success of the Max Havelaar label. Almost half of fair trade label coffee sales in Europe today are made through Third World shops - 370 in Holland, 700 in Germany and over 3000 throughout all of Europe. And fairly traded coffee has become big business, with roughly 2% of all sales in Holland and Germany translating into over US$100 million in turnover. Fair trade in Europe employs some 1500 people and reaches the public through some 45,000 points of sale.
[Note: for a review of the history of FTO, the largest Dutch ATO and EFTA's recent survey of fair trade in Europe, see the new fair trade World Wide Web home page at 'http://www.fairtrade.org/fairtrade' or 'http://www.web.net/fairtrade'. Many other fair trade documents and contacts are located there as well, including the EFTA Fair Trade Yearbook.]
Reviewing the success of the Max Havelaar label, the European Fair Trade Association (EFTA), a federation of eleven ATOs based in nine countries, began discussing the development of a label which would cover coffee as well as other products in the whole of Europe.
Max Havelaar participated in these discussions but were not initially interested in expanding their efforts beyond coffee or beyond the Dutch market. There were also tensions between MH-NL and the ATOs as mentioned above - over market shares, the 'political correctness' of dealing with 'big' business, etc. There had also been criticisms of ATO market competence by some MH-NL representatives who didn't believe 'solidarity coffee' could achieve sufficient turnover to really help the tens of thousands of small coffee growers devastated by the collapse of world coffee prices.
Since EFTA consisted of 11 ATOs in 9 countries, the dance of the dialectic around criteria for a multi-product, multi-national label was prolonged.
Around 1991, a large Swiss co-operative supermarket chain decided to introduce a fair trade label for coffee based on the success of Max Havelaar in Holland. Swiss ATOs and NGOs, to prevent the development of a "commercial" fair trade label, had to move quickly to form an independent fair trade label and essentially copied the Max Havelaar name and concept from Holland, since EFTA's discussions on a pan-European label were not at a point where that option could be quickly implemented. Apparently Max Havelaar Switzerland (MH-CH) took one of the logo designs circulating in EFTA circles and trademarked it for their own use, adding another element of contention between the Max Havelaar 'family' and EFTA (eventually TransFair) representatives.
In 1992, the EFTA discussions resulted in the launch of the TransFair International fair trade label. In actual fact, a coalition of German ATOs and NGOs incorporated as Ag Kleinbaurnkaffee and began coffee labeling operations before the formation of TransFair International. They subsequently joined the federation as TransFair Germany, which is by far the largest member of TransFair with respect to licensed sales.
The TransFair logo is owned by TransFair International and its use is licensed to national members which have the authority to in turn license its use in their national markets. In some ways, TransFair offers a national 'franchise' to its members in return for a share of license revenues to cover central costs for monitoring, coordination and promotion.
Each TransFair member or affiliate is a coalition of national NGOs, ATOs, churches, labour organizations, etc. which represents a national social/political base able to independently certify that conditions of fairness are being met, within the framework of TransFair's overall product criteria. A TransFair Council of Members meets twice a year to set overall policy and an Executive Board meets three to four times a year between Council meetings. Only members with licensed sales have a vote at Council meetings.
Some representatives of other fair trade labelling organizations and ATOs have criticized TransFair as having too centralized a structure. Despite the much vaunted unity of the European Community, there are many, many national differences and much suspicion of any overarching body which reduces national freedom of action. This applies at the NGO/ATO level as well as with national governments, social organizations, etc.
The situation is even more complex than just national politics. It involves personalities, national cultural traits, "ideologies" and turf battle for market share. If forced to put it very simply, I could say that it amounts to groups of people arguing about who has the most angels on the head of their pin. It can't be put simply however!
First, each organization is the product of its own national market and constellation of national actors, including ATOs and Third World shop networks. As noted above, Max Havelaar Netherlands left a bit of a vacuum by initially not wanting to expand beyond coffee and not providing an alternative pan-european structure or forum to EFTA. The result was that when TransFair Germany got started in 1992, there was already a history of personality clashes, resentments and probably some elements of turf battles for influence on new national label initiatives. These things happen and it would be difficult and not ultimately helpful to pin "blame" on any one side or on individuals for any of these historical turns of events.
The TransFair structure on paper (ie. EFTA "ownership", federal council of members and multi-product approach) would appear to be flexible and open, yet Max Havelaar believes it to be centrist and inflexible. This I believe is more a comment on their perception of TransFair style than on the actual structure of TransFair.
These perceptions include allusions to more focus on the logistics of national market shares and finance than on partnership with the producers; a corporate vs humanist approach - the 'liberal' Dutch vs the 'teutonic' Germans. In actual fact, these stereotypes rapidly break down when one gets to know the actors personally and when the deep personal commitment and sacrifice which they all share is very evident in day to day activities.
The TransFair constitution and by-laws authorize the members to change any of the criteria, decide what the spending priorities of TransFair are and how revenue responsibilities and sharing will be divided - and can direct and ultimately hire and fire the staff. It is a true federation both on paper and in function. It is governed by people however and often other's judgements about TransFair are made on the basis of personalities and not on institutional facts and bases. Criticisms could also be made of the internal governing structures of other fair trade label organizations and their representativity or the degree of influence of staff and personalities on their actions. We all work within complex institutions and the political process is both institutional and personal.
