Producing and Consuming Narratives the Value of Fairtrade Coffee Silje Johannessen

Producing and Consuming Narratives

The Value of Fairtrade Coffee

By:

Silje Johannesen

Master thesis Management of Natural Resources and Sustainable Agriculture

Universitetet for Miljø og Biovitenskap

Supervisor:

Tor Arve Benjaminsen

The Department of International Environment and Development Studies, Noragric, is the international gateway for the Norwegian University of Life Sciences (UMB). Eight departments, associated research institutions and the Norwegian College of Veterinary Medicine in Oslo. Established in 1986, Noragric’s contribution to international development lies in the interface between research, education (Bachelor, Master and PhD programmes) and assignments.

The Noragric Master theses are the final theses submitted by students in order to fulfil the requirements under the Noragric Master programme “Management of Natural Resources and Sustainable Agriculture” (MNRSA), “Development Studies” and other Master programmes.

The findings in this thesis do not necessarily reflect the views of Noragric. Extracts from this publication may only be reproduced after prior consultation with the author and on condition that the source is indicated. For rights of reproduction or translation contact Noragric.

Noragric Department of International Environment and Development Studies P.O. Box 5003 N-1432 Ås Norway Tel.: +47 64 96 52 00 Fax: +47 64 96 52 01 Internet: http://www.umb.no/noragric

Declaration

I, (name), declare that this thesis is a result of my research investigations and findings. Sources of information other than my own have been acknowledged and a reference list has been appended. This work has not been previously submitted to any other university for award of any type of academic degree.

Signature………………………………..

Date…………………………………………

ACKNOWLEDGEMENT

First of all, I would like to thank my supervisor in Norway, Tor Arve Benjaminsen, for his guidance through the work of this thesis. Further, I would like to thank the team at CATIE, CeCoECO for welcoming me and helping me connecting to a wider network of actors within the coffee industry in Central America. A special thank to Dietmar Stoian and Jeremy Heggar at CATIE, for constructive advice and guidance.

In Nicaragua, I would like to express deep gratefulness to Julio Solorzano at FondeAgro, and Chepe (Martinez), manager of El Polo, who welcomed me and made my field work possible. I want to express deep gratefulness to all the coffee farmers in Yali, who devoted their time to long interviews, always greeting me friendly.

In Guatemala, I would like to express great thankfulness to Alberto de Leon at Fedecocagua, who friendly welcomed me in Guatemala City, and helped me with the practicalities of the field work in Guatemala. In particular, I would like to express gratefulness to the technical advisors who assisted me with transportation and other means. And in particular, I want to express deep gratefulness to the coffee farmers of Guatemala, who friendly and welcoming devoted time to long interviews.

I would like to express a particular deep gratefulness to my brother, Steffen Johannessen, who took time off from completing his PhD dissertation to assist me in the final and most stressful phase of writing. Your devotion and enthusiasm within the field of Anthropology has particularly inspired my work.

ABSTRACT

This thesis explores the Fairtrade network through analyzing Fairtrade coffee. The expansion of the Fairtrade network has led to increasing pressure and competitiveness of cooperatives in the Fairtrade market. The thesis analyze the impact of the increasingly demand of Fairtrade products and the move of the system to mainstream market through two certified Fairtrade cooperatives. The certified cooperatives studied are; a first level cooperative in Nicaragua and a second level cooperative in Guatemala. Furthermore, the thesis analyzes the value of Fairtrade coffee through exchange value, symbolic value and sign value. The economic exchange value of Fairtrade product is analyzed using the tools of a global value chain analysis. The varieties of meanings invested in the network, ie the sign value and the symbolic value, are explored by investigating how the structures of narratives are constructed among producers, consumers, and communication strategies. These I have labeled ‘commodity cultures’.

The economic income from Fairtrade coffee is found to be highly centralized in consuming country, where importers/roasters have an income of about 74 percent, retail about 13 percent, Max Havelaar almost 3 percent, and producers around 4 percent. However, a larger share of income to producer country was evident in Guatemala, where the second level cooperative received almost 10 percent of total income. However, the income did not trickle down to producers in Guatemala, which received around the same income as producers in Nicaragua, around three percent of total income.

The value of Fairtrade coffee is concentrated within the constructed meaning attributed the product and verified by a label. The constructed narrative of Fairtrade is based on selective stories of producers where Fairtrade is recognized as aid and creating connectivity between producers and consumers. However, the narratives communicated are not general representation of producers. According to my study, most producers had very limited knowledge of Fairtrade and did not see any direct benefits from the system. The selective stories are argued as communication strategies. Thus Fairtrade is not a de-fetishized product, where the narratives rather resemble commodification of new realms.

TABLE OF CONTENTS

Acknowledgement...... iv Abstract ...... v List of Figures ...... ix List of Tables ...... ix List of Images ...... ix List of Appendices ...... ix Abbreviations ...... x Measures and Exchange Rates ...... xii 1.0 Introduction ...... 1 1.2 Research objective ...... 14 1.2.1 Specified objectives ...... 14 1.2.2 Research questions ...... 14 2.0. Background ...... 15 2.1. History of coffee ...... 15 2.2 the International Coffee market ...... 17 2.3 Sustainability initiatives in the coffee sector ...... 21 2.3.1 History of Fairtrade ...... 26 2.3.2 Fairtrade in Norway ...... 34 3.0 Research methods ...... 37 3.1 Field work In Central America ...... 40 3.1.1 Development of field research in Nicaragua ...... 42 3.1.2 Nicaragua’s political economy in brief ...... 43 3.1.3 The cooperative El Polo ...... 46 3.1.4 Development of field research in Guatemala ...... 49 3.1.5 Guatemala’s political economy in brief ...... 50 3.1.6 The second level cooperative Fedecocagua ...... 52 4.0 Theory and analytical framework ...... 55 5.0 Results and diskussion I: The global value chain of Fairtrade coffee ...... 73 5.1 The Global Value Chain – Processing of product ...... 74 5.2 The global economic value chain - Income From Fairtrade coffee ...... 76 6.0 Results and discussion II: The commodity cultures of Fairtrade ...... 85 6.1 Communication Strategies of Fairtrade ...... 86 6.2 Producer narratives of Fairtrade coffee in Guatemala ...... 102

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6.2 Producer narratives of Fairtrade coffee in Nicaragua ...... 112 6.3 Consumer narratives of Fairtrade ...... 122 6.4 Example: Lidl distributing Fairtrade Coffee ...... 131 7.0 Conclusion ...... 133 List of References ...... 149

viii

LIST OF FIGURES

Figure 1: premiums and standards communicated by sustainability initiatives ...... 24 Figure 2: Price differentiation of certifications for producer cooperatives ...... 28 Figure 3: Fairtrade as percentage of total import Norway ...... 35 Figure 4: Development of field research ...... 40 Figure 5: Development of field research Nicaragua ...... 43 Figuree 6: Development of field research Guatemala ...... 49 Figuree 7: Global Value Chain ...... 58 Figure 8: Commodity Culture of Fairtrade coffee ...... 65 Figure 9: Processing of coffee ...... 74

LIST OF TABLES

Table 1: Estimated income from coffe in Toasted Coffee Equivalents ...... 77 Table 2: Distribution of value, Farmers coffee ...... 79 Table 3: value distributed of one cup of coffe, UMB ...... 81 Tabel 4: Hypothetical Producer Income from one Fairtrade cappuccino ...... 82 Table 5: Consumer confidence ...... 123

LIST OF IMAGES

Image 1: Map of Nicaragua ...... 43 Image 2: Map of Guatemala ...... 51 Image 3: Fairtrade label ...... 89 Image 4: Farmers Coffee ...... 95 Image 5: Friele Fairtrade ...... 95

LIST OF APPENDICES

Appendix 1: Calculation of economic income, producers Guatemala ...... 163 Appendix 2: Calculation of Producer income, Nicaragua ...... 165 Appendix 3: Calculation of income from Fairtrade coffee, University of Life Sciences...... 169 Appendix 4: Calculation of Hypothetical producer income from one Cappuccino ...... 171 Appendix 5: Calculation of income from Farmers Coffee ...... 172 Appendix 6: Visualized value chain analysis ...... 174 Appendix 7: Interview Guide; Producers……………………………………………………………………………...175

Appendix 8: Survey Importers/Roasters……………………………………………………………………………180

ABBREVIATIONS

ANACAFE Asociación Nacional de Café Guatemala

ANT Actor Network Theory

Asdi Agencia Sueca de Cooperacion Internacional para el Desarrollo

CATIE Centro de Agronomía Tropical, Investigación y Enseña

CeCoEco Centro de Competitividad de Eco Empresas

CEH Commission for Historical Clarification

CETREX Centro de Tramites de las Exportaciones

CONARCA The National Commission for Coffee Modernization

‘C’ price Conventional coffee price based on New York Stock Exchange

CSCE New York Coffee, Sugar and Cocoa Exchange

CSR Corporate Social Responsibility

EFTA European Fairtrade Association

El Polo Cooperativa de Servicios Múltiples El Polo R.L.

EUREP-GAP The Euro Retailer Produce Working Group

Fedecocagua Federacion de Cooperativas Agricolas de Productores de Café de Guatemala R. C.

FINE Common term for FLO, IFAT, NEWS! and EFTA

FITA Federation of International Trade Association

El Polo Cooperativa de Servicios Múltiples EL Polo R.L.

FLO Fairtrade Labelling Organization International

FOB Free on board

FSLN The National Liberation Front

GAP Good Agricultural Practices

GATT General Agreement on Tariffs and Trade

GCC Global Commodity Chain

GCE Green Coffee Equivalents

GVC Global Value Chain

ICA International Coffee Agreement

ICO International Coffee Organization

IDB International Development Bank

IFAT International Federation of Alternative Trade

IISD International Institute for Sustainable Development

IMF International Monetary Fund

INRA National Institute for Agrarian Reforms

MAGFOR Ministerio Agropecuuaria y Forestal del Gobierno de Nicaragua

MHN Max Havelaar Norway

MIFIC Ministerio de Fomento, Industria y Comercio

NEWS! The Network of European Worldshops

Oro Green Coffee

PEC Political Ethical Consumption

Pergamino Parchment coffee

Platas money

PND Plan de Desarollo Nicaragua

SAPs Structural Adjustment Programs

SCI Sustainable Commodity Initiative

SHG Strictly High Grown

SIFO Statens Institutt for Forbruksundersøkelser

Starbucks C.A.F.E. Practices Starbucks Coffee and Farmer Equity Program

TCE Toasted Coffee Equivalents

UNCTAD United Nations Conference on Trade and Development

UPE State Production Units

VAT Value Added Tax

VSI Voluntary Sustainable Initiative

WB The World Bank

WTO World Trade Organization

MEASURES AND EXCHANGE RATES

1 quintal 100 pounds 45 kilograms

1 kg 2.2 pounds

1 quintal green coffee 1.2 quintal pergamino (parchment coffee)

1 kilogram green coffee 1.19 kilogram toasted coffee (Talbot, 2004; ICO)

1 US dollar 5.39 NOK

1 US dollar 7.6 Quetzales (Banco de Guatemala 2006/2007)

1 US dollar 18 Córdoba (Banco Nacional de Nicaragua 2006/2007

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1.0 INTRODUCTION

The importance of my study is based on international trade in commodities and the unequal terms of trade created by power imbalance in the coffee commodity chain. Profit of coffee is increasingly being made in consuming countries, which are usually industrialized countries in the ‘North’. It is estimated that around 10 million small farmers around the world grow coffee and produce about 70 percent of the world’s supply. Further, around 25 million people depend directly on coffee for their livelihood (Talbot, 2004: 128). The relevance of my study is based on the increase in Fairtrade commodities, and how the Fairtrade commodities are viewed as a challenge to the conventional trade in commodities. Fairtrade has increased both in sales and marketing, where coffee is the most important product. I research the impact of Fairtrade coffee and the value of Fairtrade coffee. The concept of Fairtrade is becoming increasingly well known through extensive and unconventional marketing strategies. The concept in itself is diversifying through a number of promotional activities. In Norway there are currently 6 municipalities who have gained status as Fairtrade municipalities. Sauda was the first municipality, currently including also Lier, Asker, Stavanger, Fredrikstad and Kvinesdal. There are 43 other municipalities in Norway working for a Fairtrade status (Max Havelaar Norway). In the UK, which is the leader of promoting Fairtrade products, there are currently more than 300 Fairtrade towns, more than 4000 Fairtrade churches and more than 70 Fairtrade universities (Fairtrade Foundation UK). Euros are today printed on Fairtrade cotton (Max Havelaar Norway)and in major political arenas it is currently served Fairtrade products, such as in the Norwegian Parliament (Max Havelaar Norway) and at the World Bank headquarters (Fridell, 2004). Annually, more than 18.3 million Euros (NOK 143.894 million) are spent on education, public awareness and marketing of Fairtrade products (Krier, 2005).

Max Havelaar is appreciated in Norway as having the potential to benefit small scale coffee producers through increased price, a social premium for development motives and market access. Max Havelaar is promoted as to generate good stories and connectivity for Norwegian consumers to the manners of production. The idea of Fairtrade is essentially based on educating the consumer of unequal terms of trade and

exploitation of poor producers. The exploitative structures of international trade in coffee originate from the colonial masters. Max Havelaar was a Dutch colonial administrator in a novel written by Multatuli (pen name of Eduard Douwes Dekker). The novel was written as a protest against the colonial policies of the Dutch government in Java. Written in its narrative form, the novel marks the point of departure of the current analysis. My analysis is framed by narratives of fair trade and a global value chain analysis to investigate the income generated from Fairtrade coffee.

The aim of the analysis is to assess the potential of Fairtrade to challenge negative effects of international trade and neoliberal market ideology. The potential of Fairtrade is analyzed by looking at the value of Fairtrade coffee. Value is defined in terms of economic exchange value, and use value, which are production centered concepts essentially derived from Marx (1971). The economic value of a product is based on demand and thus do not reflect use value of the product nor the value of labor or social relations in production. However, I understand the value creation of the Fairtrade commodity to incorporate a social constructed value, through symbols and signs. Therefore I find theories from Appadurai (1986) and Baudrillard (1975) highly inspiring. These theories are often related to as consumption centered approaches to value, including sign value and symbol value, derived from Baudrillard (1975). The sign value of a product is the value of the object in relation to other objects, such as the value of a brand or a label. The symbolic value is the value of a product in relation to other subjects. The consumption centered values are central within the social construction of meaning to the Fairtrade product.

The political point of departure is within the debate of resources taken as commodities in international trade. It is situated in the debate of fair trade as opposed to free trade, and the fair trade movement as opposed to the fair trade network. It is the Fairtrade network which is of particular interest, which is the international network of actors behind the Fairtrade labeling initiative. The particularly important international actors include Fairtrade Labelling Organization International1 (FLO), the International Fair Trade Association (IFAT), the European Fair Trade Association (EFTA) and the Network of European Worldshops (NEWS!), which are joined in the informal alliance of FINE

1 Including FLO Cert, the certification agency of FLO International.

(Raynolds and Long, 2007). The emphasis of my analysis is on FLO, which is the standard setting and labeling initiative of the international Fairtrade network.

International trade may be seen as a contest of ecological justice where resources can be taken as ‘commodities’ or resources taken as ‘commons’ (Byrne et al., 2006). The response to the commons in the global system can be seen as one of commodification. According to Byrne and Rich (1992) commodification is a process determined by increased social capacities to produce and purchase goods and services where the physical environment is valued directly as a commodity in the form of raw materials and resources extracted for social use. It is the process by which something requires an exchange value (Fisher, 2007), or the process and practice of enclosure. However, according to van Binsbergen, commodification is (2005: 11) the ways in which things and social relations are affected by the market. Thus, central to the commodification process is the involvement of the market, and according to the latter theory, commodification relates to both things and social relations. The former theories relate to a production centered approach and the latter theory relates to a consumption centered approach.

In international trade, the process of commodification is argued as privatization of resources, traded in the global market according to their exchange value. For many small scale farmers, this has been a prime method of earning an income, thus they have become dependent on ‘cash crops’ (Byrne et al., 2006). According to Hindess and Hirst (1975), followed by privatization of certain raw materials used as ‘cash crops’ is a process of ‘articulation’ where the producer have one foot in the global markets and one foot in a subsistence production exchange system. Nietschmann further follows this argument in his study of the Miskito Indians at the coast of Nicaragua, where the dual articulation creates a predictable inequality in power and exchange (Nietschmann, 1979).

Central feature of the commodity argued by economists is that of an undifferentiated product, competed as a race to the bottom in production price (Lewin et al, 2004). Exchange value of the product is essentially determined by demand where conventional agricultural products are offered at prices which do not reflect the environmental and social costs of production. This forces communities of Southern countries to cover the burden of unsustainable production, explained by the term ‘ecological injustice’ (Byrne et al., 2006). Furthermore, global trade has the effect of eliminating the connection

between production and consumption, which eliminates knowledge of the social and environmental cost of production (Byrne et al., 2006). In economics this is argued as negative externalities of the free market. Marx, on the other hand, argued this as commodity fetishism, a natural outcome of the capitalist mode of production (Marx, 1971). …’Commodities contain a double fetish that both obscures realities at the site of production and creates cultural and economic surpluses for consumers’ (Bryant and Goodman, 2004: 348). Central to the argument of international trade and economic globalization is the free trade advocacy.

…’free trade seeks the unencumbered movement of goods, services, labor and capital between markets with minimum state interference, such as in the form of regulations, tariffs and restrictions on capital flows. Free trade is supported by claims that it best produces economic growth and that markets without state restrictions are the most efficient’ (Byrne et al., 2006:65).

Free trade supporters claim that economic globalization ‘lifts all boats’ – that is, ultimately everyone grows richer from it. The anti-globalization movement counters that it ‘lifts all yachts’ – that is, only the rich benefit (Buckman, 2004: 68). According to the anti-globalization movement, claims of development through free trade have been depressed by rich countries double standards. Through large international institutions such as the WTO, WB and the IMF and TNCs, rich countries preach open markets and force developing countries to open their markets. However, the rich countries themselves practice protectionism through taxes and subsidies (Buckman, 2004). The critics of free trade policies argue that free trade provides economic advantage to the more powerful economic states and actors, where producers have little bargaining power, and prices are depressed. Production is in many cases guided by global markets, where farmers become increasingly reliant on ‘cash crops’ (Byrne et al., 2006: 65, 66). Thus, with current neo-liberal market policies, wealth is argued to be increasingly transferred to core nations. In particular, poor countries have lost out in international trade, with policies increasingly balanced in favor of core nations. Many poor nations are highly dependent on the export of raw materials, where the terms of trade have fallen increasingly in later years. According to Buckman (2004) the anti-globalization movement has been divided in two main schools; the fair trade school and the localization school. The fair trade movement believes in a globalised economy, but

through restructuring current policies and trade rules, whereas the localization movement is more radical and believes that local economies should be at the centre of economic activities, not the global marketplace. The former argue that if world trade was conducted fairly it has the ability to lift millions of people out of poverty. In particular, trade should be made fair through developing country protectionism and special treatment for poor countries. Thus, the argument is essentially about challenging power structures in trade and restructuring global trade rules in favor of poor nations. The localization school, on the other hand, believes in major structural change building on principles of self-reliance. The localization school is positioned in contrast to the ideology that increased trade will lead to development. Thus, they see a need to minimize international trade, where development is building on economic self-reliance nationally and regionally.

My analysis is based on the Fairtrade network, which builds on the ideology of the fair trade movement, where trade may lead to development. It is distinguished from the movement as it is working within the market. Thus, the Fairtrade network work in the market and against it, therefore it is naturally controlled by market logic. The case study within Fairtrade is built on coffee, an important commodity in international trade which highlights many controversial debates of trade. ‘Coffee has been one of the most important primary commodity exports of the Third World since World War II, second only to oil in total income earned by Third World exporters. …over 90 percent of the coffee exported by Third World producers is consumed in the core’ (Talbot, 1997:60).

The international coffee market is characterized by fluctuating prices which creates high vulnerability and risks for producers. This is argued as a consequence of imbalance of power in the coffee value chain causing a lack of bargaining power from the producer side (Talbot, 2004; Gibbon and Ponte, 2005). Furthermore, structural global oversupply and lack of regulation of price are contributing factors (Slob, 2006). More than 90 percent of coffee production takes place in developing countries, where coffee is the most valuable agricultural product exported (Talbot, 2004). The majority of producers are small scale farmers where 85 percent of the producers are family run farms relying on coffee as the main source of cash return (Slob, 2006). According to Giovannucci and Ponte (2005:285) increasing producer income of coffee have large developing prospects as producers generate more than thirty times revenue per capita from exports than they

receive in aid. Thus enterprise development within the coffee sector might have a key role in poverty reduction by promoting responsible business and sustainable livelihoods for low income households (Mayoux, 2003).

