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Merling Preza makes the case against FT4All

2011 November 9

Merling Preza is the general manager of PRODECOOP, a pioneering Fair Trade organization in Nicaragua that she helped to create in 1993, along with Fair Trade USA CEO Paul Rice.  In that role she leads 2,300 smallholder farmers in their efforts to forge deeper trading relationships and foster the development of their communities.  She is also the president of the Latin America and Caribbean Network of Small Fair Trade Producers, better known for its Spanish-language acronym CLAC.  In that role she represents more than 200,000 smallholder farmers from more than 20 countries in Latin America and the Caribbean who oppose FTUSA’s Fair Trade for All initiative.  I had a long converastion with Merling yesterday about FT4All and her vision for the future of Fair Trade.  These are what I consider to be the highlights of the discussion.

THE PROCESS.

“It hit us like a bucket of cold water.”

When FTUSA shared its plans for FT4All with CLAC during a meeting in Nicaragua in August 2011, Merling says that the news “hit us like a bucket of cold water.”

According to Merling, FTUSA (then TFUSA – TransFair USA) reached an agreement with smallholder farmer represenatives in 2003 that it would not admit coffee estates to the certification system.  She says it confirmed that commitment in a letter to producers in 2006.  And as recently as June 2011, Merling got personal assurances that there were no plans to open the market to estates.

By the time of the August 2011 meeting, FTUSA’s decision to move forward with FT4All had already been made.

Producer voice.

Merling suggests that the way the decision to move forward with FT4All was handed down illustrates why the advisory role of producer networks within Fair Trade USA compares unfavorably to the more active participation of producer networks in the governance of Fairtrade International.

In 2006, Fairtrade International (then FLO – Fairtrade Labelling Organizations) granted producers three seats in its 24-seat General Assembly.  Last month, that allotment was increased to 12, giving producers a 50 percent ownership stake in the governance of the global Fair Trade Certification system.  According to Merling, producer participation in Fairtrade International’s chief decision-making body has meant real empowerment for farmers.  She insists that producers have managed to use their voice in the General Assembly  to ward off reforms like FT4All that producers believe will affect them adversely.

Producer participation in Fair Trade USA is different.  “With Fair Trade USA, we participate in advisory committees but not in decision-making,” she explains.  “Fair Trade USA does not want representation of farmer networks on its board.  Why not?  Because it means empowerment.”

Corporate influence.

Merling says large corporate coffee buyers have been the chief opponents of farmer-led efforts in the past to lobby for increases in Fair Trade coffee prices.  She fears that FT4All, which will expand the supply of Fair Trade Certified coffee for large U.S. buyers, will give this segment of the market more influence in the FTUSA agenda.  In the absence of a seat at FTUSA’s decision-making table for farmer organizations, that may make it harder for smallholder farmer organizations to defend their positions on specific issues such as Fair Trade pricing and their position in the marketplace more broadly.

THE VISION.

“Empowerment doesn’t happen at the individual level.”

Merling’s comments on FT4All revealed what she called a fundamental “incompatibility” between CLAC’s vision of Fair Trade and that of FT4All.  She sees the inclusion of estate workers and unorganized farmworkers as reflective of a development process focused on individuals.  She also lamented that the Fair Trade Certification system — from Fair Trade International to the National Initiatives like Fair Trade USA and its counterparts in other countries where FTC coffee is sold — have placed so much emphasis on the developmental impact of the Fair Trade premium.  CLAC and its more than 250 member organizations believe that true empowerment comes through the processes of community organization and collective action.  She argues that any expansion of the Fair Trade system should be rooted in these principles.

How will FTUSA measure success?

“If you look at Fair Trade for All just as a market opportunity, it is interesting,” Merling said.  “But not if you look at it in terms of its impact on smallholder farmer organizations.”  By the standards of total volume, the penetration of the new FTUSA seal and FTUSA revenues, she believes FT4All will be successful.  She is less sure about how it will fare in improving living conditions at origin and empowering disadvantaged farmers.

 

THE IMPACTS.

“This is just a theory.”

FTUSA suggests that FT4All will actually increase opportunities for smallholder cooperatives.  The argument goes like this: more investment in building consumer awareness will lead to more sales in the marketplace and more impact at origin.

But Merling points out that “this is just a theory.”  She sees FT4All as an extravagant experiment to test a hypothesis for which she has seen little compelling evidence.  And she fears that once FT4All is out of the gate, it will be hard to turn back, and even harder to help cooperatives cope with the fallout.

“If Fair Trade for All affects our cooperatives, who will compensate us?” she asks. “If we lose market opportunities?  If our cooperatives weaken or dissolve?”

Bracing for the worst.

Merling believes that Fair Trade coffee cooperatives will be adversely affected by FT4All, and says they are already developing strategies to protect themselves.

She believes that cooperatives will lose ground in the marketplace when forced to compete with estates and the “promoting bodies” that will link unorganized smallholder farmers to the U.S. market for FTC coffee.  These models have economies of scale that cooperatives cannot achieve easily, Merling explains.  They have lower cost structures because they don’t share the commitment of cooperatives to invest in community development processes.  And they are more efficient because they don’t operate democratically.

Furthermore, she believes that cooperative structures will be weakened by the competition.  She says that in Nicaragua, multinational coffee traders are constantly trying to buy coffee from members of PRODECOOP and other smallholder Fair Trade organizations because of the investments these cooperatives have made to improve productivity and quality.  Competing with traders for the loyalty and business of cooperative members is a perennial challenge.  Access to Fair Trade market premiums is one of the things that cooperatives can offer that traders can’t, and represents a significant advantage in this process.  Merling fears that cooperatives may start losing more often in that competition if multinationals are certified as “promoting bodies” and can offer cooperative members a shorter path to the U.S. Fair Trade market.

 

ALTERNATIVES.

Balancing reinvestment at origin and in the marketplace.

CLAC has confidence that the cooperative model that has created opportunities for its current members can meet the demands of the marketplace for increased volumes and the demands of smallholder farmers for improved livelihoods.  Merling rejects FTUSA’s suggestion that the growth of the U.S. Fair Trade coffee market has been slowed by limited demand of smallholder coffee.  She notes that on average, Fair Trade coops sell only 40 percent of their production into the Fair Trade market.  Even if as much as 20 percent of the excess production were rejected on the basis of poor quality, that means the market could double overnight.  Furthermore, Merling argues that the system has concentrated reinvestment of Fair Trade licensing fees in developing the market.  With more investment at origin, she is confident production could expand to meet growing market demand while ensuring increased coffee income for organized smallholder farmers.

Differentiation.

If Merling sees a silver lining for cooperatives in FT4All, it is that the iniative widening the gap between two visions of Fair Trade impact: FTUSA’s, which seeks to increase efficiencies and expand volumes quickly, and CLAC’s, which favors a plodding approach to participatory community development.  The opportunities for differentiation on the basis of the transparency, participation, ownership and impact of a cooperative-driven model, she reasons, may be even greater in the FT4All era.  The CLAC Small Producer label introduced earlier this year is a part of this effort.

 

6 Responses leave one →
  1. 2011 November 11

    Continued thanks, Michael, for these postings, especially bringing in a farmer voice. Readers interested in listening some more to Merling on the importance of producer empowerment might be interested in an interview with CRS at last year’s Fair Trade Futures conference:
    http://youtu.be/xDa-uDSrBrU

  2. 2011 December 2

    Merling Preza argument is very valid, but FLO is certifying Estates already now, how is this different from certifying large producers? FLO needs to be rebuilt from the ground up.

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