Breaking News

Tweet TWEET

U.S. Rebel’s Split Riles $6 Billion World of Ethical Commerce

Fairtrade International brings together retailers and other marketers in wealthy countries with small-scale producers of foods in the developing world. The organization’s goal is to ensure the ethical treatment of workers. Retailers in the U.S., Europe and elsewhere can then sell these products as Fairtrade-labeled.

Small farmers find affluent customers, who reap the satisfaction of knowing their purchases are helping a person, not an enormous, faceless agro-corporation. Last year $6 billion worth of Fairtrade-approved goods were sold globally, up 27 percent from 2009.

There’s trouble in this utopia, though. Fair Trade USA, the largest American group, announced on Sept. 15 that it would split from Bonn-based Fairtrade International, which coordinates groups worldwide and imposes the standards that make fair trade such a powerful force. Fair Trade USA has started a separate label that retailers can use to boost sales of coffee, chocolate and fruits around the globe.

That’s sparked an uproar as fair-trade advocates claim Fair Trade USA Chief Executive Paul Rice is putting standards at risk just to boost sales, Bloomberg Businessweek reports in its Nov. 7 issue.

“Lowered standards undermine the fair-trade values producers, activists and consumers have advocated,” said Maria Louzon, national coordinator of United Students for Fair Trade. She vowed to boycott goods bearing the Fair Trade USA logo, including popular Green Mountain Coffee.

Getting Results

Rice rejects the assertion that he’s damaging fair-trade standards. “We are after results,” he said. “We want to get things done.”

Fairtrade International CEO Rob Cameron has been more restrained in his response than groups such as United Students for Fair Trade. Cameron wrote in an open letter on Sept. 16 that he and his colleagues “sincerely regret” Fair Trade USA’s decision.

Some of this may be attributed to growing pains as the labeling movement, which started more than 20 years ago, expands.

“Fair trade has caught the interest of big businesses, and that makes it possible to move large volumes of product,” said Jonathan Rosenthal, a pioneer in the movement and co-founder of the Massachusetts-based cooperative Equal Exchange. “The risk is that fair-trade standards fall to the lowest common denominator,” said Rosenthal, who supports the original vision for fair trade.

Rice is breaking away after 13 years because he said it will be easier to make business-friendly decisions and double U.S. fair-trade sales by 2015.

Connecting to Consumers

“Historically, so many folks in the movement saw fair trade as a partnership between producers in the developing world and consumers in the global north,” Rice said in an Oct. 12 conference call with fair-trade advocates. “Companies were kind of a necessary evil to make that partnership possible.”

He sees the capitalist appetite for more fair-trade products as something to encourage. “Competition is not a bad thing,” said Rice, who earned an MBA at the University of California at Berkeley after founding a coffee cooperative in Nicaragua. “Companies like Wal-Mart, Costco, Green Mountain, Starbucks and Ben & Jerry’s are expanding their offerings in terms of fair-trade products.”

Rice would like to award the fair-trade label to coffee grown on larger estates: At present, only small-scale coffee farms qualify under Fairtrade International standards, though it does certify other products grown on estates such as bananas. Rice is also testing fair-trade certification for cotton clothing even though the Bonn organization doesn’t certify apparel yet.

Ben & Jerry’s Pledge

Fair Trade USA got a commitment from Ben & Jerry’s to use non-fair-trade ingredients only if their fair-trade equivalents weren’t available by 2013. A spokeswoman for the ice cream company said, however, that the pledge may be implemented “a little later.”

Rice’s moves are straining his relations with fair-trade organizations. Portland, Oregon-based Fair World Project, which campaigns for transparent fair-trade and organic standards, said Fair Trade USA is going “rogue.”

In another controversial decision, Rice has allowed use of the Fair Trade USA label on chocolate bars with approved cocoa even if the sugar in them isn’t fair trade. “We decided to not sacrifice the livelihoods of cocoa farmers on the altar of some misguided principle,” Rice said in the Oct. 12 conference call. “We decided to be flexible.”

Flexibility looks like hypocrisy to the purists. Said Luzon: “It is unacceptable that a company be allowed to produce a fair-trade chocolate bar with non-fair-trade sugar when such sugar is available.”

To contact the reporter on this story: Simon Clark in London at sclark4@bloomberg.net

To contact the editor responsible for this story: Melissa Pozsgay in Paris at mpozsgay@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.