The sustainability initiatives in coffee include certifications and standards in production, such as Fairtrade. In recognition of the link between commodities and sustainable development, the Sustainable Commodity Initiative (SCI) was launched in 2002 by the United Nations Conference on Trade and Development (UNCTAD) and the International Institute for Sustainable Development (IISD). The SCI identifies that voluntary sustainability initiatives (VSI) have the potential to;

...’ create higher and more stable revenues through the identification of sustainable products/markets; better farm and business management practices among producers; improved producer awareness of market trends; reduced producer risk exposure to market volatility; more efficient and strategic natural resource use; improved consistency, quality and supply of products to consumers; improved consumer awareness of producer conditions through private sector communication channels; improved coordination and efficiency of supply chain management; and increased private sector investment for sustainable production and consumption.’ (Sustainable Commodity Initiative, 2008).

Increasing producer income is referred to as upgrading in the value chain for coffee producers. Searching for methods of upgrading in the value chain includes searching reward structures of the chain, and the roles that generate rewards (Gibbon, 2004). In other words, methods where the producers can increase power and income generated from coffee. Upgrading on the producer side of the value chain of coffee has increased rewards in two main methods. The first method is within the commercial market for Robusta and hard Arabica, from large or very large grower-exporters that are able to consistently supply high volumes, meet basic or above basic quality requirements, guarantee proper handling, and provide efficient logistics up to the loading of a ship (Gibbon, 2004:23). This is basically a quantitative measurement where rewards include a higher reference price and medium to longer term commitments from buyers (Gibbon, 2004). The second method concerns mainly higher quality mild Arabica such as ‘specialty’ or ‘gourmet’ coffees (Gibbon, 2004). Upgrading within mild Arabica is identified either through increased quality or adding credence attributes to the product (Slob, 2006). The former refers to production method and technology for a better

quality product, and the latter refers to standards based on trust, usually communicated through a label. Such voluntary standards are defined by Nadvi and Waltring (2002); ’Standards are agreed criteria… by which a product or a service’s performance, its technical and physical characteristics, and/or the process, and conditions, under which it has been produced or delivered, can be assessed’’ (Nadvi and Waltring, 2002, cited in Giovannucci and Ponte, 2005:286)

Through these standards, developing country farm and business will gain market access, in particular access to niche markets (Giovannucci and Ponte, 2005). The element of diversifying products, or searching for niche markets, is a normal response in the neoliberal market with increasingly varied consumer demands. In the literature, the term sustainable coffee has increasingly been referring to the method of upgrading in coffee through quality and credence attributes. The sustainability segments, such as economic viability, environmental conservation and social responsibility are directly attributes from the upgraded product. Producers participate in such programs where they believe it will bring economic benefits and market access. The standards and certifications are promoted to improve producer income, use competitive advantage and empower the producer. Furthermore, it is enhancing ecological production methods through environmental standards and increased knowledge of sound agricultural practices (Ponte, 2004; Giovannucci and Ponte, 2005).

Different types of sustainable coffees currently on the market are; gourmet or specialty coffee, denomination of origin, organic, Fairtrade, Rainforest Alliance, Utz Certified, Bird friendly and shade grown, in addition to private standards such as Starbucks CAFÉ practices, Nespresso, Coop café future, 4C, among others (Ponte, 2004; Giovannucci and Ponte, 2005).

My analysis is highly inspired by the approach of political ecology. Political ecology is a field of critical research concerning the condition of the environment and the people who live and work in it. It is a field which has attracted researchers from the fields of anthropology, forestry, development studies, environmental sociology, environmental history and geography (Robbins, 2004). It incorporates the perspective of political economy held together by a focus on the use and management of natural resources, combined with an interpretation of discourses, meaning and narratives.

Political ecology is a contested field where …’’some stress the political economy while other points to more formal political institutions: some identify environmental change as most important while others emphasize narratives or stories about change’’ (Robbins, 2004:5). Blaikie and Brookfield (1987) explained the concept of political ecology the following manner;

‘’The phrase ‘political ecology’ combines the concerns of ecology and a broadly defined political economy. Together this encompasses the constantly shifting dialectic between society and land-based resources, and also within classes and groups within the society itself’’ (Blaikie and Brookfield, 1987:17).

The political ecology approach has evolved in different directions. This paper will emphasize discourses, narratives and meanings inspired by Peet and Watts (1996) and Roe (1991, 1995). It will focus on highlighting the role of images and representations through narratives in the struggle over natural resources (Peet and Watts, 1996). Thus, the theoretical approach of my analysis is a social constructivist approach influenced by Derrida’s (1966) theory on deconstruction. Essentially, I will deconstruct the concept of Fairtrade coffee and interpret the meaning of Fairtrade within different cultures. In particular, I deconstruct the meaning of Fairtrade through producer and consumer cultures, and through communication strategies of Fairtrade. However, as the deconstructed system fail to highlight the power structures in the chain, I show this by the GVC analysis.

My paper will include two types of analysis; the global value chain analysis and the commodity cultures approach. The GVC analysis is an economic analysis of the income generated by Fairtrade coffee. The GVC approach is highly descriptive of the exchange value, or the economic income generated by actors in the chain. The approach of a value chain is a linear imagination of a chain from producer to consumer. The total income corresponds to the retail value of the product. The GVC of Fairtrade coffee essentially takes the Norwegian coffee market as a point of departure, where total income generated from the Fairtrade coffee equals the retail value of the product. The main suppliers of Fairtrade coffee in Norway is the second level cooperative Fedecocagua in Guatemala. However, in order for comparison, a first level cooperative in Nicaragua, which exports Fairtrade coffee to Sweden, is included. The main aim of the GVC is to show how the economic income is distributed through the chain.

The commodity culture approach is parallel to the work on material cultures and builds on methodology from the political ecology of development and from consumption studies. It is ideally a study which makes it possible to counter the divide between production centered and consumption centered studies. There is quite a large debate on production centered and consumption centered approaches to understanding commodities and their circulation from production to consumption. In trying to avoid this debate and the implications of either approaches, I decided to use the commodities culture approach. I use the approach in which I understand it is possible to interpret different commodity cultures individually. The commodity cultures refer to groups of actors central to the commodity. I have divided the commodity cultures into representation culture, producer culture and consumer culture, which I believe are the key commodity cultures of Fairtrade coffee. The commodity cultures approach necessarily involves a deconstruction approach, where the key groups of actors are separated and studied individually.

The commodity cultures approach involves rethinking the linear commodity chain or global value chain approach to incorporate more complex circuits and networks for new modes of understanding (Jackson, 1999, 2002). The framework is operationalized through Appadurai’s (1986) idea of the social life of a commodity but taken further as to expose neo-Marxist double fetishism of commodities (Bryant and Goodman, 2004). The social life of the commodity is related to the different cultures in which the commodity circulates. In particular, the approach highlights social relations and narratives part of the social construction of the commodity. This is essential a Marxist idea where the commodity contains a fetish which obscures social relations in production. By exposing neo-Marxist double fetishism, it is possible to expose the power structures in the global network of the commodity2 and the regimes of exploitation and the economic and cultural surpluses this creates for consumers (Bryant and Goodman, 2004:348). The commodity culture approach is grounded on post Marxist theories (Foucauldian and feminist theories) and grounds support and importance through social relations based on social constructivist approaches (Bryant and Goodman, 2004). The commodity is not only a raw product where value is added from production, processing and final

2 The idea is essentially taken from the critique which came after Appadurai’s (1986) ‘The social life of things’. The social biography of a commodity was insufficient to describe the unequal power relations in the commodity network (van Binsbergen, 2005).

consumption. The commodity has a biography which is possible to visualize through narratives of the actors participating in the complex network. …’ Acknowledgement of the textuality of the material world is enormously helpful in understanding the social significance of material objects, enabling, for example, commodity analysis to break out from narrowly economistic approaches by breaking down (artificial) distinctions between the 'economic' and the 'cultural, and by demonstrating how commodities (and the spaces that supply them) are significant sites of cultural spectacle, key spaces through which we come to understand the processes shaping society and seek to work out alternative forms of social relations’ (Bridge, 2001, cited in Bakker and Bridge, 2006:14).

However, as Bryant and Goodman (2004) highlight the importance of exposing neo- Marxist double-fetish, their analysis lacks reference to power inequalities and relations in production3. I find commodity cultures approach insufficient to highlight the power structures in the network, which made it insufficient to break the distinction between the economic and the cultural, as highlighted above (Bakker and Bridge, 2006). Therefore, I found it necessary to include the GVC analysis in addition to the commodity cultures approach. Thereby I run the risk of a production centered approach and production-related consumption. This is highlighted by van Binsberg (2005) and Appadurai (2005), building on a revised approach to the book The Social Life on Things (Appadurai, ed., 1986). Accordingly, the book, even though revealing consumption as a central theme, is referred to as production-related consumption (Van Binsbegen, 2005; Appadurai, 2005). Appadurai (2005) later emphasize the importance of bridging the two fields of consumption and production.

’We need an equivalent sociology of consumption (not a mirror image) to that Marx gave us for production. That is, we need to know the technical basis of consumption in and across national spaces, we need to know the class-formation dimension of consumption which recognizes that consumption creates classes in its own right’ (Appadurai, 2005:61).

However, this is a large debate within the field of anthropology. I do not intended to dwell on the debate in this paper, where it is more related to extensive analysis of consumption. I have mostly used consumption theories from Baudrillard, referred to in

3 Bryant and Goodman (2004) introduce the first production moment of the solidarity seeking commodity culture with a few lines before they interpret the second production moment of Fairtrade coffee; the symbolic and sign value of the product.

the above quote as mirror images of consumption, and Appadurai’s (1986) The Social Life of Things. Though I acknowledge the importance of the debate and relate some difficulties in my analysis to this debate.

By analyzing the Fairtrade network it is essential to highlighting the historical frame of which the network came about, along with the different perceptions and definitions of the active actors involved. Producers, importers, roasters, consumers, activists, NGOs and scholars alike, have various different interpretations of what stipulates Fairtrade coffee. A central feature of the commodity culture approach is how the meaning and perceptions of Fairtrade coffee changes through the commodity network as different production moments of the product4.

Particularly important when characterizing a Fairtrade coffee are the representation narratives created by the Fairtrade network. The communication strategies and the selective producer narratives distinguish Fairtrade coffee from a conventional coffee (Whatmore and Thorne, 1996). Moreover, the Fairtrade coffees’ success relies on consumer sensitivity to arguments of social and environmental justice (Renard, 1999) which is essentially an argument of demand and whether this demand is socially constructed (Bryant and Goodman, 2004). Thus, there is a need for a focus on social constructs and textuality which are sensitive to cultural frames of actors and authors in which they operate.

Discussing Fairtrade coffee in terms of consumption, Guthman (2003) argues a new paradigm of consumer demand for socially constructed shared values such as health, nutrition, authenticity; ecology and social justice. The ethics behind the new paradigm of consumer demand is, according to Renard (1999:489)

…’resulting from the industrial, productivist agricultural system that prevailed during the Fordist era-together with overproduction and the resulting financial problems-which has placed this (the current) model in question, and has caused a lack of confidence in the quality of food products.’’

The new consumer demand for ethical products, resisting mass consumption and assembly lines, has been coined by the ‘reflexive’ consumer (Guthman, 2003) building

4 Economists usually refer to production moments as the steps of processing.

on theories of life politics from Giddens (1991). Lifestyle politics builds on the notion of a reflexive project of the self where material products and choices form a certain narrative of identifying self (Giddens, 1991). According to Giddens (1991) in the era of late modernity, one identifies the self in the capacity of keeping a certain narrative going. This is also in line with moral theory presented by Macintyre (1985), where we understand our lives and live our lives in terms of narratives. The reflexive consumer choose Fairtrade product as part of defining the reflexive project of the self.

However, ethical considerations of consumption is not merely reflecting consumer behavior, it is highly influenced by marketing and representation strategies (Barnett et al., 2005). Thus, there is a need to conceptualize ethical consumption in these terms;

…’ ethical consumption as a field of marketing, campaigning, and policy-making by which ordinary, practical moral dispositions of everyday consumption are re-articulated by policy-makers, campaigning organizations, and business’ (Barnett et al., 2005:29).

Thus, Fairtrade is guided not only by consumer reflexivity and producers’ search for niche markets, but also by the social construction and marketing which gives meaning to the product.

My paper is structured as to first give a brief history of coffee and outline structures of the international coffee market. Secondly, I will briefly discuss certifications of coffee as sustainability initiatives in coffee before I move on to introduce history of Fairtrade and the Fairtrade market in Norway. This section I have named background.

The following section will outline research methodology and theory. It will firstly give an introduction to the general research approach I have taken. Secondly, there are two field methods sections, which are divided geographically between Guatemala and Nicaragua. I will give a brief introduction to political issues within the countries and outline the institutional structures of the two cooperatives I have studied. The third part within this section is devoted to theory of the analytical tools I am using to analyze my data. I outline the main theorists related to the approaches and justify for my use of the approaches. I have given particular space to justify the reason behind the two different analytical tools.

The next two sections are devoted analysis and representation of results. I have divided the result section in two different chapters as I believe they differ in such fundamental terms that it was easier to understand them separately. Thus, one chapter is devoted the value chain analysis and a second result chapter is devoted narrative analysis within three commodity cultures. The three commodity cultures are firstly, the representation culture, or strategy, secondly the producer culture and thirdly, the consumer culture. At last I have included a short example in order to highlight that these cultures are connected.

At last, I have a concluding chapter. The conclusion brings together results from the two analyses, draw the attention back to the objective of the study and highlight key findings.

1.2 RESEARCH OBJECTIVE

The key research objective is to analyze the Fairtrade system through Fairtrade coffee. I aim to identify the meaning and value of Fairtrade coffee bought in Norway in order to discuss the impact of Fairtrade. My research is guided by questions of whether Fairtrade has the ability to challenge international trade and whether the Fairtrade network is growing in accordance with, or on behalf of, the impact it has on producers. I will identify the value of Fairtrade coffee through an economic value chain analysis and the commodity cultures approach. The economic value chain highlights the income and power structures in the chain. The commodity cultures approach deconstruct the Fairtrade coffee network to interpret meaning and value through narratives within the key cultures comprising the Fairtrade coffee network.

1.2.1 SPECIFIED OBJECTIVES

1. Carry out a global value chain analysis of Fairtrade coffee, which includes the identification of economic benefits accrued by each actor. 2. Identify the Fairtrade narratives presented by key actors within commodity cultures, with main emphasis on producer narratives.

1.2.2 RESEARCH QUESTIONS

1. Who are the key actors participating in the global value chain/network of Fairtrade coffee for Norwegian consumers? 2. What is the economic exchange value of the product to each key actor? 3. What are the varieties of meanings invested in the network?

2.0. BACKGROUND

2.1. HISTORY OF COFFEE

Arabica coffee most likely originates from the highlands of Ethiopia. The legends have it that coffee was discovered by the goat herder Kaldi at the horn of Africa, in Ethiopia, probably in the province of Kaffa circa A.D. 800. Kaldi noticed his herd dancing from one coffee shrub to the other, grazing on the red cherries, and he decided to try it for himself. The legend further explains how a monk witnessed Kaldi eating the cherries and tried it for himself, being very alert to divine inspiration that same night (International Coffee Association; the story of coffee, undated). Coffee was being cultivated in Yemen at least by the 15th century, most likely earlier. Coffee was brought in at the port of Mocha, which was also the main route to Mecca. The Arabs followed a strict policy not to export fertile beans5, in order to keep the profitable activity for themselves. The Arabian coffee houses became centers of political activity. This was seen as a problem and apparently led to their suppression. The coffee houses and coffee was banned several times, but the coffee houses kept reappearing. The solution came as a tax on coffee and the coffee houses (International Coffee Association; the story of coffee, undated).

By early 1600, coffee had been introduced to Europe where coffee houses spread quickly. The Arabs controlled the cultivation of coffee and had monopoly on the desired product. They forbade the export of fertile seeds and par-boiled the coffee before export for the coffee not to be germinated. However, the seeds found its way to India, where a Dutch botanist brought them further to Java, and to a greenhouse in Amsterdam. The French eventually sent some seedling to Martinique where coffee spread to the rest of Latin America (Talbot, 2004).

‘Almost all of the coffee trees now growing in Latin America are direct descendants of a few seeds from Java. …Coffee was also introduced to East Africa around 1900 by Catholic missionaries. And ironically, although it had probably originated there, the seeds for these plantings came from the Caribbean, completing a five hundred-year journey around the world’ (Talbot, 2004:45).

5 The coffee beans are the seeds of the coffee tree, but they become infertile if one strip off the outer layer (ICA).

Robusta coffee, on the other hand, originates from Central and West Africa, and was discovered by French colonists due to its similarity to Arabica coffee. The Robusta coffee plant is more robust or resistant than the Arabica plant. The Arabica coffee plant is highly susceptible to various diseases and pests due to its limited genetic stock, in particular to leaf rust which is the main threat to Arabica coffee along with the coffee berry borer worm (broca). In many parts of Asia, Arabica was replaced either by Robusta due to its resistance to leaf rust, or by tea due to preferences, leaving Latin America as the main supplier of Arabica coffee (Talbot, 2004). Talbot explains the importance of coffee during colonial times as following;

‘Brought around the world by colonists, coffee along with other commodities became important sources of colonial power for Britain, as well as essential consumption items for the growing industrial working class. In Britain and other European powers, coffee and tea, sweetened with sugar, gradually replaced beer and wine as working-class beverages’ (Talbot, 2004:46).

One of the most comprehensively description of the introduction of colonial products, in particular coffee, to rural societies is the novel Max Havelaar by Multatouli, pen name of Douwes Dekker;

’…der kom Fremmede vesterfra, som gjorde sig til Herre over landet. De ønskede at drage Nytte af Jordbundens Frugtbarhed og paalagde Indbyggerne at anvende en Del av deres Arbejde og Tid til at tilvirke andre Produkter, der vilde kaste mer af sig, naar de blev solgt paa det europæiske Marked. …Men spørger man mig, om de javanesiske Aagerbrugere selv faar et Udbytte, der svarer til denne Rigdom, maa jeg give et nægtede Svar. …Da det dog til syvede og sidst gælder om at tjene noget, kan dette kun ske ved netop at betale Javaneserne saa meget, at de ikke dør af Sult, hvilket vilde formindske Folkets Arbejdskraft6’ (Multatuli, 1901:46).

6 ..there came unknown people from the west, which made themselves Rulers of the country. They wished to make use of the fertile soil and instructed the inhabitants to make use of their labor and time to produce other products, which would give more in return, when it was sold at the European market… But if one ask me, if the Javanese farmers themselves receive a return, which corresponds to this wealth, then I have to give a denial answer… When it in the end concerns about earning something, this can only happen by paying the Javanese as much, as they do not die of hunger, which would have decreased the peoples’ work capacity (Multatuli, 1901:46).

2.2 THE INTERNATIONAL COFFEE MARKET

The majority of coffee is typically sold as what economists refer to as a primary commodity, which is an undifferentiated good sold in bulk quantities. This reduces incentives for growers to maintain or improve quality. The market for coffee is characterized by high price volatility. High price volatility refers to ...’the inability to predict prices before an event and the retrospective measurement of their level of variation’ (Lewin et al, 2004:20). The reason for the high price volatility is the available quantity of stocks (it is possible to store unprocessed coffee, parchment coffee for up to two years in right conditions, Mitchell, 1988), sudden changes in the supply/demand balance usually caused by natural disasters where frost in Brazil has been the main cause of increasing prices. Additionally, there is a lack of information to producers about the coffee market. These changes are particularly damaging when the parameters of variation are not known in advance, which is particular the case with commodity prices (ibid). Coffee is a tree crop which takes three to four years to produce cherries. Thus, planting coffee trees require farmers to take a long-term view, which is difficult with unpredictable prices and limited access to credit (ibid). Furthermore, when prices are volatile, the actors within the supply chain with direct exposure to prices will raise their margins in order for a certain security. When this happens at the expense of farmers, revenue is transferred directly to traders (Lewin et al, 2004:22).

