Why is coffee the only thing Americans buy ‘fair trade’?

A new report by Center for Global Development Senior Fellow Kimberly Elliot gives a snapshot of the global market for fair trade goods. The fair trade market has expanded rapidly – at $7 billion, the value of fair trade goods sold worldwide in 2011 was six times larger than seven years before, though still a pittance in the context of the global commodities trade.

One interesting point made in the report is that, in the United States at least, when we talk about fair trade-certified goods, we’re largely talking about coffee. And within that category, we’re largely talking about Starbucks:

Elliot writes:

Coffee was the only product licensed to use the Fairtrade mark in the United States for the first three years after Transfair USA was launched in 1998. Tea and cocoa were introduced in 2001 and 2002, respectively, bananas in 2004, rice and sugar in 2005, and vanilla in 2006. But even with the introduction of several new products and the weight differential in favor of bananas, coffee continues to account for more than half of the US Fairtrade market even in volume terms.

One key development here was the Starbucks’ decision in 2000, under pressure from activists to begin selling Fairtrade certified coffee in its stores. Today, about 8 percent of the coffee sold by the Seattle-based giant is Fairtrade certified, which accounts for about 16 percent of worldwide Fairtrade coffee sales. Dunkin Donuts recently got into the game as well, announcing that 100 percent of the coffee in its espresso drinks would be Fairtrade certified. Coffee’s dominance of the market is also the main reason why 54 percent of the world’s Fairtrade producers are in Latin America.

So what makes coffee different? Part of it’s that buyers are willing to absorb higher costs, compared to purchasers of other products. Elliot writes:

Fairtrade-certified coffee, tea, and chocolate also tend to be sold as specialty or gourmet products, rather than as mass market items. The gourmet items are also often branded and heavily marketed as providing additional quality or other features that consumers will pay more to get, whether the products are Fairtrade-certified or not.

Sellers of FairTrade goods, including Starbucks, having been moving away from labeling them as such in recent years, for fear that the designation will imply that their other products are tainted.

As for the actual benefits of FairTrade, Elliot’s conclusions are mixed. She finds that FairTrade certification doesn’t necessarily lead to better labor standards or direct economic benefits for small farmers. (I wrote a bit more about this here.) But they can benefit from increased competition among buyers and greater access to international markets.

So your ethically pure latte may in fact be helping the people who produced it, but no necessarily the way the label implies.