WHAT IS FAIR TRADE COFFEE? – Fairtrade coffee – Fairtrade coffee is certified coffee that has met fair trade standards. Specifically, this is a global network of farmers, buyers, retailers. It was operating to ensure benefits for farmers participating in coffee growers and producers worldwide. Fairtrade is a part of sustainable coffee that helps equalize the benefit value for all members of the coffee supply chain.
Before delving into the history of the shape, the operation structure of Fairtrade coffee, we will familiarize ourselves with the following two fundamental issues:
Firstly, supply-demand balance: This concept is relatively easy to understand and familiar in life. It is very typical if the amount of coffee produced (supply) is in harmony with the market’s demand (demand). But when the production is too much (the collection is more significant than demand – too much, so it’s empty), the price of coffee will drop. And the one who suffers the most is none other than the farmers. But when (supply is less than demand – coffee shortage), the price increases, not necessarily farmers will benefit, may be forced by traders, but more commonly, just experienced a severe crop failure due to weather, or pests.
So a concept was born to regulate the balance of supply and demand, that is, barricade: limiting output to a certain level (for some time). In other words, countries will agree on production to not over-demand and not to over-supply.
Before the Fairtrade coffee, the price of coffee was regulated by the World Coffee Organization – ICO (International Coffee Organization) under the provisions of the International Coffee Agreement – ICA (International Coffee Agreement) in 1962. Regulations have been established by the coffee market research division at the United Nations to limit the amount of coffee traded between countries, to ensure that there is no excess supply leading to the consequences mentioned above of price reduction. The ICA Agreement existed for five years and was then renewed in 1968.
Until 1976, the supply of coffee production was severely reduced (due to the frost in Brazil in 1975, which lost two-thirds of the country’s coffee trees in 1976). Before the severe supply shortage, the ICA agreement appeared loopholes, coffee prices skyrocketed. Therefore, the Agreement has been revised, allowing the suspension of price quotas if the supply of coffee cannot meet the demand. The percentage has lost its balancing power of supply and demand from here.
Forerunner of Fair Trade
There was no quota, so the anticipated consequences appeared. In 1988, the global coffee crisis appeared. The supply of coffee outstrips the demand. Because there is no price quota, the market is “flooded” by coffee. Get high. In the face of a lousy price move and to save the situation for farmers, a Fairtrade certificate was born in the Netherlands with the name “Max Havelaar.” Max Havelaar’s role is to “fix a minimum price” for coffee growers to secure their livelihood. However, at this stage, Max Havelaar has not yet reached an agreement on quotas between countries, so the impact is not positive; coffee prices still go down.
From 1990 to 1992, although there was a fair trade, due to no quota, the price of coffee reached its lowest level along with the economic crisis of this period.
Fairtrade coffee was officially born.
Coffee labeled “Transfair” entered the market for the first time in Germany, and within ten years, three other equal trade organizations were born: The Fairtrade Foundation, TransFair USA, and Rättvisemärkt. In 1997, these four organizations merged into Fairtrade Labeling Organizations International – FLO (also known as Fairtrade International) to continue to set standards for Fairtrade coffee, testing and certifying coffee for coffee growers…
In the 2001 and 2007 period, many agreements were signed to stabilize the coffee economy by promoting consumption, improving the living standards of growers, expanding market research, farming areas, and production. sustainable production to pave the way for the development of fair trade coffee
Fair Trade Organizations
If you wonder what is the difference between “Fairtrade” and “Fairtrade”? There is a difference!
Fairtrade: This means fair trade relationship (like a rule of the game), and Fair Trade Organizations means appropriate trade certification organization for farmers (like arbitration).
Fairtrade: Simply a trademark granted to farmers by Fair Trade Organizations. More precisely, this is the “label,” and the following four organizations can issue the Fairtrade label on each coffee package:
Fairtrade Labeling Organizations International – FLO: This is the most popular Fairtrade labeling organization (the most potent arbitrator)
World Fair Trade Organization(WFTO)
Network of European World shops
European Fair Trade Association(EFTA)
What is the working mechanism of Fairtrade Coffee?
You can imagine Fairtrade Coffee as a game, with rules and arbitration:
Exporters (farmers or coffee production cooperatives): Apply the Fairtrade label on their coffee. If approved, their coffee will be purchased at a higher price.
The FLO (the arbitrator) will issue a certificate to the producer if it meets the prescribed standards such as public information and transparency, no use of child labor, safe working conditions, environmental protection. Similarly, must also register to use the Fairtrade logo on product packaging and communication. And pay an extra fee to the exporter. depending on the type of coffee Arabica or Robusta
Fairtrade does not restrict retailers; they can sell coffee with the Fairtrade label as a premium product and charge as much as they like.
Cost to exporters of Fairtrade coffee
Fairtrade coffee will not operate individually on each farmer. Still, many farmers will be the same cooperation (hex). Many affiliates “combine” to create a level 2 network or a level 3 network. .. These contacts are collectively known as exporters; they will represent farmers selling Fairtrade certified coffee.
Export cooperatives bear the cost of certification and inspection, marketing costs, etc., and some incidental charges for all coffee. After paying the fee, farmers will accept the lower price if there is a deficit. On the contrary, if the surplus is left over, farmers will not be paid extra but will use it for social projects such as building schools, playgrounds, etc.