The inadequate access to information creates shocks and instability in producing countries. The market is characterized by its ups and downs. There are good times and there are bad times, though there are always better times in local communities around coffee harvest. The coffee harvest proceed for about three months, and these three months are described as the liveliest times in Yalí, a small village two hours north of Jínotega, northern Nicaragua. People have ‘platas’ (money) during these three months, because the whole village is somehow included in the coffee industry. They are proud of their coffee, rumors has it that the first coffee plant in Nicaragua was brought here many years ago (although this is only a rumor, other coffee villages claim the same). They are also proud of the quality they have, this is coffee grown at high altitudes, which is the first characteristic of a good quality coffee. The village is dependent on the sale of coffee;

the village is based on coffee, like so many other rural villages in Central America7. Coffee is one of the world’s most important Third World commodities and over 90 percent of the coffee production takes place in developing countries (Slob, 2006). More than 70 percent of the coffee-producers are small scale farmers (Milford, 2004), who produce coffee on farms of less than ten hectares (Oxfam, 2002).

Coffee was a profitable activity in producing countries from about mid 1960s to late 1980s, and profits were spread through rural areas (Talbot, 2004). The prices for coffee are determined on the two big future or stock markets in London and New York, the former is the benchmark for Robusta coffee and the latter for Arabica. Futures prices reflect not just current physical market prices but also the expectation of future events which can have impact on prices, including speculating activity from actors such as large financial traders and speculators (Lewin et al, 2004). The coffee futures contract traded on the New York stock exchange is called the ‘C’ contract, based on Central American Arabica coffees. Coffee has been exchanged there since the founding of the New York Coffee exchange in 1882. It merged with sugar and cocoa to the New York Coffee, Sugar and Cocoa Exchange (CSCE) in 1982 (Talbot, 2004).

Like other commodities, coffee is a good which is inelastic to demand. This means that a sharp decrease in price due to a good harvest year will not mean a significant increase in demand. Nevertheless, coffee harvests differ enormously, where yields could be ten times as large in good years as in bad years, resulting in very unstable coffee prices (Hira and Ferrie, 2006). Furthermore, the prices are largely dependent on big producer countries, such as Brazil, evident when the price soared to US 1.80/lb in 1994 when frost damaged the coffee harvest (Hira and Ferrie, 2006).

The market is defined by its booms and busts as a consequence of natural disasters, in particular damage of the harvest in Brazil. Under the International Coffee Agreement (ICA), which controlled the export of coffee through quotas, a little more than half of the total income from coffee went to producing countries, with a third of it as surplus (Talbot, 2004). However, the 1975 Brazilian frost created an increase in surplus to producing countries for the harvest of 1976-1977 of about 80% of total surplus available along the chain (Talbot, 2004). After the 1976-1977 harvest the surplus was

7 Based on conversations with farmers in the community of Yali.

evenly distributed between producer and importer nations until the aftermath of the Brazilian draught in 1985, which lead to price increase and temporary suspension of ICA quotas in 1986-1987. The income of producer countries fell to about a quarter, while the income in consuming countries rose to two thirds of the total. However, because total surplus increased, there was a shift in distribution of surplus, now 60 percent to the producers.

The next mayor shift was caused by the end of quotas and the price crash of 1989 (Talbot, 2004). The vulnerability in the coffee market is seen as a consequence of structural global over supply, natural disasters in Brazil, and a shift in bargaining power of agents in the coffee chain due to a failure to renew the International Coffee Agreement (ICA) in 1989. The entrance of Vietnam as a leading coffee producer and Structural Adjustment Programs (SAPs) from the International Monetary Fund (IMF) are also important factors, which increased supply and affected coffee prices (Bacon, 2005; Muradian and Pelupessy, 2005). Income in producer countries rose to three quarters of total, while income of producer countries fell to about 15 percent. The Brazilian frost shifted temporarily surplus back to producer countries, but leading to the second crisis, almost all surpluses was retained in consuming countries. Many producers received less than it cost them to produce (Talbot, 2004). From the late 1980s-early 1990s until 2004, earnings of coffee producing countries in terms of export free on board (FOB) decreased from US$10-13 billion per year to US$5.5 billion.

In the broader picture, prices of most major agricultural commodities have fallen between 50 and 86 percent during the last 20 years. However, coffee showed one of the greatest fall (Slob, 2006), reaching a record low in 2001 (Milford, 2004). Under the ICA regulations, coffee was traded in the managed market. Governments in both producing and consuming nations sought to agree pre-determined supply levels by setting expert quotas for producing countries. The breakdown of the ICA in 1989 had many causes, most important being the incapacity of members to negotiate a new quota allocation, lobby actions from American firms8 and the inability of producer and consumer countries to control extra quota in coffee movements (Muradian and Pelupessy, 2005). The reasoning is also related to the geopolitical historical context of the Cold War. The

8 Including large coffee corporations such as Procter & Gamble and Sarah Lee (Fridell, 2004).

new neighbor policy of the US wanted to reward friendly governments through coffee trade, which was impossible with the current ICA structure, therefore the Reagan Administration decided to sabotage renewal negotiations by making impossible demands from Brazil and Colombia (Jaffee, 2007:42).

The agreement survived, administered by the International Coffee Organization (ICO), but it lost power to regulate the supply of coffee through quotas and the price corset (Oxfam, 2002). The consequence of the breakdown of the ICA and liberalization policies by the World Bank (Talbot, 2004) was an increase in coffee production followed by rising inventories9 in consumer countries, slow-moving demand and market concentration in trading and roasting industries (Ponte, 2002). Consequently creating a shift in power to the roaster and retailing end of the commodity chain and falling prices paid to the producers (Ponte, 2002; Bacon, 2005).

Thus, when the frost in Brazil drove prices upwards in 1994, growers responded by increasing coffee planting. Before liberalization, the state would have increased taxes and revenues which would have worked as insurance against next period of low prices. This would also have reduced incentives to plant more coffee for producers. When the increased production hit the market around 1998, this set off the second coffee crisis. Media have increasingly blamed World Bank policies for funding increased production in Vietnam for the second coffee crisis. However, according to Talbot there has been limited evidence for this. What has been more important is the increased power of large TNCs which have taken advantage of their position by buying larger quantities of low quality Robusta coffee from Vietnam and blending this with higher quality Arabica coffee. This has lowered demand of Arabica coffee, thus pressing the prices down. Furthermore, the changed structure of the coffee chain along with privatization policies, as explained above, has limited the producer state control. Large TNCs have currently control of the entire chain, from producer to consumer. ‘Increasingly, small peasant farmers producing coffee using family labor on one side of the market were directly confronting giant transnational conglomerates with state of the art information technologies, access to virtually unlimited financial resources, and a clear picture of the entire global coffee situation on the other side’ (Talbot, 2004: 129). According to Eakin et

9 Inventories refers to keeping a certain amount of stock in storage.

al. (2006:156), revenue from coffee sales in Central America declined as much as 44 percent. The coffee market is described as oligopolistic where few large TNCs dominate the market (Talbot, 2004). The crisis is described as a market failure due to oligopoly and the creation of cartels or informal agreements between firms. The price paid to farmers for both Robusta and Arabica coffee was in 2001, taking inflation into account, 25 percent of its level in 1960, which only covered 60 percent of the production cost in many countries (Oxfam, 2002).

In 2004, the international coffee market showed some signs of recovery. The upward trend started in the last month of 2003 and continued to 2005 (Slob, 2006). In February 2005, prices reached the same levels they averaged in 1999 of more than US 85 cents per pound (Slob, 2006).

The value added along the chain takes place increasingly in consuming countries. In producing countries, actors sell material coffee according to quality evaluated on export point. While in consuming countries, coffee is sold packaged with symbolic and in- person service components where value is controlled by roasters, retailers and coffee owners (Daviron and Ponte, 2005), creating the so-called ‘latte revolution’ (Ponte, 2002).

2.3 SUSTAINABILITY INITIATIVES IN THE COFFEE SECTOR

One of the main challenges for the coffee industry is how to sustain better market conditions to avoid the cycles of boom and bust (Slob, 2006). The recovery of producer prices after the coffee crisis currently makes coffee production a profitable activity for many. However, roasters and retailers have shown capacity to add substantial value to the green beans by targeting ever more segmented consumer markets. Roasters and retailers capture increasingly more profit downstream. Producers have seen their total value decline from 30 percent to 5 percent of total retail price in the past two decades (Lewin et al, 2004:95). Farmers seek differentiated markets for better prices and improved production methods. However, these are not easy tasks for the poorest farmers, which demands understanding of current market trends, appropriate technology, multiple distribution channels and financial, logistical and risk management options. These new methods require new organizational and management capacities of organizations such as cooperatives. But it also includes a different view of the product

by roasters, importers and consumers, as a commodity, according to economists, is an undifferentiated bulk product which rewards the lowest cost of production

The practices of the differentiated coffee differ in design, standards, attributes, and values added (Slob, 2006) and they are traded through differentiated channels. In order to participate, producers need a differentiated product and the ability to access buyers and to export their product. It involves a shorter supply chain, but for many, traders and middle men are still important actors.

The term specialty or differentiated coffee is not clearly defined and has been a source of confusion in the industry (Lewin et al, 2004:99). In particular, marketing campaigns in the global coffee trade have imprecisely used terms like ‘gourmet’ or ‘shade grown’ coffee.

Clearly, if the industry itself is unclear (about these terms) one can only assume that consumers are equally at loss. Consumer confusion is known to depress rather than stimulate markets (Lewin et al, 2004:99)

Not only are consumers confused about what stipulates a specialty coffee or the different certification initiatives in coffee; the growing increase in specialty coffee initiatives appeal to the consumer in different ways. They differ in the information strategies communicated to the consumer and what they actually represent (see Figure 1). Standards are important for producers in developing countries as they determine access to new markets and new terms of participation in global value chains. Standards set entry barriers and it provides the opportunity for the selected producers to add value, improve their product and assimilate new functions along with a different relationship with buyers in importing countries (Giovannucci and Ponte, 2005). Standards can be seen as a market tool of product differentiation, market penetration, system coordination, quality and safety assurance, brand complementing, and product niche differentiation (Giovannucci and Reardon, 2000).

The different standards and certification of coffee communicate information about the attributes of a product. Ponte (2004) classify these attributes according to the ease with which they can be measured. Search attributes are verified at time of transaction, such as the color of the coffee bean. Experience attributes are assessed after the transaction has taken place, such as the taste. These attributes pertain to the product itself, such as

appearance, taste, cleanliness and absence of taints, or to production and process methods. The credence attributes are attributes that cannot be detected based on physical characteristics, but are based on trust. The credence attributes responds to aspects such as authenticity of origin (geographic appellation), safety (pesticide residues, levels of toxins) and environmental and socio-economic conditions, such as organic, Fairtrade and shade-grown certifications (Ponte, 2004).

Furthermore, Ponte (2004) classifies standards in three broad categories; mandatory in the form of government regulation, voluntary from a formal coordinated process, such as eco-labels, or resulting from NGO-initiatives, such as Fairtrade labeling and other third party certifications such as Raniforest Alliance, shade-grown certifications, birdfriendly and Utz Certification. In addition there are private standards which are developed and monitored by individual enterprises (Ponte, 2004), such as the Starbucks CAFÉ practices (Fisher, 2007) and Coop café futuro. However, Fairtrade seem to differ from other initiatives in that it has widespread consumer activist support through NGOs such as Oxfam and Global Exchange (Fisher, 2007). The different initiatives in the coffee sector create confusion of what stipulates sustainable coffee;

Recent large-scale industry surveys in 14 major markets suggest that the specific characteristics of certifications are confusing to the coffee industry – and especially to consumers (Giovannucci, 2001; Giovannucci and Koekoek, 2003). (cf. Giovannucci and Ponte, 2005, pg 285)

FIGURE 1: PREMIUMS AND STANDARDS COMMUNICATED BY SUSTAINABILITY INITIATIVES

Premiums certified coffee 2006-2007

Starbucks C.A.F.E. Practices C' price average 2006 Rainforest Alliance (FOB US$/lb) Utz Certified Fairtrade Pricefloor (FOB US$/lb) BirdFriendly Organic Premium (FOB

Fairtrade + Organic US$/lb) Certification Social Premium (FOB Fairtrade US$/lb) Organic

0 0.5 1 1.5 2 Value (US dollar/lb)

REFERENCE 1: GIOVANNUCCI, 2007

The Starbucks C.A.F.E. practice is a private program including social and environmental criteria, started in 2001. It is essentially a market-driven point system, which gives points to better social, environmental and economic conditions, with a requirement of good quality coffee. The quality requirements limit the program to Arabica coffees with ‘zero defects in grade, superior even color, and consistent bean size’. Price incentives allow an increment of US$ 0.10/lb, for a total up to 100 points, which is then characterized as preferred supplier (May et al, 2004). It includes an additionally USD 0.15 for organic certification.

Rainforest Alliance is mainly an ecological certification scheme. Along with techniques for conserving and creating protective zones to the natural ecosystem, the certification requires a minimum of 70 individual trees per hectare that must include 12 native species. There must be a shade density of at least 40 percent at all times and criteria must be complied within five years of certification. There are no set economic premiums for the producers, but importers are encouraged to pay higher prices for the certified

product, in addition to the ecological benefits to the producers (Rainforest Alliance webpage).

The Birdfriendly certification is an initiative from the Smithsonian Migratory Bird Center, and is also essentially an ecological certification scheme. The certification is based on a minimum shade management practice, at least 40 percent canopy cover, in support of migratory birds. Planted shade should include a high diversity of species in support of a diversity of migratory birds, with minimum criteria of ten different species and encourage old growth forest. The certification requires organic production (Smithsonian Migratory Bird Center webpage).

Organic certification has a minimum requirement of no application of prohibited substances such as synthetic fertilizers, herbicides, pesticides, growth regulators, fungicides etc, for a period of at least three years. It encourages the use of techniques such as composting, terrace building, and biological control (Killian et al., 2006). There are numerous different organic certification schemes worldwide, where certification criteria at the production sites must comply with certification in the consuming countries. In Norway, Debio is the certification of organic production with requirements for distribution of organic goods (Debio Norway, undated).

Utz Certified, or the former Utz Kapeh which means ‘good coffee’ in Mayan, was founded by Arnold Coffee Company to serve its private needs. It is now an independent foundation and certifies coffee according to its own code of conduct (Giovannucci and Ponte, 2005). Utz Certify have adopted the EUREP-GAP (The Euro Retailer Produce Working Group) sustainability criteria, which is a standard-setting body for international certification and produces for good agricultural practices (GAP) (Lewin et al, 2004). Utz also bases its standards on ILO standards. The code of conduct for production processes includes specified criteria on maintenance of agricultural registration, traceability, soil management, use of fertilizers and irrigation, crop protection, hygiene, workers safety, prevention of environmental and human contamination from planting through post-harvest, and destination and recycling of crop residues and toxic product containers. Utz Certify does not operate with a price floor, such as FLO, but encourage that buyers pay a ‘Sustainability Differential’ to producers at times of low prices. The differential is not fixed, but negotiated between buyers and sellers in reference to a perceived added value by Utz Certified (Utz Certify, 2008). The

code of conduct is not necessarily verified through independent third-party certification, which makes for weaker compliance of standards (Giovannucci and Ponte, 2005).

2.3.1 HISTORY OF FAIRTRADE

‘Fairtrade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers-especially in the South. Fairtrade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade’ (EFTA, 2001).

The Fairtrade network10, as we know it today, is here defined by the informal umbrella network FINE, consisting of FLO (Faritrade Labelling International), IFAT(International Federation of Alternative Trade), NEWS! (Network of European World Shops) and EFTA (European Fairtrade Association) (EFTA, 2001). FLO International was established in 1997 as an umbrella group for the National Initiatives of Fairtrade labeling initiatives such as Max Havelaar, Trans Fair, or the Fairtrade Foundation (Fridell, 2004). The Dutch development aid organization, Solidaridad, created the Max Havelaar Foundation in 1988, coffee being the first and most important commodity (Jaffee, 2007).

FLO International, currently separated into FLO-International and FLO Cert, is different from these other organizations as the main areas of work is to develop and review the Fairtrade standards and provide support to Fairtrade certified producers (FLO- International; about us). FLO-CERT GMBH is responsible for certification and inspection of producer organizations and traders after the FLO-International standards (FLO-Cert; about us). IFAT, NEWS! and EFTA as ATOs have focused on a somewhat different role than FLO. Whereas FLO’s main objective has been to increase the Fairtrade sales through participation of conventional corporations in the network, IFAT, NEWS! and EFTA have focused on enhancing marketing skills and efficiency to better compete against conventional corporations (Fridell, 2004).

10 The Fair trade network refers to the fair trade purchasing system.

The core of the FLO system is the price floor, a price supposed to be fair, covering the costs of production and stable over time (Milford, 2004). However, the price floor is an indication of consumer willingness to pay, and must remain close enough to conventional prices as not to discourage ethical consumers (Renard, 1999:497; Fridell, 2007:192). The price floor was US$ 1.21 11at the time of research (2007), though will rise to US$ 1.26 as of the first of June, 2008 (FLO International, 2008), in addition to a social premium which was US$ 0.05 at time of research, rose to US$ 0.10 on the 31.01.2008 (FLO International, 2008). However, the futures market (New York for Arabica and London for Robusta) is used as a reference, whereas if the ‘C’ price exceeds the FLO price, buyers are required to pay the ‘C’ price plus the social premium. However, the US$ 1.2612 is the fob (free on board) price for the exporting cooperative, indicating that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays freight, insurance, unloading costs and transportation from arrival port to the final destination (Talbot, 2004). In general, the producers receive about 80 percent of fob price in the Fairtrade market (Fridell, 2007) whereas they receive around 60 to 70 percent in the conventional market (Talbot, 2004; Fridell, 2007). For the price differentiation since 1996, see figure below, (Feil! Fant ikke referansekilden.) where the ‘C’ price and the Fairtrade price refers to washed mild Arabica beans. The ILO core labor standards form a central element of FLO across agricultural products, but it plays a lesser role in coffee as FLO criteria only permits small holder producer with little or no hired labor supply in the Fairtrade market. The small farmers allowed certification are described as not ‘structurally dependent on permanent hired labor, managing their farm mainly with their own and their family’s labor-force’ (FLO-International, 2008).

Included in theory as a requirement, buyers are required to offer pre-financing of production up to 60 percent of reference price and long-term contracts (FLO). However, these requirements have remained largely optional (May et al, 2004).

11 Prices are given for washed Arabica from Central America.

12 Price at time of research including the social premium.

FIGURE 2: PRICE DIFFERENTIATION OF CERTIFICATIONS FOR PRODUCER COOPERATIVES

180 160 140 120 100 80

60 US$ Cents/lb US$ 40 20

2002 2000 2001 2003 2004 2005 2006 2007 Year

Fair trade + social premium Price NY "C" (Mild Arabica) Specialty coffee Fair trade price floor (FOB)

REFERENCE 2: FLO INTERNATIONAL, 2007; INTERNATIONAL COFFEE ORGANIZATION, UNDATED A

Furthermore, important features in the area of social development are democracy, transparency and participation where the farmers should be able to demonstrate the use of revenue from Fairtrade to the promotion of small farm socio-economic development. Environmental protection is stated to be an important part of the production methods. As a minimum requirement, producers should obey to national and international norms and regulation for the use, management, storage and destination of pesticide containers, protect water resources, preservation of forests and natural ecosystems, and soil protection matters.

However, Fairtrade was not established by the foundation of Max Havelaar. Rather, the foundation of Max Havelaar was …‘a response to arguments made by Southern Fairtrade partners about the need to gain access to real markets’ (Fridell, 2004:419). The earliest traces of Fairtrade in Europe dates from the late 1950s when Oxfam UK started to sell crafts made by Chinese refugees in Oxfam shops. In 1964, the first Fairtrade Organization was created. The Dutch third world groups started with sugar canes with

slogans ‘by buying cane sugar you give people in poor countries a place in the sun of prosperity’ (EFTA, 2006). The growth of Fairtrade, or alternative trade, from late 1960s was associated primarily with development trade, parallel to the second UNCTAD conference (United Nations Conference on Trade and Development) in Delhi 1968, communicating ‘Trade, not Aid’. Its founders were mainly large development and religious agencies establishing Southern Fairtrade Organizations, importing crafts and food and selling them in so-called World Shops. Alongside development trade was solidarity trade, which focused on importing goods from marginalized countries in the South (Fridell, 2004).

The first fairly traded coffee was imported in the 1960s by Fairtrade Original in the Netherlands, from cooperatives of small farmers in Guatemala. Currently, about 25-50% of turnover of Northern Fairtrade Organizations comes from coffee. In the 1980s, a Dutch church-based NGO conceived the idea of a Fairtrade label as a new way to reach the broad public. The label would make them stand out among ordinary products on store shelves, and would allow any company to get involved in Fairtrade. In 1988, the Max Havelaar label was established in the Netherlands, name taken from the 1860 novel by Multatuli (Eduard Douwes Dekker) ‘Max Havelaar: Or the Coffee Auctions of the Dutch Trading Company’, which was written as a protest against the abuse of Dutch colonial power in Java and Sumatra (Multatuli, 1901).

