Apples and Oranges: How We Compare Direct Trade to Fair Trade

When the Fair World Project published this comparison of select brands in the U.S. coffee market last year, I was sorely tempted to respond — to explain publicly what was happening privately: that I was being asked by Fair Trade roasters in the upper tiers to arrange meetings with Direct Trade roasters in lower tiers at the time the report was published. The former wanted to learn from the latter — to better understand how they were working to marry a relentless focus on cup quality with a serious commitment to social impact. But instead, I bit my tongue.

After FWP took more pot shots at Direct Trade last week in this editorial on The Huffington Post, however, I feel compelled to weigh in.

Why?

Because even though FWP concludes — correctly, in my estimation — that you can’t judge a roaster based on the label it chooses to apply to itself, it throws some sharp elbows, and a few grenades, in the direction of the Direct Trade camp along the way.

I don’t write as an apologist for Direct Trade, but in the interest of a fair-minded comparison of the two approaches — as one of the few international development practitioners who has worked as extensively with Fair Trade roasters as I have with Direct Trade roasters. And as someone who still believes that the next-generation business model innovations that will unlock the deepest value for everyone along the supply chain will emerge from the place where these two models overlap.

Where I Agree with FWP

Roasters who practice what FWP calls “authentic Fair Trade” (more on that later) are explicitly committed to transformation in a way that Direct Trade roasters generally are not. For many coffee consumers, this may be all that matters, and may inform a preference for Fair Trade over Direct Trade. Fair enough!

My Argument with FWP

What I struggle with is this: FWP continues to judge the merits of the Fair Trade model on the basis of the contributions of the roasters who do it best while judging the merits of Direct Trade on the basis of a tired stereotype. It compares the practices of specific roasters it characterizes as authentic Fair Traders — pioneers like Equal Exchange and activist roasters like Just Coffee and Higher Grounds — with an amalgam of practices attributed to Direct Trade generically. The Fair Trade narrative, informed by FWP’s active participation in the Fair Trade movement, is richly textured; the Direct Trade narrative thin and underdeveloped by comparison. Apples and oranges. It isn’t clear to me whether FWP doesn’t fully understand what the best Direct Trade roasters are doing, or whether chooses to omit that evidence from its communications. Either way it doesn’t make for a fair fight.

Disingenuous Claims

The table inserted in the FWP editorial includes some claims that I find less than illuminating.

Direct purchasing. FWP says the claim to direct sourcing “can mean just about anything” when advanced by Direct Trade roasters, but boasts that “the best Fair Trade roasters work in solidarity with small-scale farmers who grow their coffee.” So too, of course, do the best Direct Trade roasters. Implying there is a difference in the sourcing approaches of the leading proponents of each model is misleading.

Quality focus. In the third column, where FWP renders its judgments, it cautions consumers against equating cup quality with quality of life: “let’s not pretend there is any correlation between high quality coffee and making the world a better place.” I agree with this sentiment and flatly reject the suggestion made by at least one celebrity chef that the search for fine flavor will save the world. Flavor has no transformative potential if it is disembodied from a consideration of the social, economic and environmental circumstances in which it is created. But, when higher quality coffee fetches higher prices for the smallholder farmers who grow it — as it does in the Direct Trade model — fine flavor makes a contribution to the viability of smallholder farming, a contribution whose importance I would not discount at a time when the underlying economics of coffee farming are tenuous.

High prices. FWP says that the high prices paid by Direct Trade roasters “may not be the price going to the producer,” implying that the full FOB price paid to Fair Trade coops does go directly to the producer. Coops play the same commercial role that exporters do, delivering services including credit, transportation, warehousing, grading, hulling, export, financial options, etc. Like those exporters, coops need to recover the costs they incur in delivering those services, as well as the costs of certification. The table disingenuously suggests otherwise by raising this caution only for Direct Trade.

Farmer organization. Finally, FWP argues that, “Organized producer groups do more than pool together coffee and create market access for small-scale coffee farmers. They also advocate for political change and oversee community projects, making improvements for all.” As the leading cash crop for millions of smallholder farming families around the world, coffee and the terms on which it is traded are pretty important. But I agree with FWP. The coffee trade alone won’t likely foster widespread rural development or pull large numbers of smallholder farmers out of poverty in a single generation.

This research, based on real data from our Borderlands project in Colombia, reaches a similar conclusion. Farmer organization for political engagement and advocacy and for community activism are essential as both means to and evidence of real empowerment. Fair Trade as a movement is without a doubt more explicitly committed to processes of social organization and empowerment than Direct Trade. But does Fair Trade deserve all the credit for the extraordinary efforts of smallholder farmers in coffee-growing countries? Shouldn’t we attribute the achievements of La Fem, the inspiring group of women coffee farmers in Nicaragua enlisted as evidence of Fair Trade’s transformative potential, first and foremost to those women themselves?

Growers participating in our Borderlands project in Colombia have organized effectively, staring down guerrillas who tried to intimidate them. They have created community-based savings groups and emergency funds for people in need. They have pressed their claims on government, and they have gotten results in the form of public investment to improve infrastructure, reduce hunger, and make the coffee sector more competitive. They have sold their coffee mostly to Direct Trade roasters. But we attribute their successes in organization and their empowerment to them, not to their Direct Trade partners.

One other note here. FWP wants to give Fair Trade credit for something that is not part of its charter but central to Direct Trade (trading directly) while refusing to do the same for Direct Trade on something that is not part of its charter but central to Direct Trade (supporting smallholder farmer organization), when my experience suggests that the best roasters in each category do both.

In Summary

Direct Trade in coffee wasn’t born out of the same desire to radically transform the coffee trade that drove Fair Trade’s pioneers. Is has not had — or aspired to have — the same kind of social impact as Fair Trade.

But there are some good things happening in the coffeelands beyond the confines of authentic Fair Trade, despite the evidence marshaled by FWP. And some of these good things involve Direct Trade roasters who are unapologetically driven by pursuit of cup quality, not indifferent to the economic, social or environmental impacts of their work, and often keenly insightful about the conditions of smallholder production.

Here are just three immediate examples from my current work with Direct Trade roasters that are top-of-mind.

Economic. This research, based on data from our Borderlands project in Colombia, suggests that the only lots that were profitable in the low market of the 2013 crop year were the ones sold to Direct Trade roasters.

Environmental. More than 80 percent of the coffee that Counter Culture sources is certified organic — a pretty deep commitment to a top-shelf set of environmental practices. In Nariño, where there is little certified organic coffee available and less interest in pursuing certification, we are working with Counter Culture to develop a customized environmental performance scorecard that encourages agroforestry practices and ties financial incentives to continuous improvement in environmental practices.

Social. When confronted with the critique leveled by FWP that Direct Trade undermines social cohesion, Counter Culture invested in original research on the social impacts of its purchasing model. One of the commitments Counter Culture made as a result of that process was to not only source the highest-quality coffees from its partners but also those that don’t make the microlot cut. Counter Culture has made good on its commitment in our collaboration, sourcing single-A coffees along with microlots. Similarly, we will be working with Intelligentsia during the 2016 harvest as it expands its purchasing into lower quality tiers, including a single-A tier that will generate price premiums for coffees that haven’t previously qualified for them.

There are important distinctions between Direct Trade and Fair Trade. What I find frustrating is that those distinctions are often not fairly characterized in the debate about and between Direct Trade and Fair Trade. More importantly, I think the best expressions of the two models have more in common than the debate suggests. My conversations with Direct Trade roasters getting more serious about social impact and Fair Trade roasters getting more serious about quality incentives confirm that. And make me optimistic about the future of the coffee trade.