Fair Trade vs. Direct Trade

You’ve likely seen ‘Fair Trade’ on items such as coffee, chocolate, and chocolate products such as cocoa for example, but what does Fair Trade mean? How about Direct Trade? and how important is it that we purchase and support fair trade and direct trade products?

Well before I was a lighting aficionado I was a budding sociologist at UVic and simultaneously a barista at a local coffee shop. One of the research projects I had done was on Fair Trade vs. Direct Trade from a sociological perspective of course. So here you have you have it, a comparison between the two (I took out all the boring Sociology stuff).

Fair Trade

First here are a couple of definitions:

A Fair Trade minimum price is the minimum price paid to producers and workers for their particular product. This price is set at a level which sufficiently covers the cost of sustainable production. For coffee this minimum price is $1.40/lb US for conventional coffee and $1.70/lb US for organic coffee (2011).

A Fair Trade premium is a sum of money paid in addition to the Fair Trade minimum which must be used towards economic, social, or environmental development.

Set Fair Trade is a strategy for poverty alleviation and sustainable development. It’s purpose is to create opportunities for producers and workers who have been economically disadvantaged or marginalized by the conventional trading system.

These are the Fair Trade Standards for producers in small farmer organizations. This usually applies to crops such as coffee, cocoa, cotton, and rice.

For social development criteria:

• Farmer’s organizations must have a democratic structure and transparent administration to enable effective enable effective control by it’s members
• There must be no discrimination against organization members on the basis of race, religion, gender, and politics.

For economic development:

• Organizations can effectively administer the Fair Trade premium in  a democratic and transparent manner on behalf of its members.

For environmental development:

• It must ensured that the producer organization and its members protect the natural environment and ensure that environmental protection is an integral part of farm management.
• Set rules relating to the protection of farmers’ health and safety, to waste disposal, chemical usage, and protection of natural resources must be followed.
• No GMO’s
• Work towards organic practices where feasible and possible.
• Work to reduce the use of chemical fertilizers and insecticides and alternatively encourage the use of natural fertilizers and biological methods of disease control.

These are the Fair trade standards for producers utilizing hired labour on commercial farms. This includes crops such as tea, bananas, grapes, and flowers.

For Social Development Criteria:

• There must also be freedom from discrimination on the basis of religion, gender, race, and political views.
• Freedom of association, such as the right to join a trade union, and collective bargaining.
• The use of child labour is forbidden and the minimum age for a worker is 15.
• A safe working environment must be ensured.

For Economic Development Criteria:

• The Fair Trade premium must benefit the workers and their communities and must not be used for the benefit of the owners.

The Fair Trade standards for buyers are the terms of trade which traders who buy Fair trade certified products must comply with, these include:

• Buyers must pay the Fair Trade minimum price
• Buyers must pay the Fair Trade premium
• Buyers must pay in advance when producers require it.
• Buyers must sign contracts that allow for long term planning and sustainable production practices.

Direct Trade

Direct trade (lower-case letters) is a trade practice by which coffee roasters purchase directly from growers and co-ops while ensuring a fair price for a quality product. Direct trade also entails the creation of respectful relationships with the growers and small co-operatives as well as friendly environmental practices and sustainable social practices.

Direct Trade (with capital letters) is a trademark of Intelligentsia, a Chicago-based coffee roasting company; however none-the-less, the direct trade process is still the same.

In 2008 Counter Culture coffee introduced its Counter Culture Direct Trade certified coffee.

The basic criteria of Direct Trade are that

• Coffee must be of exceptional quality
• The minimum price paid to the local co-op or farmer must be higher than the Fair Trade minimum price. For Intelligentsia this price is at least 25% above Fair Trade and for Counter Culture it is at least 19% above Fair Trade. This price may vary as farmers with a superior quality product would be financially rewarded.
• Company representatives must visit the farm at least once per harvest season.
• Finally, all financial transactions must remains 100% transparent by providing financial information to all parties.
• There is one addition criteria for Intelligentsia that does not apply to Counter Culture coffee and that is the encouraged use of environmentally friendly practices.

Direct trade differs from fair trade in that they cut out all middle-men such as the exporters and importers in order to get the money to where it needs to go, the farmer. This also helps to build stronger relationships between the farmers and the roasters. Direct trade also pays a greater price than fair trade, pound for pound, for the coffee they purchase. In addition direct trade rewards farmers with a superior product a higher price for their product which is thought to give farmers an incentive to work towards producing a quality product, something which is lacking from fair trade.

On the negative side, however, direct trade is not certified like fair-trade is, so a relationship based on the trust that criteria are being met has to be developed between the company and the consumer. Counter Culture attempts to address this issue by collaborating with a 3^rd-party certification company which will ensure criteria are met.

The Direct trade fair price consistently appears to be for the benefit of the company and the product. Here, financial rewards are used as an incentive for growers to produce a better product, even though this money will contribute to better quality of life for the farmer, the main priority is still the product.

Direct trade so far only applies to coffee and as you will see the products are more expensive than most and are sometimes hard to obtain.

Where to buy?

Fair Trade products are available in almost all grocery stores now, just keep a look out for the Fair Trade logo on the packages.

For Direct Trade Intelligentsia coffee check-out Dolce Vita Coffee Art here in Victoria. They use Intelligentsia beans and sell small packs of them too.