The objective of Max Havelaar was to offer the label to conventional importers who met Max Havelaar’s standards in exchange for a certification fee. …’Conventional importers would be encouraged to participate in Fairtrade because of the ‘’added value’’ the Fairtrade label-injected with symbolic meaning-would give them on the market’ (Renard, 1999, cited in Fridell, 2004: 419). This departure, by mainstreaming the network, is quite significant and requires further analysis of the Fairtrade movement. It is important to make this distinction between the Fairtrade network and the Fairtrade movement. The Fairtrade network is the system of rules and principles of trading whereas the latter is part of a broader Fairtrade movement (Fridell, 2004).

‘’The Fairtrade network was significantly influenced by the broader Fairtrade movement, which set the context within which it evolved’’ (Fridell, 2004: 416).

The Fairtrade movement, also referred to as the Fairtrade/Back to Bretton Woods’ school or globophilies (Buckman, 2006), emerged in the inter-war period 1918- 1939 (Fridell, 2004) as part of the less radical policy school of the anti-globalization movement (Buckman, 2006). It was esentually a movement to combat the rapid decline in primary commodities-copper, tin, rubber, coffee, wheat, sugar, and cotton-as opposed to secondary manufactured goods (Fridell, 2004). Control schemes was established throughout the 1920s and 1930s for primary commodities through stockpiling and restricting output of the market of these products in order to rise prices (Fridell, 2004).

An important pillar in the post-war period which both influenced the anti-globalization movement and divided it was the Bretton Woods meeting in 194413, which established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank). Shortly after the Bretton Woods, the Havana Charter was adopted in 1947 under the auspices of the UN as a commodity control agreement through the use of buffer stocks in order to stabilize the price of raw material exports (Fridell, 2004). The US refused to ratify the charter and it was finally ditched by President Truman in 1950 (Buchman, 2006:43) The finally outcome of the Havana conference, the General Agreement on Tariffs and Trade (GATT) was much more minimalistic than the Havana Charter, with independent agreements on the different commodities for five year periods. The agreements were renewed during the wartime boom in 1950s due to the declining prices of primary commodities. The International Coffee Agreement (ICA) was not renewed in 1989, for political-economical reasons that will be elaborated on later, however other agreements such as sugar collapsed already in the 1960s with the US boycott of Cuban sugar. World trade negotiations continued and after the Uruguay Round of trade talks (1986-1993), the World Trade Orgainzation (WTO) was established from its predecessor GATT, which included a more binding force and included new trade-related issues (for more details see Buckman, 2006). The collection of these public financial institutions along with the world’s transnational corporations (TNCs) has become a major global bureaucracy and wields enormous

13 The Bretton Woods meeting in 1944 fixed an American dollar to gold convertibility with a related payment system and exchange rate mechanism, and confirmed an international stabilizing fund the International Monetary Fund (IMF) to provide short term loans with conditions to countries with balance of payments difficulties and the International Bank for Reconstruction and Development (the World Bank) in order to provide finance for long term loans for development projects (Buckman, 2006).

influence underpinned by the Washington Consensus, which is the label of the free market ideology.

The anti-globalization movement rose as a reaction to the enormous influence of these institutions. The divide of the movement is described as a divide between the radical reformers, the localized school whose ideology stems from Schumakers ‘Small is Beautiful’ and the Fairtrade school supportive on the philosophy of John Maynard Keynes. Though Keynes early writing was criticized of being in favor of tariffs and protectionism, it is argued that he sympathized ultimately with a less radical restructuring of the international institutions such as IMF and WB (Buckman, 2006). Another conference held in attempt to bring export earnings to southern producers was the first United Nations Conference on Trade and Development (UNCTAD) in 1969. It was founded by Raul Prebish; the founder of the structuralist school, challenging the Ricardian’ notion of economic advantage of nations in production of certain goods over other nations. UNCTAD promoted the concept of ‘unequal exchange’, also incorporated into the structuralist school (Fridell, 2004).

The Fairtrade movement argues for a level playing field in economic globalization through more rules and regulations in the market place, to end rich world protectionism and differentiated trade rules for poor countries (Buckman, 2006).It is separated from the localization school and the more radical anti-globalization movement in that it supports the world economic system powered by the World Bank, IMF and the WTO through major reforms. However, according to Fridell (2004) the Fairtrade movement lost momentum as the neo liberal policies tightened its grip;

’While the 1970s were the pinnacle of the Fairtrade movement, the 1980s saw its derailment as states and international financial organizations turned away from policies of government intervention and market regulation’ (Fridell, 2004:416).

Importantly, parallel to the decline in the Fairtrade movement was a rapid expansion of the Fairtrade network with exceptional sales in the era of neoliberal globalization (Fridell, 2004). The Fairtrade network, influenced by the dependency theory, was a parallel trading system to open alternative markets in the South. During its first phase, believed to be in the 1940s and 1950s, it was driven by the idea that the world capitalist system was incapable of providing development benefits to the poor, adopting the

slogan ‘trade, not aid’. It started as a direct purchase project by Christian mission-driven NGOs in Europe and North America, led by Oxfam UK and a Dutch Catholic group Fairtrade Organisatie in Europe (Fridell, 2004). In 1969, the first ‘’world shop’’ was established in the Netherlands selling Fairtrade products. The Fairtrade network grew steadily in the 1970s and 1980s, though in the late 1980s it underwent a significant reorientation. It departed from the dependency theory of a new economic world order to meet the demands of the capitalist market. According to Fridell (2004);

…’most Fairtraders has abandoned his14 focus on the nation state as a primary agent in development, which derives from the dependency theory’s focus on the goal of national self- sufficiency… And his (Barrett Brown) focus on creating a parallel trading network that presents itself as a distinct alternative to the existing trade. …In contrast to this, most Fairtraders now focus on NGOs as the primary agent of development.. An important exception to this is Oxfam International, which continues to lobby for such things as international commodity agreements and state-enforced social and environmental standards while at the same time promoting the Fairtrade network’s non-statist project’… (Fridell, 2004:418).

Fridell (2004) argues that the change of course of the Fairtrade network stems from two broad factors. Firstly, the change in the ideologically conditions under which the Fairtrade was constructed with the rise of neoliberal globalization; where development projects based on international market regulation and strong state have been halted by neoliberal structural adjustment policies. Additionally, this was combined with the perceived failure of all post-Second World War development models in the South and the fall of Soviet-style communism. Secondly, the restructuring of the Fairtrade network stems from the imperatives of the Fairtrade market;

’The growth of the network was hindered by lack of access to consumers, the limits of volunteer labor, poor marketing formulas, and public perceptions about the poor quality of Fairtrade goods. In response to these limitations, Fairtrade organizations reoriented themselves toward gaining access to mainstream markets that they hoped to reform. To do

14 ‘’Barrett Brown’s model for a new economic order composed of democratically controlled state marketing boards, with grassroot control at all levels, and direct link between Northern consumers and Southern producers… central is a trade union, designed to address Southern countries’ lack of access to hard currency and credit needed to diversify and develop trade… The final outcome would be a decentralized economy based on a parallel trading system’’ (Fridell, 2004:418)

this, Fairtraders stepped up their efforts at consumer research, marketing strategies, and quality control. …Most importantly was the founding of the independent labeling initiative Max Havelaar, which sought to expand the market available to Fairtrade commodity producers by dealing directly with conventional TNCs in the north’ (Fridell, 2004:419).

Furthermore, the use of traditional filiere15 actors avoided the need for developing a new infrastructure and reduced costs of penetrating the market. ‘’By adding a label to existing brands, it is possible to take advantage of the image already created around these brands, as well as the knowledge the corresponding industrials have with regard to the market demand’ (Renard, 1999:496). However, the Fairtrade network was not only pushed forward by conscious consumers. It was a point of coincidence between conscious consumers and the interest of filiere actors as a convergence of various interests (Renard, 1999). The filiere agents responded to demand of consumers and benefiting from profits but also through the creation of a certain image.

To sum up, there is a clear difference between the Fairtrade network and the Fairtrade movement though the former have grown out of the latter16 and can thus not be seen as not in relation. The distinctive shift in ideology and manner which happened in 1988 with the introduction of the labeling initiative from Max Havelaar also highlights many of the current limitations of the system. This shift marked the growth of the Fairtrade network and the decline of the Fairtrade movement. The Fairtrade network is now embraced by TNCs, public institutions such as in the European Union where all its institutions use Fairtrade coffee and some use Fairtrade tea, and in many national, regional and municipal institutions throughout Europe, and last but not least, international organizations such as the World Bank who has begun promoting the Fairtrade network and are sipping Fairtrade coffee at their offices in Washington, DC (Fridell, 2004:426).

15 The filiere actors is the french equivalence to commodity chain analysis and here refer to the importers, roasters and distributors.

16 While it is important to highlight that as though much reference on the fair trade movement is taken from Buckman (2006), I clearly take distance from his note that the fair trade purchasing system has no relation to the fair trade school (Buckman, 2006:171).

2.3.2 FAIRTRADE IN NORWAY

A study done by SIFO (Statens Institutt for Forbruksforskning,) of ethical-political consumption in Norway found Norwegian values to be among the worlds’ most politically correct; concerned about world justice, animal liberation and the environment (Terragni et al, 2006). However, Norwegians have strong faith in the state and assume the state to handle these cases, less so through consumer power. The sales volume of Fairtrade coffee has been growing steady since the introduction of the Max Havelaar initiative in Norway (see Figure 3), though only amounted to about 1 percent of total coffee import in 2005.. Currently the market share is almost 1.5 percent in Fairtrade coffee (Ragnhild Hammer, personal interview, 21.02.2008). In addition, there are currently six Fairtrade towns or municipalities in Norway, and another 43 municipalities are working to obtain the status as Fairtrade municipalities (Max Havelaar Norway).

Surveys carried out by SIFO state that one third of the Norwegian population has boycotted particular commodities during the last year and 44 percent said they bought particular goods due to their political, moral or environmental considerations. However, in a survey of 1000 informants, 37 percent claimed to have bought ecological certified goods within the last four weeks, whereas 16 percent had bought Max Havelaar certified products. Nevertheless, it is highlighted in the report the fact that Max Havelaar certified products are pioneers in the field with high probability of expanding (Terragni et al, 2006).

Consumption of coffee is central in Norwegian culture. Norway has been a coffee nation since the alcohol law of 1842, which abolished the private brewing of alcohol (Stenseth, undated). Norway has among the highest consumption of coffee in the world, with a per capita consumption of 9.3 kilo in 2004; on average a Norwegian consumes 5-6 cups a day. The Fairtrade certified coffee had a market share of about 1 percent, which amounted 215 metric tons of imported green beans in 2003 (Giovannucci and Koekoek, 2003), increased to 484 metric tons in 2006 (FLO International, 2007), almost 1.5 percent of the market share in 2008 (Ragnhild Hammer, personal interview, 21.02.2008). On the Fairtrade market in Norway, 174 tons of green coffee is channeled through the mainstream retail where the majority is owned by these three roasters. In

2001, about 40 tons of green coffee certified Fairtrade was channeled through the specialized market (Giovannucci and Koekoek, 2003).

In 1996, three large roasters shared 85 percent of the market in Norway; Kaffehuset Friele, Joh. Johannson and NKL (Coop), which are also the main distributors of Fairtrade coffee to mainstream retail.

FIGURE 3: FAIRTRADE AS PERCENTAGE OF TOTAL IMPORT NORWAY

fairtrade as percentage of total import

1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 1999 2000 2001 2002 2003 2004 2005

t i me

REFERENCE 3: FLO INTERNATIONAL, 2007; ICO, 2007

The Fairtrade coffee for mainstream retail is largely distributed through the three major roasters in Norway. The main coffee houses import the majority of their Fairtrade coffee from the Fedecocagua cooperative in Guatemala (Engdal, E. et al., 2007).

Max Havelaar Norway (MHN) was established in 1997 as a cooperation project between 12 organizations. Max Havelaar Norway argues for the definition of Fairtrade in line with FLO as a new model for trade which ensures a living wage for the producers (Max Havelaar Norway, undated). According to Hammer, director Max Havelaar Norway (personal interview, 21.02.2008), the practical organization of Fairtrade is organized in the following manner; in order for Norwegian roasters/importers to distribute Fairtrade coffee they need to become licensees of MHN. MHN would put the licensee in contact with FLO certified producer organizations. The licensee decides on a certain producer in which committing to a long term trading relationship is crucial. The licensees have to pay the minimum price set by FLO for the coffee. In addition, a fee must be paid to Max

Havelaar (Hammer R., personal phone interview, 27.03.2007) which is NOK 1.8 per kilogram of toasted coffee (Hammer, personal interview, 21.02.2008) The license fee amounted in 2005 to 29 percent of the total income of the organization, where the additional funding is mainly covered by Norwegian aid, Norad, and to lesser proportion by other development-oriented organizations (Årsregnskap Max Havelaar, 2005).

Max Havelaar Norway place the importer in contact with a FLO certified agent or trader who imports from different organizations in producer countries to make a particular blend and exports this to the roaster/importer in Norway (Glavin T., general manager of Joh Johannson, personal phone interview, 28.03.2007). The responsibility of MHN includes quarterly controls of importing contracts, payments, volume and references in order to secure the minimum price paid to producer.

Importers and licensees are put in direct contact with producer organizations through FLO International following they are certified by FLO-Cert. The certification process is a costly and thorough process where minimum standards need to be met. The cost differs with the kind of organization, number of members or member organizations, number of products sold under Fairtrade conditions and whether the organization is owner of a processing installation. However, an example for a small organization with 200 members applying for coffee and one other additional product, running a wet processing plant with 45 workers includes the following: An application fee of NOK 2000, an initial certification fee of NOK 22 812, in addition to the initial certification service inspection with a daily rate of NOK 3 260, all costs to be paid in the first year. The following inspections are charged on a time and expense basis with a daily rate of NOK 3 260 (FLO International, 2006).

3.0 RESEARCH METHODS

The research has taken place over a period of seven months, including a preparatory study at a research station, CATIE (Centro de Agronomía Tropical, Investigación y Enseña) in Costa Rica and field work with producer cooperatives in Nicaragua and Guatemala. Consumer research is based on secondary information due to time limitations. This section will explain the development of research, the methods used in collecting data, give a brief detail of the study areas and outline the analytical tools used in the research.

The epistemological concern of research is social constructivist, which considers how social phenomena develop in particular social contexts (Bryman, 2004). I render the particular theory of knowledge appropriate in order to understand the Fairtrade commodity as separate from a conventional commodity. Thus, I use the concept of deconstruction, coined by Jacque Derrida in the 1960s (Derrida, 1966), in order to analyze the social construction of Fairtrade coffee. However, the polarized debate between constructivist and realist epistemology is inaccurate, where the constructivist approach disregards the material. Avoiding the conceptual use of material I highlight that the GVC analysis is carried out based on economic exchange value. The exchange value is different to use value, sign value and symbol value. The social constructivist approach to knowledge highlight the social construction of value to the Fairtrade coffee. By deconstructing the determinants of value incorporated in the Fairtrade coffee, I am at understanding the social construction of Fairtrade coffee.

The constructivist approach to knowledge assumes we can only understand the social world through meaning and qualitative methods of research. The research seeks to analyze how signs and images have power to create particular representations of people and objects. Thus, in a sense, peoples’ thoughts and experiences are part of a system of meaning. The system of meaning is constructed socially, not individually which is the interpretive approach to research. The underlying ontology is essentially that human life is fundamentally constituted in language (Terre Blanche and Kelly, eds., 1999). The epistemological grounding is based on understanding others’ experiences by interacting with them and listening to what people say. The ontological considerations of research are based on the assumption that people’s subjective experiences are real and should be

taken seriously. However, working with commodity cultures it is important to highlight that they are subjective real within their context (Terre Blanche and Kelly, eds., 1999). The commodity cultures consist of narratives, or the general subjective meaning of Fairtrade coffee. Thus, the analysis seeks to understand each of the social cultures surrounding the biography of Fairtrade coffee. The constructivist approach opens a possibility of dismissing certain narratives on behalf of other narratives closer to a certain reality. The certain reality would then be based on more general subjective representation of meaning. As such, the tools of research would be open for the possibility of constructed narratives, or strategic selective representations of a reality, to be dismissed as constructed discourses (Terre Blanche and Durrheim, eds., 1999). However, the narratives would not be dismissed as myths, because history(ies) are always myths which seeks to establish identities in the present (Friedman, 1992). Thus, more importantly is to identify general and selective representations, and the underlying meaning and agenda of the narratives. Following the model of ‘verstehen’ (understanding) by Dilthey is to seek an understanding of how narratives and texts are created within their social settings (Terre Blanche and Kelly, eds., 1999). The narratives serve different purposes, which is only possible to understand within the different cultures and contexts. The modes of understanding are separated within each context. The textual understanding is based on analyzing narratives, be they constructed in terms of symbols, meaning or selective representations, or be they general narratives of producer perception. The purpose of analysis is to deconstruct the meaning and value of Fairtrade coffee in order to analyze them, one by one, before they are placed back into context in a new perspective.

According to Derrida, once you deconstruct a system by pointing out its inconsistencies (or binary oppositions as he describes them), you have two options. Either you disregard the whole system, or you keep using the structure but recognize it is flawed. The former attributes a certain truth value to the system through disregarding the system as untrue, the latter option prevents attributing a ‘truth’ value to the system but rather see systems as constructs even though the central idea is flawed (Derrida, 1966).

I will interpret the system of Fairtrade through deconstructing the system. The deconstruction should be close enough to the context so that people familiar with the context would recognize it, but far enough away so that it would help see the

phenomenon in a new perspective (Terre Blanche and Kelly, eds., 1999). By this I am not claiming a new truth to the system, but rather highlight any misrepresentations that might be within the system and point out difficulties within the system of Fairtrade.

The relationship between theory and research has been mainly inductive, where theory has been the outcome of research and observations (Bryman, 2004). In other words, it is a bottom-up approach where one identifies certain instances and organizing principles from the data collected. This is not to disregard the importance of background knowledge and theories before entering the field (Bryman, 2004). However, the categories of organization was not made before entering the field, thus the approach is inductive with elements of interaction between theory and observation. Furthermore, the interaction between theory and research has been important as the field work have been carried out in three different geographical regions. In particular this has been important with the research in Norway. Some background research and interviews had to be made before entering fieldwork in Central America to be able to research the producers who supplied the majority of Fairtrade coffee to Norway. In addition, further research was necessary when returning from fieldwork in order to collect sufficient data to carry out the GVC analysis in addition to the representations of Fairtrade and the consumer culture.

The process of gaining knowledge (see Figure 4) on the subject area was done by going through secondary information (literature review and reports), attending conferences (Ramacafe 2007 in Managua and Second International Symposium on Multi-Strata Asgroforestry Systems with Perennial Crops: Making ecosystem services count for farmers, consumers and the Environment in Turrialba, Costa Rica) and through semi structured interviews with key actors in the network of Fairtrade coffee, with particular emphasis on interviews with producers and management board of producer cooperatives. In addition, I spent three months at CATIE research institute in Costa Rica which was valuable in terms of networking and dialogues with experts on the area of research on coffee; upgrading in the value chain; and certifications of commodities. Cooperating with the Centre for Competitiveness of EcoEmpresas (CeCoEco) was particularly educative in the area of GVC analysis and small producer firms.

FIGURE 4: DEVELOPMENT OF FIELD RESEARCH

Secondary Information (Literature review, reports and conferences)

Primary Information (Telephone interviews, semi-structured interviews, survey and dialogues)

Validity of Information (Dialogues with key informants)

Analysis of information

Triangulation, comparing the different analyses

3.1 FIELD WORK IN CENTRAL AMERICA

The field work took place in Nicaragua and Guatemala. The reason for the choice of two study areas was to analyze the difference between a small cooperative and a large secondary cooperative, because I had found that the majority of Fairtrade coffee (85 percent) was produced by a large secondary cooperative working on a national scale in Guatemala. The method of collecting data was through qualitative semi-structured interviews. The data was recorded and transcribed as the fieldwork developed. Preliminary understanding of the meaning of data was shaped within the collection of data, but further analysis was carried out when returning to Norway after fieldwork in Central America. When returning to Norway, further data was collected. Particular important was the collection of data on economic income from Fairtrade coffee by the main actors in Norway, in addition to semi structured interviews with key actors both through telephone and personal interviews. Included in the fieldwork in Norway was a desktop analysis of representations and marketing of Fairtrade and further literature review on similar impact studies of Fairtrade coffee. Due to restrictions of time and resources, it was not possible to realize an extensive survey of Fairtrade consumers in Norway, thus the analysis of consumer behavior rely on secondary sources. There is a lack of independent surveys of consumer behavior in relation to Fairtrade buying

behavior in Norway. This is a knowledge gap which would be very interesting to fill in the future and could also be interesting in relation to organic buying behavior and the commodity cultures of these two alternative food networks.