The Dutch, having started their project as an extension of solidarity work with specific coffee co-ops, see things from the perspective of partnership. The Germans also represent NGOs and other development community organizations which act in the interests of their Third World partners, but in a very different market which is dominated by cut-throat competition from Phillip Morris (General Foods/Kraftco). As fair trade label sales have exploded, taking market share from the transnationals, the need for professionalism and highly organized monitoring of the criteria and conditions of fairness have become more and more important.
To some, this is a signal that partnership is taking second place to contracts and databases. Indeed elements of this are evident in the movement and even in relations between coffee producer organizations in the South. It is however, one thing to be in partnership with a few coffee co-ops in one or two countries and quite another to certify fair transactions between some 280 registered coffee producer organizations representing thousands of growers, dozens of commercial importers and over a hundred coffee roasters and supermarket chains.
Ironically, since the 'political' Third World shops which form a large part of the social base of the ATOs have seen their sales double or even triple as a result of the promotion and national campaigns of the labels, they have been pushed to become more efficient and are less inclined to be critical of 'business' as in the past.
To this complex mix, one has to add the history of the Second World War, differences between ATOs, NGOs and Southern partners backed by European social democratic and/or christian democratic organizations or by Catholic and/or Protestant churches, strong personalities (mostly male egos I'm afraid), and by now, very significant invested interests (millions of dollars) in national market recognition of label names.
Another difference in 'ideological' approach is exemplified by the concerns both Max Havelaar and TransFair have with the Fairtrade Foundation of the U.K. They are uneasy about the U.K. approach - which could best be summarized as starting at the "best practices" of transnational business and entering into a dialogue with them to move the goal posts and gradually strengthen the standards. Several Fairtrade Foundation representatives have said they believe the only way to really change the terms of world trade was to have an impact on the "big boys", rather than by just helping a "few" small farmers. Max Havelaar and TransFair on the other hand, generally believe that it is more strategic to get a foothold in the market at the 2-5% ethical 'niche' level, expand consumer awareness from a reliable, self-sufficient base and then start talking to the transnationals.
There are differences within the Fairtrade Foundation itself on these issues as well, and changes are taking place there and in their relations with the continental labels. They have now joined the International Coffee Register (ICR) and participate in Trans/Max talks. These regular Trans/Max discussions on co-ordination and eventual merger, and joint work within the ICR are forming a gradual basis for more closely co-ordinated work.
Several strong personalities are involved and their clashes have contributed to a negative inter-label atmosphere, which began to be dealt with this past year. Establishment of staff level confidence building contacts in the short term in the ICR and other product registers (tea, cocoa, sugar and honey) have also helped, with the ICR Coffee Producers Assembly in Copenhagen in June 1995 being particularly helpful in creating a sense of shared 'ownership' which may build to eventual unity in the long-term (two to three years?) It won't be easy however, since there are many outstanding issues and a history of misunderstanding and mistrust on all sides based on poor communications.
A more recent conflict over tea label criteria also brings out some of the complex differences between the three label organizations.
The Fairtrade Foundation began discussions with British companies over the labelling of tea from the perspective of 'best practices' as outlined above. This meant that they were prepared to offer a premium of approximately 10 pence per kilo of tea over the world market price. Tea is like diesel fuel to the U.K. - the country runs on it, and although somewhat simplistic, one could say that it is a largely undifferentiated market which is highly price sensitive.
Germany on the other hand, has a large premium tea market which can bear a higher premium and TransFair tea criteria include a premium of about One Pound Sterling over the market price - some 10 times the British premium! Since the European Community prohibits the limiting of cross border marketing, German tea packagers could have been faced with a 'fairly traded' tea from the U.K. with substantially lower premiums. The Fairtrade Foundation had not included in its license agreements a clause which prohibited licensees from actively marketing products outside the U.K.. Max Havelaar and TransFair had agreed to insert such a clause in all of their coffee license contracts and TransFair Germany has included it in their tea licenses.
A discussion about low or high fair trade premiums and price sensitivity, and resulting sales, market share and overall benefit to producers in different national markets is a legitimate issue for debate in the movement. However, such a debate takes place in the context of overall relations, which include all of the many other issues outlined in this history - putting rational economic analysis and conclusions on the back burner far too often.
To continue - in order to minimize the European impact on producers of a low tea premium in the U.K. market, TransFair pushed the launch of a tea label forward in Germany. One of the criteria accepted by TransFair led to the registration of privately owned tea gardens which were prepared to allow either trade unions or independent worker associations form to decide on how the fair trade premium would be spent on each estate.
This drew criticism from some Max Havelaar representatives who believe that fair trade labels should only certify the production of small growers represented by co-ops or other democratic forms of ownership and organization. At the same time however, Max Havelaar Netherlands has been working with the Dutch NGO Solidaridad to develop fair trade in bananas from plantations and have held discussions with Fyffes, a large U.K. banana importing transnational.
Each commodity market is different of course and arguments can be made for different approaches for each product. Each label organization makes decisions based on its particular social base, history and the highly specific internal conjuncture of forces acting at the moment of any decision. However, the histories outlined above have led to differences over issues that have little to do with a fundamental analysis of the impact of each option on either producers or our overall long-term objective of changing world trade conditions and structures.
I hope that this brief history from an "outsider" will be helpful in setting a framework in which discussion can take place towards increased co-operation in our work.