The methods which I used of collecting data was convenience sampling and snowball sampling, using CATIE in Costa Rica and the conferences as a starting point of building a network. Convenience sampling is a sample method where availability of informants is the key research strategy (Bryman, 2004). Snowball sampling is a form of convenience sample, where key informants ‘makes the snowball roll’ by establishing contacts with others (Bryman, 2004). Thus, dialogues with key actors and specialists in the field became extremely important.

I encountered a number of difficulties on the road of collecting data to this analysis. The first obstacle was to obtain data from importers and roasters on their Fairtrade coffee. It took months before I was able to receive data on where the Fairtrade coffee was produced, and it was not until my return from fieldwork after various emails and telephone interviews, that I was able to obtain data sufficient for the GVC analysis. In addition, carrying out interviews in Spanish was a challenge as my background knowledge was limited to basic knowledge of the language, and the rural areas in Nicaragua and Guatemala, have quite significant different accents. Language difficulties was also experienced in relation to technical terms, which became a learning experience both when interviewing producers, but perhaps in particularly when interviewing roasters in Norway.

Furthermore, a lack of objectivity was felt through fieldwork in Nicaragua and Guatemala, which may have affected my data, even though I have tried to take this into consideration. Firstly, in Nicaragua I became to know the cooperative management through a buyer of their Fairtrade coffee in Sweden. Thus, I became associated with the buyer, also because I am from the same geographical region. Furthermore, about half of my data from Nicaragua was collected with the presence of a technical advisor from the cooperative. The presence of the technical advisor was one of the main reasons which made the research possible, due to the geographical locations of the farms, but may have affected my data. The farms located closer to the community centre I visited alone. Secondly, the presence of the technical advisor was also central to the Guatemalan context, which also became an issue of geographical location. However, I decided myself

which first level cooperatives to research, based on the latest coffee sold to Friele AS. Thus, the presence of a technical advisor was also here crucial to make the research possible, but in a few cases I had to intervene during focus groups when the technical advisor from Fedecocagua was participating too actively.

3.1.1 DEVELOPMENT OF FIELD RESEARCH IN NICARAGUA

The development of field research (see Figure 5) in Nicaragua began at the event Ramacafé 2007. This is an annual international conference where people involved in the coffee sector, from producer cooperatives to representatives from Nestle, Starbucks etc., discuss opportunities in the coffee business. Ramacafé 2007 focused on communication through the global value chain in coffee ‘comunicación de semilla a taza’17. At the event, contact with key actors was established, such as a roaster from Sweden; Philippe Barrecka from Arvid Nordquist HAB, and Julio Solórzano from Fondeagro/Magfor (Ministerio de Agropecuario y Forestales, Nicaragua). Through these contacts I was able to develop further contact with the cooperative El Polo, which exports Fairtrade coffee to Sweden. Hence, a snowball sample method was used with assistance from key informants through the work of identifying the actors in the global value chain of Fairtraded coffee to Scandinavia.

Upon arrival at the study site in Nicaragua, convenience sample structure was used in order to reach farmers/respondents. I reached the farmers by walking to various farms in close vicinity of the village, the technical assistant of the cooperative assisted me by motorbike to farms further away, and I used stationary methods of interviewing farmers who came in to the cooperatives’ office in the village town.

17 Communication from bean to cup.

FIGURE 5: DEVELOPMENT OF FIELD RESEARCH NICARAGUA

Attending event Establishing Ramacafe 2007 Field trip to Yali, contact with Jinotega with Sr. for increased Snowball and representative Julio Solorzano. understanding of convenience Semi-structured from Arvid Established the market and sample of farms interviews and Norquist, and contact with the establishing within the dialogues with Fondeagro through cooperative El contacts. cooperative El cooperative Sr Julio Solorzano Polo Polo leaders, board of directives and

farmers

3.1.2 NICARAGUA’S POLITICAL ECONOMY IN BRIEF

Nicaragua’s history is usually described in large parts in its legacy of political turmoil and lack of investment in human resources. Between 1936 and 1979 Anastasio Somoza followed by his sons ruled Nicaragua as dictators.

IMAGE 1: MAP OF NICARAGUA

REFERENCE 4: GOOGLE EARTH, 27.02.2008

Nicaragua experienced its most significant economic growth from 1960-1977, primarily due to record international prices of cotton and coffee. However, the Somoza dictatorship was a period of corruption, repression and enormous accumulation of wealth of the elites, and a growing concentration of property (Westphal, 2002). The Sandinista Front of National Liberation (FSLN) was founded in 1961, and the Sandinista revolution began in 1977. With the Sandinista revolution, land and most modern installation and machinery were confiscated from the political and economic group supporting Somoza and made state property protected through the National Institute for Agrarian Reform (INRA) (Westphal, 2002). The FSLN seized power in 1979, Daniel Ortega assumed presidency from 1984. Under Ortega’s leadership, the FSLN implemented many socialist reforms including land distribution through the Agrarian Reform Institute, bank nationalization, and the establishment of cooperative societies, media censorship, and a large military force. The National Commission for Coffee Modernization (CONARCA) was formed in order to control coffee leaf rust disease, increase coffee production to generate export earnings, compact the coffee growing areas and create jobs for rural poor (Westphal, 2002).

During the 1980s, the area of the state and cooperative sector increased as further land was confiscated from landowners who fled the country. Efforts were concentrated on the state production units (UPE) until the reform package of 1981 which guaranteed the land rights of productive farming units regardless of size (ibid). During the agrarian reform of the eighties, the promotion of cooperatives was intensified including collective ownership and management, ruled by an elected board with a general secretary. The cooperatives also gained importance as a defense unit as the ‘contra war’, started by a militant counter-revolutionary movement supported by the USA, began to threaten the security of many rural families. …’The cooperatives were perceived not merely as production units but also as mechanisms for political organization and entry points for state intervention into rural society… as functions in the Sandinista development project..’ (Westphal, 2002:86)

Coffee was first introduced to Nicaragua in 1796 as a decorative plant. It developed into an agricultural crop in areas around Managua and by 1841 small quantities of coffee was being exported to Europe along with indigo, cotton and tobacco (Villanueva et al, 2006). Coffee was introduced to northern Nicaragua, Matagalpa and Jinotega by 1880 and while

other agricultural crops such as cotton and bananas developed, coffee still remained the most important export crop and the main source of income in Northern Nicaragua. During the 20th Century, Nicaraguan producers in the region concentrated on increasing productivity rather than improving quality, also due to a large ‘planting’ campaign launched by the government during 1960-1970.

Production of coffee is still polarized where small producers constitute 72 percent of the rural population but own only 16 percent of the land, whereas the medium and large scale farmers constitute 28 percent of the population possessing 84 percent of the land (Ministerio de Fomento, Industria y Comercio, MIFIC, 2003).

'The agrarian structure in Nicaragua is highly polarized and fragmented. The rural landless, the smallholders (up 2 mz.), and small producers (2-5 mz) comprise 72% of rural households, but they represent only 16 percent of the land. They have not only limited land, but also low levels of schooling. Limited access to land, combined with a low level of human capital, extensively characterize the poor living in rural areas in Nicaragua. The medium and large producers, representing 28% of rural households, possess 84 percent of the land18’ (Ministerio de Fomento, Industria y Comecio, MIFIC, 2005:11,12).

Thus, as the coffee crisis evolved in Nicaragua it hit the rural poor hardest. The price received was not covering the cost of production. However, it forced the producers to look for markets who paid better prices;

‘The crisis helped the producers to be more efficient and look for markets that paid better prices, as an alternative to the falling prices. Those who failed to improve their production costs and quality of the seeds had to leave the market. The latest coffee crisis faced by producers due to the falling prices of green coffee served to improve the efficiency and quality of the product, and currently the sector is focused on further increasing exports of specialty coffee, which rose from 50 000 Quintals three years ago to nearly 400 000

18 ‘La estructura agraria de Nicaragua se encuentra altamente polarizada y dispersa. La población rural sin tierra, el minifundio (hasta 2 mz.) y los pequeños productores (2-5 mz) constituyen el 72% de los hogares rurales, pero representan apenas el 16% de las tierras. No sólo tienen poca tierra, sino también bajos niveles de instrucción escolar. El poco acceso a la tierra, combinado con un capital humano de bajo nivel, caracterizan ampliamente a los pobres que viven en el área rural de Nicaragua. Los medianos y grandes productores constituyen el 28% de los hogares rurales, pero poseen el 84% de la tierra18’. (Ministerio de Fomento, Industria y Comecio, MIFIC, 2005:11,12)

Quintals in the last agricultural cycle. Not only was a larger volume of specialty or differentiated coffee exported, but new countries have been added to the exporting list, after becoming familiar to the quality coffee from Nicaragua’19 (Ministerio de Fomento, Industria y Comercio, MIFIC, 2005: 42).

3.1.3 THE COOPERATIVE EL POLO

The cooperative El Polo is located in San Sebastian de Yali, Jinotega department in the central-north region of Nicaragua. This region produce de majority of coffee in Nicaragua, with excellent growing conditions with high altitude and consequently high quality beans.

The region produces approximately 83.80% of the national production and possesses excellent agro-ecological conditions for the production of coffee, including the departments of Matagalpa, Jinotega and Boaco. The region produces most coffee as Strictly High Grown (SHG), or bean particular high altitude, with a perfectly balanced cup. This area includes the plains of the mountains Isabelina, Peñas Blancas and the mountains of Matagalpa and Jinotega. These conditions make for primary growing conditions for coffee’20 (Ministerio de Formento, Industria y Comercio, 2005:12).

The cooperative was founded in 1996 as a cooperative of 50 small producers of coffee divided between 47 male and 3 females under the name of ‘La cooperative Agropecuaria de Servicios Yali RL’. It changed its name to ‘La Cooperativa de Servicios Multiples El Polo RL’ in April of 2004. The cooperative has currently 275 member

19 La crisis les ayudó a ser más eficientes a los productores y les obligó a buscar mercados que pagaran mejores precios, para tener una alternativa para sortear la caída de los precios. Quien no logró mejorar sus costos de producción y la calidad del grano, ha tenido que salir del mercado. La última crisis que enfrentaron los cafetaleros por la caída de los precios internacionales del “grano de oro” les sirvió para mejorar la eficiencia y calidad del rubro, y ahora el sector está enfocado en seguir incrementando las exportaciones de las variedades “especiales”, que subieron de 50 mil quintales hace tres años, a casi 400 mil quintales en el último ciclo. No sólo se logró un mayor volumen de exportaciones de variedades especiales o diferenciadas, sino que se han agregado nuevos países a la lista de compradores, después de conocer la calidad del café nica19 (MIFIC, 2005: 42).

20 ‘Esta región produce aproximadamente el 83.80% de la producción nacional y posee unas condiciones agro-ecológicas excepcionales para la producción del café, incluye los departamentos de Matagalpa, Jinotega y Boaco. La región central produce más que todo café Strictly High Grown (SHG) o tipo grano estrictamente de altura, con una taza perfectamente balanceada. Esta zona incluye la llanura de montañas Isabelia, las montañas de Peñas Blancas y las montañas de Matagalpa y Jinotega. Estas condiciones hacen de estas tierras primordiales para la producción del cafe’. (Ministerio de Formento, Industria y Comercio, 2006:12).

divided between 234 male and 41 females. The main objective of the cooperative includes;

‘To promote development integrated in the sector, boosting production and processing, promoting marketing of production, strengthening the productive infrastructure, managing the improvement of internal roads, developing agricultural techniques, animal and vegetation health, and protection of the environment. Additionally the cooperative aim at supporting health programs, education and sport, for the producers in the sector, strengthening socioeconomic development and female participation’ 21(Solorzano, 2007).

The cooperative is set up of small producers with an annual production during the last three years of 15, 750 Quintals green coffee, where more than 60% is produced in altitudes between 1000-1200 meters above sea level, which means that it holds a high level of quality. During the Agricultural Cycle of 2006/2007, the cooperative exported a total of 10 472 Quintals green coffee, whereas the quantity of specialty or differential coffee amounted to 9 462 Quintals green coffee (Solorzano, 2007).

From 1997 to 2003, the cooperative only had one buyer; Atlantic-ECOM, which is an exporting company operating throughout Latin America. Consequently, the firm had a large amount of negotiating power over the cooperative. However, in May, 2005, the Cooperative El Polo obtained its exporting license through CETREX (Centro de Tramites de las Exportaciones) holding exporting license number 179. Obtaining an exporting license allowed El Polo to export its coffee to a differentiated market, including the Fairtrade market (Solorzano, 2007).

However, this would not have been possible without help from FondeAgro, in particular its component Agrobusiness. Fondeagro is an institution part of MAGFOR (Ministerio Agropecuario y Forestal del Gobierno de Nicaragua), financed by the Swedish aid agency (Asdi; Agencia Sueca de Cooperacion Internacional para el Desarollo). The component

21 ‘de promover un desarrollo integral del sector, potenciando la producción y su procesamiento, fomentando el mercadeo de la producción, mejorando la infraestructura productiva, gestando por la mejora de los caminos de penetración, desarrollando técnicas agropecuarias, sanidad vegetal y animal, protección del medio ambiente. Adicionalmente la cooperativa pretende apoyar programa de salud, educación y deporte, para los productores del sector, fomentando el desarrollo socioeconómico y la participación del sector femenino’’ (Solorzano, 2007).

Agribusiness under Fondeagro has a perspective of value chain and partnership. This is part of The National Development Plan of Nicaragua (El Plan de Desarollo de Nicaragua, PND), which includes a rural development strategy that seeks to change the prevailing view from economic actors towards an entrepreneurial vision oriented towards the necessity of the market. In particular it includes product and process innovations, allowing upward movements in the value chain through certifications and other innovations (Instituto Nacional de Informacion de Desarollo, 2005). The strategy has a local and territorial approach, promoting partnerships at different stages in the production chain in order to pursue rural development goals (CecoEco, date unknown). After a valuation made in 2004, an action plan was created by FondeAgro, including the following activities;

‘Support to identify the best strategy to penetrate the differentiated coffee market and management of certification for marketing coffee in the differentiated market. Economic support from FondeAgro to cover the initial certification of the cooperative. Support from FondeAgro to develop trade links with coffee buyers in the differentiated market. Support from FondeAgro to find additional sources of funding, with the aim of achieving a more appropriate funding for the production and improve the capacity to negotiate the marketing of coffee from the cooperative. Strengthening the administrative financial capacity of the cooperative’ 22(Solorzano, 2007:20).

Through cooperation between the institution FondeAgro and the cooperative, direct contact with buyers within the Fairtrade market was created. This is necessary in order for the cooperative to launch its application of certification. In December, 2004, in the interest of potential buyers; Arvid Norquist from Sweden and a cooperation between Starbucks and Atlantic ECOM, El Polo logged its application for FLO certification, which was followed up by FLO Inspector Mayra Ross on the 22nd of February, 2005. The FLO certification was finalized in April and May of 2005 funded by Fondeagro at the initial

22 ‘’Apoyo para identificar la mejor estrategia para penetrar el mercado diferenciado de café. Apoyo para la gestión de certificación, para la comercialización del café de la cooperativa en el mercado diferenciado. Apoyo económico de FondeAgro para costear la certificación inicial de la cooperativa. Apoyo de FondeAgro a la cooperativa, para desarrollar vínculos comerciales con compradores de café, del mercado diferenciado. Apoyo de FondeAgro para encontrar fuentes adicionales de financiamiento, con el objetivo de lograr un financiamiento más apropiado a la producción y mejorar la capacidad de negociación para la comercialización del café de la cooperativa. Fortalecer las capacidades administrativas financieras de la cooperativa22.’’

cost of 2000 Euros (Solorzano, 2007). Currently, El Polo sells seven containers of coffe through the Fairtrade market.

3.1.4 DEVELOPMENT OF FIELD RESEARCH IN GUATEMALA

The development of research in Guatemala (see Figuree 6) took a different character, based on the institutional structure of the cooperative of interest. Fedecocagua is a second level cooperative including 20 000 farmers within 148 first level cooperatives spread across the nation. As the internet response from the cooperative was limited, I visited the main office of the cooperative in Guatemala City. After various interviews with key actors, a field trip was set up to visit different first level cooperative. The sample of first level cooperatives under Fedecocagua was based on a systematic sample. The decision of researching particular first level cooperatives under Fedecocagua was based the cooperatives that had produced the recent blend of coffee which Fedecocagua had sold to Friele AS. Together with the marketing manager of Fedecocagua and a technical assistant, we investigated the previous mix of coffee sold to Friele AS and decided to visit the first level cooperatives who had distributed the exact coffee as Friele AS was distributing in Norway.

FIGUREE 6: DEVELOPMENT OF FIELD RESEARCH GUATEMALA

Establishing contact with Carry out semi- A Selection of 5 first Fedecocagua structured level cooperatives of interviews with Organizing Fedecocagua using cooperative leaders fieldtrip to Focus convenience, at the Fedecocagua visit the groups with snowball and main office in la different cooperative strategic sample Ciudad de Guatemala cooperatives. leaders in 5 methods different 1st level coops.

The schedule for field trip was set up by the second level cooperative, and coordinated by technical assistants employed by Fedecocagua in various geographical places. The

first level cooperatives had been informed of the meeting, thus the cooperative boards were prepared, including other farmers who happened to be present. The field trip included visiting first level cooperatives in La Democracia, La Todos Santos, Huehuetenango, La Unión, Esquipulas, Chanmagua and Acatenango. The collection of data was carried out as a focus group discussion where all actors contributed and together we discussed issues of trade, Fedecocagua, certifications and Fairtrade. I only visited one first level cooperative whose first language was Mayan. This particular visit was the only time I had to use an interpreter.

3.1.5 GUATEMALA’S POLITICAL ECONOMY IN BRIEF

Guatemala, like many of the other nations of Central America, has experienced a turbulent past. The Guatemalan Civil War ran from around 1960 to 1996 with deepened confrontations from 1978 to 1983. The UN sponsored Commission for Historical Clarification published in 1999 a report of evidence that around 200 000 people were murdered during the civil war of which 83 percent being Maya Indians. It is stated that 93 percent of the human rights violations were attributed to the state army. ’The majority of human rights violations occurred with the knowledge of, or by order of the highest authorities of the State’’ (Commission for Historical Clarification, 1999).

…’the CEH concludes that the reiteration of destructive acts, directed systematically against groups of the Mayan population, within which can be mentioned the elimination of leaders and criminal acts against minors who could not possibly have been military targets, demonstrates that the only common denominator for all the victims was the fact that they belonged to a specific ethnic group and makes it evident that these acts were committed “with intent to destroy, in whole or in part” these groups (Article II, first paragraph of the Convention). .. the CEH concludes that agents of the State of Guatemala, within the framework of counterinsurgency operations carried out between 1981 and 1983, committed acts of genocide against groups of Mayan people which lived in the four regions analyzed’ (Commission for Historical Clarification, 1999) .

The peace Accords in Guatemala were signed at the end of 1996. Currently, between 40 and 60 percent of Guatemala’s 12 million inhabitants are Maya, speaking one of 21 distinct Maya languages. Furthermore, the agriculture population of Guatemala is about

50 percent of total population. Around 80 percent of Maya live in rural areas which are inadequately served by public services; around 60 percent live in extreme poverty (Lyon, 2007).

IMAGE 2: MAP OF GUATEMALA

REFERENCE 5: GOOGLE EARTH, 27.02.2008

Coffee became the major primary export of Guatemala towards the end of the 19th Century, apparently the foundation of wealth, determinant of social status and arbiter of political power (Lyon, 2007). The cooperative movement has grown steadily from 1976, after the historic earthquake in Guatemala. The aftermath of the earthquake and influx of international leaders progressed the cooperative expansion to 510 cooperatives with over 132 000 members. Currently there are 1620 registered cooperatives with 579 705 members (Lyon, 2007).

According to FITA (The Federation of International Trade Association), Guatemala is the eight largest coffee producing country in the world. Even though the quantity of coffee exported has decreased, Guatemala has shifted its focus in production. After a USDA Foreign Agricultural Service report, the production of coffee was in 1980, 20 percent of the production was hard and strictly hard beans; the higher quality beans that bring better prices in the market. By 2005, 80 percent of the coffee production was hard and strictly hard beans, which has increased the financial security of the industry (Tay, 2007). According to the same report;

‘Four years ago the Government of Guatemala authorized a $100 million trust fund to assist coffee farmers during the price crisis. The trust fund was managed by ANACAFE and has provided financial assistance to coffee farmers at a low interest rate. In addition, USAID and the Interamerican Development Bank (IDB) are supporting coffee farmers with loan programs to help them recover from the low prices of a few years ago. Guatemala’s coffee efforts have also been recognized by the International Coffee Organization (ICO), which will provide the sector with $ 4 million to be used in their competitiveness program, for the following two years. ANACAFE will support the initiative with an extra $ 2 million within this same period’ (Tay, 2007:7).

Thus, some support mechanisms were in place to aid coffee cultivators after the price crisis. This must be understood in relation to the shift in Guatemala to focus on high quality coffee, which receives better prices on the world market.

3.1.6 THE SECOND LEVEL COOPERATIVE FEDECOCAGUA

Fedecocagua (Federacion de Cooperativas Agricolas de Productores de Café de Guatemala R.L.) was founded in 1969 by 19 cooperatives to improve the position of small-scale coffee growers. Currently, Fedecocagua consists of more than 148 cooperatives on a national basis and is the umbrella organization of 20 000 farmers. The majority of its producers are Mayan, about 70 percent are indigenous people, and there are more than 100 000 people that are involved with Feecocagua and dependent upon activities of cultivating coffee. The producer cooperatives are spread over different regions of Guatemala including Huehuetenango, Coban, Verapaces, Retalhuleu, San Marcos, and Zacapa. Fedecocagua assists the small producers with technical assistance, credit schemes, secure transport of coffee from the cooperatives to the warehouse, purchase, processing and export of member’s coffee, and research on opportunities in the market (Fedecocagua homepage).

Coffee is the main cash crop and provides 90 percent of farmers’ income. The average farm is about 10 ha, where 3.2 ha is shade-grown coffee production (Fairtrade Foundation UK homepage). In 1997 Fedecocagua started selling to the alternative marked, which is currently named FLO, as a second level cooperative with identification number 189. In general almost 40 percent of its coffee is sold as Fairtrade. In addition

Fedecocagua have certifications as Utz Certify, Rainforest Alliance, Starbucks CAFÉ practices, Nescafe from Nestle, program AAA from Nespresso and 4C. Fedecocagua have 70-75 percentage of its production certified within these initiatives and 100 percent is ‘certified’ Fairtrade (De Leon, A., Marketing manager of Fedecocagua, personal interview December 2007, Guatemala City).

According to a capacity study from CecoEco and CATIE in Costa Rica in cooperation with the World Bank, the strength of Fedecocagua lies in its structure as a professional firm and the technical and production capacity of the firm.

‘This (the technical and production capacity) is perhaps one of the areas where the firm is most developed. When the product is collected in the regional warehouses of the cooperative, these are transported to the central processing station/warehouse of Fedecocagua’23(Junkins and Yaniris, 2005:7).

Furthermore, the cooperative have the function of an external commerce, or exporting firm for the first level cooperatives involved. According to the same capacity study, the power is highly centralized in the leadership of Fedecocagua. The director positions have been occupied by the same persons for about 20 years, with limited delegation of power. …’the first level cooperatives understand the second level cooperative as an external trader which they emphasize are looking to protect and give them benefits, even though in reality they have doubts if this is true or not’.

However, the capacity study highlight the high business capacity of Fedecocagua, which includes a department of commerce, of logistics, of exports (Junkins and Yaniris, 2005), and currently developing a department of sustainability. This high capacity of the firm is proved through long-term business relationships, some up to 20 years, and long term contracts with various clients. Fedecocagua has been promoted in major international forums, though its website is quite limited24’ (Junkin and Yaniris, 2005:7)

23 …’Este (Capacidad técnica y producción) es quizás uno de los rubros en los que la Cooperativa está mejor preparada. Una vez acopiado el producto en las bodegas regionales de la cooperativa éste se traslada hacia el Beneficio Central de FEDECOCAGUA…’

24 ‘Capacidad empresarial: Los puestos direccionales están ocupados por las mismas personas desde hace cerca de 20 años. Esto tiene como consecuencia que el poder esté centralizado y poco delegado, lo cual tiene como consecuencia que las cooperativas vean a la de segundo nivel como un ente externo comercializador, que les insiste en que busca protegerlos y darles beneficios, aunque en la realidad ellos mismos tengan dudas de si esto es cierto o no. A pesar de ello no cabe duda de la capacidad empresarial de

Furthermore, Fedecocagua is the second largest commerce associate for the bank BANRURAL in Guatemala, where it receives the majority of its funding;

‘FEDECOCAGUA is the second largest partner (after government) of BANRURAL, explaining abundant funding, although conditions were not completely satisfied. In addition they are financed from IDB financing, Swedish Cooperative Centre, MAGA and Oikocredit with interest fees around 8-16%. The resulting finances of the cooperative have been positive since its foundation even during the coffee crisis 25'(Junkins and Yaniris, 2005:7).

Findings of the capacity analysis, one of the few existing of Fedecocagua, highlight associates see relations as good whereas evaluations assumes a lack of transparency26.

‘The associates consider the relation with Fedecocagua as good, however, it stands out from the perspective of the associates that there is a lack of transparency, dependency, and effort to empower the cooperatives and mechanisms for communication between them’27 (Junkins and Yaniris, 2005:7).

Thus, the cooperative Fedecocagua is a large second level cooperative working on a national scale. It has a highly professional institutional structure, and is viewed by the first level cooperative as an exporting company. The cooperative have been highly successful in promoting its coffee as high quality, specialized coffee.

FEDECOCAGUA, donde un departamento de comercialización, uno de logística y el de exportaciones, coordinan de manera permanente para garantizar que el producto llegue a su destino en las condiciones más apropiadas de venta. Prueba de esto es que con varios de sus clientes mantienen relaciones comerciales de largo plazo (20 años). Se promueven en los principales foros internacionales y producen abundante material promocional, aunque su página Web es bastante limitada.’(Junkin and Yaniris, 2005:7)

25 ‘FEDECOCAGUA es el segundo socio mayoritario (después del gobierno) de BANRURAL, razón por la cual cuentan con abundante financiamiento, aunque las condiciones no les satisfacen por completo. Cuentan también con financiamiento del BID, Centro Cooperativo Sueco, MAGA y Oikocredit en tasas que rondan los 8-16%. Los resultados financieros de la cooperativa han sido positivos desde sus inicios incluso durante la crisis del café’.(junkins and Yaniris, 2005:7)

26 This is also experienced in my own fieldwork.

27 ‘Las relaciones con los socios son consideradas por ellos como muy buenas. Sin embargo resalta desde la perspectiva de los socios la falta de transparencia, dependencia, pocos esfuerzos por empoderar a las cooperativas y mecanismos de comunicación medianamente efectivos’ (Junkins and Yaniris, 2005:7).

4.0 THEORY AND ANALYTICAL FRAMEWORK

Fairtrade coffee is a product with a variety of invested meanings. I will analyze the value and meaning of Fairtrade coffee from an economic and an anthropological approach to commodities. Objects which are commoditized incorporate an economic value and a material semiotic value. However, first of all, it is important to state what I mean by value. The theory of value is most commonly described either within production centered or consumption centered theories. However, I will try and address both, by referring to the consumption centered theories from Baudrillard (1981, 1996) and Appadurai (1986) and production centered theories from Marx (1971). According to Baudrillard (1996), the value of objects is fourfold. Firstly, the functional value is the objects instrumental purpose, equivalent to Marx’s (1971) use value. Secondly, the exchange value of objects is the value of exchange; often, but not always, its economic value. The market place value of a product is determined by the demand of the product. These two values are the main emphasis of Marx (1971). To Marx (1971), the economic value of exchange does not reflect the use value of a commodity; it is a direct reflection of demand of the product. His notion of commodity fetishism runs from the perspective that through international trade, producers and consumers have no direct contact, therefore have no conscious agreement to provide for one another. Thus, the value added by laborers and the social relations appear as objective properties of the commodities. Marx (1971) typically referred to this objective property as a fetish which masks the commodities true worth. The work of Baudrillard (1996) is consumption centered, parallel to Marx production centered work28. Baudrillard (1996) was particularly interested in advertisement, and the value added to products through advertisement. His main emphasis is on the social construction of demand. Baudrillard (1996) further included two dimensions of value to the object, thus thirdly the symbolic value and fourthly, the sign value of objects. The symbolic value of an object is the value that a subject assigns to an object in relation to another subject, thus the social construction of value relative to other subjects. The sign value of an object is the value of the object within a system of objects, thus the personal construction of value relative to

28 Important to note, Baudrillard in his later work distinguished himself directly from Marx in his work on representations. One may perhaps say that they claim a different ontology where Baudrillard focus on social constructs and representations and Marx claim a certain material worldview. Baudrillard criticize Marx on his view on consumption as passive and the concepts of need and utility.

other objects. Baudrillard (1981) and Appadurai (1986) criticize the Marxian notion of referencing the economy in relation to the problematic of production (Appadurai, 1986). However, their overly focus on consumption have been criticized for lacking emphasis on power and exploitation at production site. As Marx argued the manner of production created classes, Appadurai argues that consumption, in the spirit of modern consumerism, creates classes (van Binsbergen, 2005). Thus, the two theories are fundamental different.

I believe both Marx’s (1971) production theory and Baudrillard’s (1996) consumption theory are both important to my current analysis. However, searching for analytical tools of analysis within similar studies, I did not find the appropriate tools which incorporated both. The typical economic studies of a commodity are global commodity chain (GCC) analysis and global value chain (GVC) analysis. These studies are strictly separated from the social constructivist chains such as commodity circuits, actor network theories (ANTs) and commodity cultures. I render either analytical tool insufficient for my intended study; therefore I have chosen to use two distinguished types of tools to analyze my data. Thus, I aim at incorporating both the economic and the material semiotic through an economic value chain analysis and a social constructivist commodity culture approach.

The economic value is analyzed through the tools of a global value chain analysis. In general, a global value chain (GVC) analysis seeks to break down the international structure of production, trade and consumption of commodities into stages that are embedded in a linear network of activities (Daviron and Ponte, 2005). It describes the range of activities which are required to bring a product or service from conception, production, transformation and delivery to final consumers (Kaplinsky and Morris, 2000). It allows for the identification of ‘place’ where quality attributes are produced, and how value is distributed between different actors. The GVC has been developed following the concept of a global commodity chain (GCC) from Hopkins and Wallerstein (1986) who discussed international chains for agricultural products. The GCC approach follows a product from one point to the next, usually involving an analysis of price formation at the different stages of production or processing. It is much similar to the French filiere approach, though distinguished where the filiere approach is usually restricted to national scale. The revised concept of GVC in replacement of the GCC has

come to identify a variety of products that lack commodity features, therefore it is more correct to follow the value flow in the chain (Daviron and Ponte, 2005; Gibbon and Ponte, 2005). Important to note, the concept refers to value in strictly economic terms, following income and service providers. Much of the work on GVC has focused on opportunities of upgradingat production sites in GVC for primary commodities, either through improving quality of the raw product, or new forms of the commodity or a move towards localizing commodity processing.

The term global in the global value chain refers to the arrangements of coordinated activities divided among firms that in particular extend over a global scale. The use of the term chain suggests a linear relationship between buyers and suppliers, and the movement of a good from producer to consumer (see fig. 10, pg 46).

In the literature, GVC analysis has focused more on explicit structural elements of production, distribution and consumption than on the social/cultural/symbolic relations among actors (Gibbon and Ponte, 2005). Furthermore, until recently, GVC analysis did not extend its analysis to the retail level, thus remained silent on issues of consumption. It has also been criticized for not paying enough attention to labor relations at the site of production. Latest contribution of GVC have started to pay more attention to both material and symbolic aspects of exchange to tackle issues of social embeddedness, covering horizontal aspects such as gender and labor relations and analyzing consumption as a key dimension of governance (Gibbon and Ponte, 2005). According to Mayoux (2003) the value chain analysis conceptualizes enterprises, not as separate entities, but as part of chains, networks and systems of production and exchange activities in diverse geographical areas. It focuses on analyzing chain governance, power relationships between actors and opportunities and constraints at the different levels. This allows for an exploration of different alternative strategies for poverty reduction and upgraded value for the producer (Mayoux, 2003). Recent literature of participatory value chain analysis facilitates dialogues and mutual accountability between stakeholders in order to analyze common interests (Mayoux, 2003).

FIGUREE 7: GLOBAL VALUE CHAIN

Suppliers of Services (technical, industrial, financial etc)

Primary Primary Transformation Secondary Transformation Exporting Company Importing/ Roaster Retail

Primary Primary Production Final Consumption

REFERENCE 6: DONOVAN, 2006

The GVC approach used by Gibbon and Ponte (2005) focuses on the type of governance in the chain, power and the possibility for upgrading in the chain by the producer. The concept of upgrading has been used to highlight the possibility by producer to increase governance and share of surplus in the value chain. This is done by two main methods. More value can be added to the producer by shifting to more rewarding functional positions (Gibbon and Ponte, 2005) highlighted by Donovan (2006) as possibilities for upgrading the level of enterprise organization, assimilation of technology and the establishment of strategic alliances with other actors in the productive chain. Secondly, by making products that have more value added invested in them and can provide better returns to producer (Gibbon and Ponte, 2005). According to Donovan (2006), this may be through an improvement of the quality and transformation of the product as well as new forms of packaging and/or marketing. The upgrading process in the GVC literature is examined through the lenses of how knowledge and information flow within value chains. Upgrading is about acquiring capabilities and accessing new market segments through participating in particular chains and learning from key lead firms in the same functional position. However, it is sometimes difficult to distinguish product and process upgrading in the case of agricultural products, where the introduction of organic processes generates a new category of product (Gibbon and Ponte, 2005).

In particular, the conventional coffee value chain is characterized as a buyer driven chain where producers are subordinated to lead agents controlling design and marketing. In particular this includes the actors who controls international brand names and retailing, where barriers to entry are high and profit is concentrated (Gibbon and Ponte, 2005). The overall chain is buyer driven, where coffee roasters play a key role in determining the functional division of labor along the chain. Consequently, roasters define the key terms of participation directly for their immediate suppliers and indirectly for other actors upstream in the value chain. Crucial for the success of upgrading and certification of coffee is representation and marketing strategies. Standards29 communicate information about the product, such as search attributes which includes appearance, experience attributes which appeals to taste, and credence attributes, which must be based on trust. These attributes can pertain to the products itself or to production and process methods, which includes geographic appellation, safety regarding pesticide use and level of toxins and environmental and social conditions such as organic, Fairtrade and shadegrown coffees.

I will use the tool of the GVC to analyze the income generated from Fairtrade coffee. The structure of the analysis is inspired by the work of Talbot (1997, 2004), which have estimated the generation of surplus along the chain of coffee in historical perspective. However, the current analysis distinguishes itself from the former (Talbot, 1997, 2004) as visualizing one direct chain. In such perspective it is in many ways better to indicate a participatory value chain analysis, as the data of income generated along the coffee commodity chain have been gathered through participatory methods such as semi- structured interviews with key actors. Thus, it is not a weighted average, but the direct income generated from Fairtrade coffee by key actors in the chain.

The analysis of income generated along the chain is divided into four main stages with sub-stages. The first stage is the income generated by producer, which is the income at farm gate. The second stage is the income generated in the producer cooperative. However, in Guatemala this stage is divided into a sub-stage attaining a second level

29 Standards are divided into three broad categories; mandatory, voluntary and private (Ponte, 2004), where Fairtrade standards are typically voluntary standards. Mandatory standards are usually set by the state and private standards are typically created by private companies or initiatives.

cooperative and a first level cooperative. The third stage is the importer/roaster, where in Norway the majority of large importers are also roasters. The fourth stage is the income of wholesalers, retail, cafes and the state through taxation. The total income along the chain is equal to retail prices, or the amount a Norwegian consumer pays for the product.

As highlighted earlier, the GVC have been reformed in recent literature to engage in issues of consumption and to incorporate social issues. However, the GVC remains production centered and leave limited space for a understanding consumption related issues such as marketing and symbols (Leslie and Reimer, 1999). It is rendered problematic to analyze a system such as Fairtrade treating retail and consumption as unproblematic starting points for an analysis of exploitation in the production sphere. Furthermore, according to Hughes (2000:177) the often uni-directional linearity of commodity chain approaches, along with the culturally and geographically impoverished nature of their system-based methodologies, imposes analytical constraints. Therefore, the commodity cultures will define the semiotics, or the meanings and ideas of the product within each culture, whereas the GVC analysis will highlight power structures in the chain. The different cultures are defined as production cultures, representation cultures and consumption cultures. The material and semiotic representation will be interpreted within a narrative analysis. The narrative is the way of telling about the commodity and its place within the network. Fairtrade coffee is more than the economic income generated along the chain. The meanings and symbols created through marketing and advertising is particularly what distinguish Fairtrade coffee from conventional coffee.

In particular, drawing on different aspects of value, such as symbolic and sign value and the importance of advertising, I find it necessary to explore more comprehensive tools of analysis. The idea of networks and circuits of culture allows for a more dynamic approach to understanding relationships and meanings (Hughes, 2000, Hughes, 2006). In particular, the second analysis is based on a theory of deconstruction, where it is possible to pull certain links apart, and investigate the meaning of the particular product in terms of ‘commodity cultures’ (Cook et al., 2003).

The term social deconstruction was coined by Jacques Derrida in the 1960s. Essentially it describes how it is possible to understand social phenomenon by deconstructing ideas and the meanings in which comprise them. Social deconstructive approach is often used

in discourse analysis in order to understand the construction of discourses. The discourses are often understood through narratives which in many cases become the discourse in practice. Scholars advancing a discursive and narrative perspective to the analysis of environment and development includes such as Fergueson (1990), Escobar (1988, 1995, Escobar et al., 1998), Roe (1991, 1995), Peet and Watts (eds., 1996) Bryant and Bailey (1997) and Adger et al. (2001). Some of these scholars are situated within the school of political ecology30, in particular within poststructural political ecology (Escobar, 1988, 1995) which focuses on discourse analysis and the social construction of different environmental ‘crisis’ (Adger et al., 2001). A discourse is broadly defined as a shared meaning of a phenomenon (Adger et al., 2001). The discourse perspective has been used in the environmental arena to characterize pervading and received wisdom, the evolution of the environmental crisis and their social construction (Adger et al, 2001; Leach and Mearns, 1996; Roe 1991, 1995). Influential writers from Ferguson (1990) and Escobar (1988, 1995), Escobar et al. (1998) have identified the importance of identifying the construction and institutionalization of managerial approaches to development (Neumann, 2005). In particular, Foucault’s work on power, and the relationship between power, knowledge and discourses have been influenced by the deconstruction approach. ‘Ideas are not powerful because they are true; they are true because of power’ (Foucault, 1980). The emphasis on Foucault and constructed ideas through hegemonic discourses is following postmodernist lines of thought. A hegemonic discourse is a discourse which dominates thinking and is translated into institutional arrangements (Adger et al, 2001).

Scholars using discourse approach have analyzed the narratives which comprises in order to identify so-called counter narratives, essentially a theory from Ferguson (1990) and Roe (1991, 1995). They draw on policy implications of development narratives31, where development policies are often based on arguments, scenarios and narratives

30 Political ecology is an approach where it is possible to explore multi-level connections between global and local phenomenon. The approach is not limited to exploring environmental functions, but includes social functions, decision making and hierarchies of power (Robbins, 2004). According to critics, political ecology often goes beyond requesting more attention to political influences on human/environment interactions than analyzing environmental change itself. Critics argue that too much emphasis has been placed on political influence which over-socializes environmental problems (Vayda and Walters, 1999; Jansen, 1998). Political ecology risks downplaying the natural dimension of production (Jansen, 1998) and the ecological processes of change (Vayda and Walters, 1999).

31 In which sense later authors (Adger et al, 2001) identifies as discourses.

that do not stand to closer scrutiny. Roe (1991, 1995) explained the hegemonic discourse within development policies as ‘blueprint development’. The development narratives persist and continue to inform policy-maker in spite of the fact that they are frequently being contradicted in the field. However, Roe (1991) stresses the development narratives should not be dismissed as myths. Instead, he argues the importance of ‘counter-narratives’ in order for a better story and practices. By engaging with the hegemonic or outdated narrative it is possible to improve the narrative through different views or by creating parallel narratives, so called counter-narratives, to the hegemonic construct.

Thus, certain dominating narratives comprise a discourse, which again relies on these narratives in order to prevail (Adger et al, 2001). For the current analysis I need to clarify the difference between narrative and discourse. The narrative concept implies accounts of specific cases within a wider discourse. The discourse is framed by narrative producers’ encompassing certain power in knowledge (Benjaminsen and Svarstad, 2008). Thus as understood here, narratives are the active methods of describing the world, whereas the discourse is more manifested in Foucault’s (1980) notion of power, and the relationship between power and knowledge.

The narratives are understood as social representations of history (ies), how actors perceive of certain issues in time and space. ’..we all live out narratives in our lives and because we understand our own lives in terms of the narratives that we live out that the form narrative is appropriate for understanding the action of others’ (Macintyre, 1985:212).

A narrative analysis is an approach to the analysis of data that is sensitive to the sense of temporal and spatial progression that people, as tellers of stories about their lives or events around them, identify in their lives and surrounding episodes. It employs to answer ‘how do people make sense of what happened’ (Bryman, 2004). This is a useful method of analysis when relating to Macintyre (1985) and his work on moral theory of people as story-telling animals through their actions and practice;

’Just as a history is not a sequence of actions, but the concept of actions is that of a moment in an actual or possible history abstracted for some purpose from that history, so the characters in a history are not a collection of persons, but the concept of a person is that of

a character abstracted from history. What the narrative concept of selfhood thus requires is twofold. On the one hand, I am what I may justifiable taken by others to be in the course of living out a story that runs from my birth to my death; I am the subject of a history that is my own and no one else’s, that has its own peculiar meaning’ (Macintyre, 1985:217).

Thus, according to Macintyre (1985) we live out narratives in our lives and we understand our surroundings and the action of others through narratives. Moreover, he argues that we render others’ actions intelligible by placing the particular episode in context as part of narrative histories of the individuals and their setting. Interpreting narratives within the commodity cultures of Fairtrade coffee highlights how each actor renders and make sense of the product. It is further applicable in representation narratives, or through advertising and marketing of the commodity in order to pursue consumption purpose and how consumers act upon these narratives.

Thus, a narrative analysis is an approach to the analysis of qualitative data that emphasizes the stories people employ to account for various events. The narrative analysis focuses on how actors perceive and describe the particular issue or system of interest.

Aiming at an analysis of neither production centered nor consumption centered approaches, but a combination of the two, the work on commodity cultures is particularly inspiring. ‘Work on commodity cultures aims to thicken descriptions of the meanings attached to goods through a cultural analysis of different phases of commodity circulation, including consumption’ (Hughes, 2000).

The work on commodity cultures is perhaps easiest explained as where the centre approach is the commodity, circulating through different culture of actors. The commodity is seen as having a social biography, moving through different realms, inheriting different meanings through different cultures. ‘the commodity is not one kind of thing rather than another, but one phase in the life of some things’ (Appadurai, 1986:17).

The commodity culture approach builds on similar approaches to the study of commodities and their complex web of networks in which they acquire different meanings and values. Similar approaches includes such as; circuits of culture associated

with Hall (1997), Leslie and Reimer (1999), actor network theory32 developed by Latour, Callon and Law (Law, 2007), work on commodity networks by Whatmore and Thorne (1997) Hughes (2000, 2001, 2006) and Cook and Crang, (1996), Lowe and Ward (1997). In addition, the work on material cultures (Appadurai, 1986; Kopytoff, 1986; Bakker and Bridge, 2006) have been important in defining a shift from production centered to consumption centered analysis, with emphasis on things and their history. The commodity culture was developed by Jackson (1999, 2002), and it runs parallel to geography research on material cultures (Bryant and Goodman, 2004). It may seem to contradict the work on material cultures of consumption, but it share common characteristics through elaborating the neglected connection between consumption studies and the political ecology of globally uneven development (Bryant and Goodman, 2004). Much work on material cultures have aimed at tracing the historical connections through which things became things (Cook et al., 2007:1120). It seeks to tell the stories of people and their lives as partners in producing the same product. Hence, the material culture explores the hidden values behind seemingly insignificant commodities (Cook et al., 2007:1120). Thus, the material cultures aims at identifying the meaning of commodities through narrating commodity stories about global resource flows (Bakker and Bridge, 2006). The aim of the material culture is ‘lifting the veil of commodity fetishism’ through visualizing the social connections behind the commodity (Bakker and Bridge, 2006; Klooster, 2006).

The commodity culture approach assimilates these theories through a focus on meaning and semiotics. Most of these approaches build on social theories where GVC is rendered narrow in only tracing linear economic and physical flows and connections. The social or cultural approaches aim at interpreting the narratives that surrounds the commodity or the textuality of the commodity within different cultures. According to Appadurai (1986:17) …’a commodity is not one kind of thing rather than another, but one phase in the life of some things’.

Incorporating both productions centered and consumption centered studies, the commodity is at the centre of the cultures. The cultures in which the commodity fluxes

32 The commodity culture bears resemblance to the ANT through the focus of complex networks and how different actors see things differently. However, in the commodity culture it is important to distinguish between the commodity and the different social settings or culture through which it circulates. The concept of actors are used, not the notion of actants as in ANT (Law, 2007).

give meaning and value to the commodity (Crang et al., 2003). The term culture is here understood in the widest sense as a collective social practice, in which the product serves a common purpose.

According to Baudrillard (1981), Appadurai (1986) and Goodman and Dupuis (2002), earlier attempts of analyzing commodities within a production – consumption approach have shown limited success due to the neglected consumer culture. As such, consumer politics have rather been confined to the worlds of production, where consumers are passive receivers of commodities, sheltered from the exploitative social relations inherit in the commodity by the ‘veil’ of the commodity. According to consumption related theories, consumption is social, relational and active, rather than private, atomic and passive which is the case of production centered studies. As shown below (

Figure 8) the approach involves rethinking the linear commodity chain to incorporate more complex circuits and networks for new modes of understanding (Jackson, 2002).

Figure 8: Commodity Culture of Fairtrade coffee

Fair trade network Producer Culture of Fair trade movement culture of ATOs and production expansion Radical and market opposition to access global trade rules

Media/ Importer/ Academia Roaster Culture of Culture of knowledge and profit- representation maximization

Consumer Conventional Culture of Coffee Prices knowledge, market reflexive Fair trade logo culture consumer Culture of narratives and connectivity

The production centered approach is usually based on Marxist theories of commodities. According to Marx (1971) the fetish of commodities is the product of alienation between production and consumption.

‘’For Marx, the worth of commodities is determined by the social relations of their production; but the existence of the exchange system makes the production process remote and misperceived, and it ‘masks’ the commodity’s true worth. This allows the commodity to be socially endowed with a fetish-like ‘power’ that is unrelated to its true worth’’ (Marx, 1971, cf. Kopytoff, 1986:83)

Alienation is created through the exchange system, or the value chain, where the value added by laborers appears as objective properties of the commodities. According to Marx, the definition of a commodity is through its exchange. ’To become a commodity a product must be transferred to another [person], whom it will serve as a use-value, by means of exchange’ (Marx, 1971:48). This is where the capitalist system becomes problematic for Marx, where the exchange value does not reflect use value33. The exchange value is determined by demand of the product and does not reflect social relations and labor at production site; neither does it reflect the use value of the commodity. Marx argues from an essential production theory, where the value which is not visible for the consumer was created at the production site. Thus, the social cost of production is not inherent in the use value of the commodity, nor is the social relations of trade. Thus the moral obligations to social exploitation in production cease to exist. According to Bryant and Goodman (2004:348) commodities contain a double fetish that both obscures realities at the site of production and creates cultural and economic surpluses for the consumers’. The exchange in commodities is a transaction between objects, creating an economic surplus for consumers. Work which focus on unraveling the ‘veil’ of commodities highlights the hidden social relations and the properties and meanings associated with the consumption and circulation of commodities (Bakker and Bridge, 2006) aiming at restoring a certain moral obligation to producers (Cook and Crang, 1996). However, this work is highly production centered. According to

33 The same difficulty is highlighted by Appadurai, referred to as the process of which ‘goods’ become ‘commodities33’ (the Marxian terminology of how use value becomes exchange value). Kopytoff (1986) relate to the same notion in ’the social history of things’ where the object moves in and out of market circuits.

consumption centered studies34 such as the work of Appadurai (1986) and Kopytoff (1986), highly inspired by the work of Baudrillard (1975),

‘Marx was still imprisoned in two aspects of the mid-nineteenth century episteme: one could see the economy only in reference to the problematic of production… the other regarded the movement to commodity production as evolutionary, unidirectional and historical. … Following Baudrillard (1981) I suggest that we treat demand, hence consumption, as an aspect of the overall political economy of societies. Demand, that is, emerges as a function of a variety of social practices and classifications (Appadurai, 1986:29)

Thus, consumption centered theories highlight that properties and meanings are not intrinsic to the commodity …’Properties and meanings are seen to emerge from the interaction of objects with social processes. As a result, the meanings attached to things (and the identities and subjectivities produced through these attachments) are multivalent and fluid’ (Bakker and Bridge, 2006:12). Thus, a new fetish is created by social relations throughout the biography of the commodity. The new fetish is particularly related to the social construction of demand and the mystique of advertisement (Baudrillard, 1981). Needs, and thus demand are, according to Baudrillard (1981) socially constructed. This is part of Baudrillard’s main criticism of Marx, and the concept of use value, or the difference between need and utility. Where Marx argued that need was directly translated into use, naturally inherent in the capitalist system of consumption, Baudrillard argue all purpose signify a social construct. For Baudrillard, the origin of needs precedes the production of goods, whereas Marx argued need as innate (Baudrillard, 1981). Thus, whereas Marx argued production as the drive of society, Baudrillard argues consumption as the drive of society. Accordingly, Marx argued commodity fetishism due to hidden social relations in production, Baudrillard (1983) see all purposes to signify a fetish side. In particular, he saw the mysteries of advertisement as part of a socially constructed demand, thus by large creating a fetish.

I find it extremely important to include this theory of analysis because this is where most studies of Fairtrade is positioned. Many scholars have analyzed Fairtrade

34 The approach of Appadurai (1986) Kopytoff (1986) and Baudrillard (1981) have later been criticized of being consumption centered within a production related approach, ignorant of exploitation of production (van Binsbergen, 2005).

commodities in relation to Marx production centered theory because the Fairtrade product is argued to visualize many of these attribute which a conventional ‘fetishized’ product is hiding (Goodman and Cohen, 2004; Hudson and Hudson, 2003; Bryant and Goodman, 2004; Goodman, 2004; Moberg, 2005, Fridell, 2007). The label, and the supporting narratives, visualizes certain social relations in production and trade to the consumer. However, these studies thus disregard the importance of marketing and representation strategies. According to Whatmore and Thorne (1997) and Raynolds (2000);

‘Fairtrade products are given significance and gain value because they are more than just food. Knowledge of where the products are produced and how they are connected to wider cultural and political trend is a critical component of consumer choice and participation within the alternative market. The Fairtrade market is celebrated for creating modes of connectivity and re-embedding producer-consumer relationships’ (Whatmore and Thorn, 1997; Raynolds, 2000, cf. Lyon, 2006: 457)

Through this process it is argued directly and indirectly that Fairtrade coffee resemblance a commodity whose fetish is limited due to the social embeddedness visible through the label and the narratives it represents (Goodman and Cohen, 2004; Hudson and Hudson, 2003; Goodman, 2004; Moberg, 2005). However, the production centered theory does not include the importance of marketing and symbols. Analyzing commodity cultures does not necessarily aim at lifting a certain ‘veil’ of the commodity. According to Goodman and DuPuis (2002), work which centre around lifting a certain veil of the commodities is still highly Marxian or production centered. According to Goodman and Dupuis (2002) Marx insisted that political power exist in production only, thus the power to shape society depends on control of production. Within the production centered approach, consumers are passive recipients sheltered from the exploitative means of production by the commodity ‘veil’. Thus, the production centered approach believes that by lifting the veil of commodities, consumers’ consciousness is awakened and consumption can again claim political base (Goodman and Dupuis, 2002). A consumption centered approach, on the other hand, aim at visualizing the social constructed demand. According to Appadurai (1986) consumption should be analyzed not only for sending messages, but for receiving them as well, where ‘…demand is subject to social definition and control’ (Appadurai, 1986:32). Thus, in order for a complete

analysis I aim at defining the commodity cultures of production, consumption and advertisement. I will follow the argument from Goodman and Dupuis (2002) to go beyond the production-consumption debate. Even though the commodity has a center stage, the use value, exchange value, sign value and symbol value is crucial for understanding Fairtrade coffee. Inherent in the social construction of demand is a notion of consumption being part of the biography of a commodity;

’Consumption is the phase of the cycle in which goods become attached to personal referents, when they cease to be neutral ‘’goods’’, which could be owned by anybody and identified with anybody, and become attributes of some individual personality, bridges of identity, and signifiers of specific interpersonal relationships and obligations.. …What distinguish consumption from exchange is not that consumption has a physiological dimension that exchange lacks, but that consumption involves the incorporation of the consumed item into the personal and social identity of the consumer’ (Gell, 1986:112).

However, arguing the consumption culture within a consumption centered approach includes looking at the social construction of demand. According to Baudrillard (1981), advertisement is part of the socially constructed demand. The meaning of the product is socially constructed, in particular by communication strategies which attempt to persuade people to consume the particular product. Consumption is not only a matter of sending social messages, but for receiving them as well. Thus, demand is subject to social definition and control (Appadurai, 1986: 32).

After highlighting the importance of advertisement and the social construction of needs, it is possible to see demand of Fairtrade products in relation to Giddens (1991) notion of the reflexive project of the self, occurring in late modernity. Giddens (1991) argue that lifestyle politics, as opposed to ‘emancipatory politics’ is characterized by the reflexive project of the self. The reflexive project of the self is confined by a politics of choice where lifestyle practices give material form to a certain narrative of identifying self (Giddens, 1991). According to Giddens (1991) how one identifies the self is …’not to be found in behavior, nor – important though this is – in the reactions of others, but in the capacity to keep a particular narrative going. …the ongoing story of the self (Giddens, 1991:54). …‘What to do? How to act? What to be? These are focal questions for everyone living in circumstances of late modernity – and ones which, on some level or another, all of us answer, either discursively or through day to day social behavior (Giddens, 1991:70).

Thus, by referring to the consumer culture of Fairtrade coffee necessarily includes understanding how the constructed meaning of the product influences consumer choice and lifestyle politics. Thus, referring to the reflexive project of the self (Giddens, 1991) and socially constructed values of Fairtrade, it is possible to identify the consumer culture of Fairtrade. According to Strømsnes (2005) one can define political ethical consumption in terms of boycotting or buycotting products in order to influence politics (Strømsnes, 2005:166). Boycott is the negative version of political consumption where consumers choose not to buy a certain product as a protest… Buycott, on the other hand, is a positive political consumer choice, where the consumer decides to buy certain products based on political, ethical or environmental reasons’ (Strømsnes, 2005: 166). Thus, my analysis will be based on buycotting a product, where consumer demand for Fairtrade coffee is influenced by political and ethical reasons. Regular advertisement mainly works on associating consumption with the good life, where consumption contributes to self-satisfaction, which stimulates the volume pace of consumption (Wilhite and Lutzenhiser, 1998). However, the complex web of actors in the Fairtrade network place emphasis on the products characteristics, thus create a certain meaning to the Fairtrade coffee. One may say this is a second production moment, because the factor which separates the Fairtrade product from the conventional product is the particular meaning of Fairtrade.

Rather than lifting the veil of the commodity, the commodity culture approach is inspired by Appadurai’s suggestion ‘to follow the things themselves, for their meanings are inscribed in their forms, their uses, their trajectories . . . it is the things-in-motion that illuminate their human and social context’ (Appadurai, 1986: 5). However, I find it extremely important to challenge the weakness of Appadurai’s (1986) theory, by including the relation of power in production of commodities and theirs regimes of exploitation (Bryant and Gooman, 2004). I will highlight this by using the different commodity cultures as their own centers of production. Thus, the commodity cultures deconstruct the Fairtrade coffee network, interpret the different cultures by themselves, in addition to the economic value chain which highlights the difference in income, hence the power structures in the chain. I will aim at this through also including the production centered approach through producer narratives, and the economic GVC analysis. This is in stark contrast to Cook and Crang (1996) and Bryant and Goodman (2004), which argue that the commodity culture approach should rather polish the surfaces of the

commodity35 in order not to inhibit ethical consumption. My aim is by no means to inhibit ethical consumption; however I see the importance of a claim to a more general representation of producer narratives than the producer narratives which are strategically presented by the Fairtrade network. This is also important in order to discuss the different values of Fairtrade coffee.

In my analysis I will focus on the construction of meaning to Fairtrade coffee. By deconstructing the idea and practice of the Fairtrade commodity it is possible to interpret the economic income and the semiotic value of Fairtrade coffee for the different commodity cultures involved in the network. I will use a social constructivist approach by deconstructing the concept of Fairtrade coffee and interpret the meaning of Fairtrade coffee within each culture. The commodity cultures are understood in its widest sense as producer cultures, consumer cultures and representation cultures. However, the representation culture is distinguished from the other two cultures as it has an agenda of influencing the consumer culture, thus it is more appropriate to discuss this culture as a strategy. The narrative analysis I will present will have main emphasis on the key actors within the network of fair trade coffee. The narratives are separated between material and imaginative production moments. Thus, the theoretical tools presented above will be used to define the value of Fairtrade coffee, both economic and semiotic, in order for a broader understanding of the Fairtrade network.

35 According to Cook and Crang (1996) and Bryant and Goodman (2004) there should be no claim to reality at either stage because this only means ignoring the realm of usage altogether. …’We can apply critical dusting to grapes..Pick up the fingerprints of oppression on them. We can expose the truly obscene geographies, upsetting our consuming pleasure. … providing other voices and stories for consumers to hear. …And in casting consumption as a place of choice between competing moralities.. it can only wish away …consumer cultures’ roles in flexible self-identification and pleasurable sociality, and position itself in opposition to the hedonistic possibilities of modern consumption, a positioning that is located nearer to some consumer cultures than others, hence, perhaps the socially and sectorally differential adoption of ‘ethical’ consumerism’ (Cook and Crang, 1996:146,147).

5.0 RESULTS AND DISKUSSION I: THE GLOBAL VALUE CHAIN OF FAIRTRADE COFFEE

‘To begin with, a commodity, in the language of the English economists, is “any thing necessary, useful or pleasant in life,” an object of human wants, a means of existence in the widest sense of the term. Use-value as an aspect of the commodity coincides with the physical palpable existence of the commodity. …A use-value has value only in use, and is realized only in the process of consumption’ (Marx, 1851)

The economic value chain focuses on use-value and income generated in the chain. As shown below (see

Figure 9), the final product of coffee is produced in various steps. For assessment purposes they have been divided into three main stages, firstly; the growing and initial processing of coffee in producer country up to the green coffee stage and exporting. In Guatemala, the second level cooperative is responsible for the initial processing stage with a major processing plant in Palin, close to Guatemala City. In Nicaragua, the first level cooperative buys the initial services regionally. The second stage is the importing of green coffee, along with the production and sale of roasted coffee. This stage is located in consumer countries, necessarily close to consumption as the final product need to be fresh. Through a global value chain analysis it is possible to visualize the distribution of returns among the parties participating in the value chain. The basic measure of income used in this analysis is the total value of income remaining at each major link in the global value chain. This is also referred to as retained value (Talbot, 1997, 2004). The total income generated in the global value chain is here equal to retail price or the total amount spent by consumers purchasing the product.

5.1 THE GLOBAL VALUE CHAIN – PROCESSING OF PRODUCT

FIGURE 9: PROCESSING OF COFFEE

Producing Country Level 1 Harvesting Wet or dry The coffee (paid by Drying

processing plant with 'lata') red cherries

Central Miller Export (logistical)

Houses Norwegian Coffee

Consuming Country Level 2

Roasting and packaging

Barista coffee Retail coffee consumed in coffee

bars

In producer country, coffee cherries are harvested selective picking by hand. This is done in order to maximize the amount of ripe cherries harvested and leave behind

unripe, green beans to be harvested at a later time (Coffee research Organization, undated). The primary goal of producer country processing is to separate the bean from the skin and the pulp of the cherrie (Ponte, 2002). Depending on location and local resources, coffee is processed in two main ways; wet or dry processing. The wet processing method was mostly observed during fieldwork, and the end result is Mild (or washed) Arabica, which is traded different from ‘Hard’ coffee which is either Hard Arabica or Robusta (Ponte, 2002). This includes pulping, were the skin and the pulp is separated from the bean, followed by drying. Beans are also separated by their weight. Then the coffee is placed in fermentation tanks in order for enzymes to break down the mucilage (sticky stuff adhering to the parchment surrounding the beans) and is cleaned. The wet parchment coffee (pergamino) contains 57 percent of moisture at this stage. To reduce this moisture content the parchment is dried by using usually a combination of sun drying and mechanical drying, down to an optimum of 11.5 percent (field observations and International Coffee Organisation, undate). The Milling of the coffee usually occurs on a centralized basis. It includes hulling, which removes the parchment layer from the wet processed coffee (Ponte, 2002), polishing, grading and sorting. After the milling process the coffee is classified and exported as green beans. Proper processing in producer country, along with soil type and fertility, weather conditions and farm practices, is the key determinant of coffee quality (Ponte, 2002).

5.2 THE GLOBAL ECONOMIC VALUE CHAIN - INCOME FROM FAIRTRADE COFFEE

The coffee commodity chain is relatively simple in that very few other inputs are used in the process from growing and processing green coffee to its manufacturer and final consumption (Talbot, 1997). The chain has very few side branches which makes it feasible to estimate distribution of income along the chain. The total breakdown shows the direct value calculated by percentage in each stage. In the conventional supply chain of coffee, Milford argues it is possible that a coffee bean change hands as many as 150 times (Milford, 2004:5). As highlighted by Slob (2006)

‘’In a report published on the occasion of the fifteenth birthday of Max Havelaar, Fenny Eshuis and Jos Harmsen demonstrate that in 2002 the gross income of a producer (farmer) was € 0.10 per package of mainstream coffee (250 grams) sold in the Netherlands, compared to a retail value of € 1.57 for the same package of coffee. This means that the producer would obtain 6.37 percent of the retail value’’ (cited from Slob, 2006:25).

Slob (2007), referring to studies from Eshuis and Harmsen (2003), highlights that in a Fairtrade system, the gross income of the producer organization is 29.15 percent of retail value. However, by comparing these two value chains, Slob (2006) compares the benefits to producer in conventional chains with the benefit to producer organization in the Fairtrade coffee chain36. The importance of cooperatives is not an outcome of Fairtrade; it is rather a form of producer organization with long tradition in Central America (Lyon, 2007).

Through fieldwork in Nicaragua and Guatemala, I have estimated the gross income of producer and the gross income of producer organizations of Fairtrade coffee. Firstly, I will present the overall income of the producers of Fairtrade coffee. Secondly, I will present a global value chain analysis of the Fairtrade product Farmers Coffee from Joh. Johannson AS. Thirdly, I will present a global value chain of one cup of Fairtrade coffee from the cafeteria at the Norwegian University of Life Science. And at last I will present

36 The report by Slob (2006) is produced by the Centre for research on Multinational Corporations, funded by the International Fair Trade Association (IFAT), the European Fair Trade Association (EFTA) and Fair Trade Labelling Association (FLO).

an imaginary image of producer income of one Cappuccino in order to illustrate the income of producers.

The producer income per kilogram of Fairtrade coffee sold in Norway is approximately NOK 2.50 per kilogram (see Table 1). The producer income is similar in Nicaragua and Guatemala. However, the total income in the producer countries shows higher variation. As highlighted below (Table 1) the exporting cooperative in Guatemala have a total income of NOK 7.24 TCE per kilogram, whereas the exporting cooperative in Nicaragua have a total income of NOK 4.48 TCE per kilogram. Important to note though, the price is calculated as an average of income and must be seen in relation to the producer narratives as for evaluating the total producer benefit of Fairtrade. All the producers interviewed in both Nicaragua and Guatemala use a system of liquidation of price. Therefore, the amount given here is the average income of the producers37.

TABLE 1: ESTIMATED INCOME FROM COFFE IN TOASTED COFFEE EQUIVALENTS

Actors Coffee income Percentage of total (NOK/kg TCE) (percent of NOK 74) Producers Nicaragua a 2.56 3.5 % Producers Guatemala a 2.52 3.4 % Total income producer country; 4.48 6.1 % Nicaragua b Total income producer country; 7.24 9.8 % Guatemala b

(See Appendix I, Appendix II and Appendix V for calculations)

Furthermore, from the above table (Table 1) there are clear differences from the distribution of benefits from producer to producer organization. The difference is more remarkable in the producer organization in Guatemala then in Nicaragua. The

37 Justified according to above where there is no highlighted price difference to producers, the fair trade price is below ‘C’ price and a normal fact that not all coffee is exported through fair trade channels. However, the farmers researched in Nicaragua and Guatemala have other certifications in addition to fair trade and normally fetches higher prices. The producers in Nicaragua obtained a higher price through the Esperanza Coffee group than they did to their fair trade buyer, but received the same benchmark price from the fair trade coffee as with their Starbucks CAFÉ practices.

specialized second level cooperative in Guatemala receives a higher portion of benefits than the small cooperative in Nicaragua. Furthermore, the producers in Guatemala receive less direct benefits than the producers in Nicaragua. I believe this highlight the increasing demand of Fairtrade products and the move to mainstream Fairtrade. The second level cooperative in Guatemala is able to supply a large amount of coffee but the creation of a second link in the supply chain decreases the direct economic benefits to the producer. Not distinguishing from the table, but the second level cooperative in Guatemala invest in producing high quality coffee and operate more as a professional firm (de Leon, marketing manager of Fedecocagua, personal interview, Guatemala, 2007) than the small scale cooperative in Nicaragua. Furthermore, the second level cooperative in Guatemala supply 630 containers of Fairtrade coffee annually (de Leon, marketing manager of Fedecocagua, personal interview, Guatemala, 2007), whereas the cooperative El Polo in Nicaragua supply 7 containers of Fairtrade coffee annually (Solorzano, 2007).

Important to note, the current ‘C’ price is higher than the Fairtrade price floor, thereby the Fairtrade price is supposed to follow the ‘C’ price. The main benefits one can thus find of the Fairtrade system is the social premium. The social premium resides at the cooperative38 in order to increase their capacity and distribute a better quality coffee. Indirectly, this aids the producers to export more and better quality coffee, a highly important aspect of Fairtrade benefits.

According to Slob (2006), the amount of extra benefits to the producer ...’varies according to the cooperatives’ handling of debt servicing, co-operative expenses, distribution of Fairtrade social premium etc’ (Slob, 2006: 28). This acknowledgement is essential in relation to the new method of ‘doing’ Fairtrade. By mainstreaming Fairtrade, growing consortiums of cooperatives operating on national basis have the lion’s share of the market. They incorporate an additional link in the value chain which requires profit and are positioned with increased potential of exerting power over the producers.

The income generated from Farmers Coffee is visualized below (Table 2). Accordingly, the direct value to producer of one package Farmers coffee is 63 Norwegian øre,

38 In the case of Guatemala, the social premium resides in the second level cooperative.

whereas the importer/roaster has an income of almost 74 percent of total value. This highlights that Fair trade does not challenge the direct power in the global value chain, where the main share of profit remains at the importer/roaster level. The Fairtrade network works within the market thus is not able to change the power and governance of the global value chain. Furthermore, it is important to highlight Max Havelaar as an expensive organization, with an income close to the total income received by producers from the same product. It is also important to bear in mind the difference in quantity sold. The second level cooperative is on a national scale, receiving 0.21 percent39 of every kilogram of coffee exported from the 20 000 producers all over Guatemala, whereas the producer have small family-run farms. The roasters and retailers in Norway are also macro scale where three main roasters distribute to 85 percent of the Norwegian market.

TABLE 2: DISTRIBUTION OF VALUE, FARMERS COFFEE Direct output price Direct output Value added Value added (NOK/kg toasted coffee price (NOK/kg toasted (percent of Joh Johannson AS equivalents) (Green Bean coffee equivalent) total) Equivalent) Retail b 74 62.18 10.24 13.83% Max Havelaar 1.8 1.51 1.8 2.43 % Norway c Joh Johannson AS d 63.76 53.58 54.71 73.93 % 2nd level 7.25 6.09 3.92 5.97 % cooperative e 1st level cooperative f 3.33 2.80 0.83 1.12 % Producer g 2.5 2.10 2.5 3.38%

(See Appendix I and Appendix IV for calculation. For visual representation see Appendix VI.)

The producer receives 3.38 percent of total value of one package of Fairtrade coffee. Total income in producer country amounts to 10.47 percent. In comparison, the

39 Assuming on average 12 percent to the second level cooperative of total price paid to producers.

importer has an assumed income of 73.9 percent40 of the total value, and the organization Max Havelaar has an income of 2.43 percent of total value.

According to Talbot (1997, 2004), the income of producers in the conventional coffee market was about 14.6 percent in 1989/1999, decreased to 10 percent in 2000/2001 (Talbot, 2004:169). Even though Talbots’ figures are calculated as a weighted average of prices paid to growers in each ICO member exporting country, during the time of the coffee crisis, they correspond extremely well with the figures I have received from the producers. However, during the same period, the value added in consuming countries increased from 75.5 percent (1998/1999) to 79.4 percent (2000/2001). The figures are comparable to my findings, where Talbot has not divided value according to sector.

From the distribution shown above (Table 2) the income generated by retail is extremely low if one takes the VAT into account. According to my findings, by including VAT as separate income, the income of retail would be negative, where VAT is 25 percent corresponding to 19.01 percent of total retail value. However, I have included VAT within the income of retail as they assume other benefits such as writing off other types of costs from their tax returns. However, similar findings where retail assumes low income from coffee are highlighted by Ponte (2001);

‘Supermarkets retail value margins for coffee have remained generally lower than for the average food portfolio. In some countries such as the US, retailers sell coffee even at a loss in order to generate traffic. Retailers need to stock coffee because consumers expect them to do so. They can attract customers with relatively cheap coffee and entice them to buy other, high-margin items during their visit’ (Ponte, 2001:19).

Thus, the general low income from retail is a general trend, where low priced coffee is a product which attracts customers.

The distribution of income by sector of the Fairtrade coffee used on campus at the Norwegian University of Life Sciences is shown below (Table 3). The estimation is made of Fairtrade coffee for students, who are exempt from VAT when using their student

40 The value is only calculated out of value in the other part of the chain as direct value was not possible to obtain. Other scholars have noted same difficulty, such as Talbot (2004:180) ‘Information on costs of production (TNCs) can legally be considered a ‘trade secret’ which does not have to be disclosed’.

cards41. Producers’ gross income from one cup of coffee bought at the University campus of UMB is 0.79 percent of total value (Table 3), or 4.7 øre. The total value which reaches the producer organization, Fedecocagua in Guatemala, is 1.55 percent.

Needless to mention, one has to take into consideration the different cost of services and labor in the two different countries. Even though the figure lacks comparability to a conventional market, it is representative to impacts of Fairtrade when prices of the international market are better. It pictures the value received by producers given prices are better than price floor set by FLO International. In many cases, it would have been impossible to compare the Fairtrade value chain with a conventional value chain where coffee sometimes change hands as many as 150 times (Milford, 2004; Slob, 2006). Nevertheless, producer income can be compared. However, seen in relation to the perceived benefits from Fairtrade one can argue that direct benefits to the producers are at a minimum but the social premium increase the organizational capacity of the organization. The social premium of USD 0.05 per pound green beans is equivalent to 0.15 NOK/kg42 TCE or the coffee bought at retail. Dividing this number by four and one has the social premium of one package of Fairtrade coffee (0.04 NOK/package 250 gr.). The social premium has currently increased to USD 0.10 per pound GBE, thus equivalent to 0.30 NOK/kg TCE, or 0.08 NOK/package 250 gr.

TABLE 3: VALUE DISTRIBUTED OF ONE CUP OF COFFE, UMB

Value chain UMB Small coffee percentage per cup Siås cafeteria a 4.75 79.17 % Max Havelaar b 0.02 0.38 % Friele AS c 1.14 18.95 % Total value producing country d 0.09 1.51 % 2nd level cooperative e 0.05 0.82 % 1st level cooperative f 0.01 0.17 % Producer g 0.03 0.52 % Total 6.00 100.00 %

(See Appendix I, Appendix II and Appendix IV for calculations)

41 Important to note that if one buy a regular including VAT there have been added 33 percent to the total product, whereas the rates in Norway are 25 percent of the ‘added value’ of the product, excluding value of raw product.

42 Given US$1 is NOK 5.39; 1pound is 2,2 kg; 1 kg green coffee is 1.19 kg toasted.

The distribution of income in the value chain is shown above (Table 3) where the total amount correlates to the NOK 6.00 per cup of coffee43, excluding taxes. The University cafeteria receives about 79.17 percent of this value whereas Friele AS receives 18.95 percent and producer country receives 1.51 percent. Thus, from one cup of Fairtrade coffee bought at campus, the producer has an income of 3 Norwegian øre, or the total income in producer country is 9 Norwegian øre.

TABEL 4: HYPOTHETICAL PRODUCER INCOME FROM ONE FAIRTRADE CAPPUCCINO

Producer benefit Producer benefit (Percentage of Actors (NOK/cappuccino44) total price of cappuccino45) Producers Nicaragua a 0.02 0.06 % Producers Guatemala 0.02 0.06% Total value producing b country; 0.05 0.16% Nicaragua Total value producing country; 0.03 0.10 % Guatemala

(See Appendix I, Appendix II and Appendix V for calculations)

Only as a hypothetically case, the table above (Tabel 4) shows the income to coffee producer of one cup of cappuccino sold. The producers receive about 0.06 percent of total income from one cup of Fairtrade cappuccino46. This phenomenon is explained by Ponte (2001) when discussing the ‘latte revolution’ and the ‘Starbucks factor’; coffee is consumed more as an experience in get-away places such as cafés. Coffee in this sense is no longer a commodity but ‘pre-packed with lifestyle signifiers’. This is further collaborated below regarding the commodity cultures and corresponding narratives. However, as Ponte (2001) highlights;

43 I justify not including transportation costs by neither including cost of production.

44 According to Barista Norway, one cappuccino includes 35 ml of espresso, which is 7 grams of fine toasted beans.

45 Where one cappuccino costs NOK 32.

46 This is hypothetically. The large coffee houses in Norway do usually not operate with fair trade for their espresso, for instant Friele AS buys the espresso coffee from Illy in Italy. This type of coffee is usually referred to as specialty coffee and fetches a higher price at producer site (sales manager Friele AS). However, since estimation of producers’ income includes a small part sold as specialty coffee it is possible to assume similar benefits.

‘What difference does it make to a smallholder if a consumer can buy a ‘double tall low-fat soy orange decaf latte’ or if specialty beans are sold at USD 12 per pound in the US if he/she gets less than 50 cents for the same product’ (Ponte, 2001:20,21).

The marketing manager of Fedecocagua (de Leon, personal interview, 2007) claimed farmers receive 88 percent of the Fairtrade price, in which at time of research responded to USD 1.21, Fedecocagua thus keep 12 percent of total income47. The average price received directly by producers was actually USD 1.15 per pound of green coffee. The percentage of the average ‘C’ price for the corresponding period was USD 128.64 (International Coffee Organization, undated; indicator prices). One can draw two speculative conclusions out of this; either the producers received 89.40 percent of the corresponding market price, or the second level cooperative received a price bonus for quality and/or certifications and distributed this equally to producers which amounted to an increase in price received by 1.40 percent48. The latter is more likely when, according to Norwegian roasters, coffee from Guatemala is not usually used in regular mixed coffee brands due to its high price49 (Purchasing Manager, Coop Norway Kaffebrenneri). Nevertheless, the calculations presented above is based on a higher price than the Fairtrade price, therefore one would find a smaller portion reaching the producer when the FLO price floor is active. On the other hand, depending on amount sold through Fairtrade channels, the difference from conventional market price would be higher. However, according to Fridell (2007);

‘…When viewed historically the Fairtrade price is relatively low and consistent with conventional prices. From 1976 to 1989 and from 1995 to 1998, a total of sixteen years, the international price for Brazilian Arabica beans was generally close to or well above USD 1.26 per pound (Fridell, 2007:86). ..It would be untenable, given the historically exploitative conditions under which coffee producers have lived and worked, to make the claim that during these years the price of coffee beans was fair (Fridell, 2007:86)… The

47 This is correct according to FLO system because the fair trade price is given as FOB price

48 It was not possible to receive the exact price of Guatemalan coffee sold by Fedecocagua, but see the narrative section for how the second level cooperative distribute the social premium.

49 The cooperative El Polo, on the other hand, received at the corresponding time period US$ 1.26 cents per pound of green coffee for the majority of their harvest. This was through Arvid Nordquist HAB in Sweden and Starbucks CAFÉ practices, which paid equal price. The cooperative sold a small amount of coffee as specialty coffee through The Esperanza Coffee group where they received US$ 138 per quintal.

basic minimum price of USD 1.26 per pound has not changed in over ten years, and, according to one calculation, has lost 75 percent of its value to inflation in Mexico during that time ...Even taking into consideration that Fairtraders receive a greater percentage of the FOB price than conventional farmers, for most of these years conventional farmers received a final price that was higher or equivalent to the Fairtrade price. … It would be untenable… to make the claim that for these years the conventional prices for coffee beans (equal or higher than the current Fairtrade price) reflect the social and environmental costs of production (Fridell, 2007:192, 193).

According to above calculations, FLO International and Max Havelaar is a rather expensive organization. Placing the numbers in perspective; the total income generated by producer countries of one package of Fairtrade coffee sold in Norway is, in Guatemala NOK 1.81, or in Nicaragua NOK 1.12. The total income of producers in Guatemala and Nicaragua is NOK 0.64. However, the total income of the Fairtrade organization is NOK 0.45 of the same product. Even though the numbers lack comparability to a conventional market, it is important to highlight that currently, due to the high conventional price of coffee, the only direct economic benefit of Fairtrade is the social premium. Thus, at time of research, the total extra income of one package of Fairtrade coffee compared to conventional coffee was NOK 0.038, or 3.8 øre. This amount has currently increased to NOK 0.073, or 7.3 øre, still more than six times the direct income from the Fairtrade organization.

6.0 RESULTS AND DISCUSSION II: THE COMMODITY CULTURES OF FAIRTRADE

‘’For the economists, commodities simply are. That is, certain things and right to things are produced, exist, and can be seen to circulate through the economic system as they are being exchanged for other things, usually in exchange for money. This view, of course, frames the commonsensical definition of a commodity: an item with use value that also has exchange value. ..From a cultural perspective, the production of commodities is also a cultural and cognitive process: commodities must be not only produced materially as things, but also culturally marked as being a certain kind of thing. ..the same thing might be treated as commodity at one time and not at other… the same thing may, at the same time, be seen as commodity by one person and as something else by another’’ (Kopytoff, 1986:64)

My following analysis will focus on the narratives surrounding Fairtrade. The narratives presented here are separated between the material and imaginative production moments of Fairtrade coffee. The material production moments are divided geographically between the two cooperatives in Nicaragua and Guatemala and the imaginative production moments are divided between the different representation strategies. At last, I will present the consumer narratives, though due to limitations of research they are not given the full attention they ought to have as I had to rely on secondary data. The imaginative production moments are analyzed through communication strategies. The communication strategies are the main difference between the Fairtrade commodity50 and the conventional commodity. The complex network of Fairtrade actors are referred to as a ‘lengthening51’ of the network, as compared to networks of conventional coffee.

50 The fair trade commodity is referred to within alternative geographies of food.

51 ‘Alternative geographies of food are located in the political competence and social agency of individuals, institutions, and alliances, enacting a variety of partial knowledge and strategic interests through networks which simultaneously involve a ‘lengthening’ of spatial and institutional reach an a ‘strengthening of environmental and social embeddedness’ (Whatmore and Thorne, 1997:294,295).

6.1 COMMUNICATION STRATEGIES OF FAIRTRADE

According to Lamb (2007:55), the director of the Fairtrade network, it is indeed the ‘marketing methods which are unique to Fairtrade and which seek to realize the core objective of bringing the organized consumer closer together with disadvantaged, organized producers. …these techniques have helped make Fairtrade fashionable’.

The communication or marketing of fair trade reflect a certain power to formulate ideas and communicate them effectively52 (Mare, 2007). It is indeed difficult to relate to communication narratives as marketing strategies due to the moral power the Fairtrade network embark on, which I will come back to later. However, basing these data on visual representations of Fairtrade in Norway, grounded in text from the Director of the Fairtrade Foundation in the UK about marketing strategies of Fairtrade, I find the term ‘marketing’ justified. The Fairtrade mark has embarked on various different marketing strategies. It is important to highlight these in order to gain a fuller understanding of Fairtrade as a network.

The first communication strategy is the name Max Havelaar, which represents the Fairtrade Labeling Organization International (FLO). The name Max Havelaar and Fairtrade implies a certain moral grounding. The second communication strategy presented is the label. The label is a symbol representing a narrative which is communicated to the consumer. Thirdly, the organization Max Havelaar is the communication face of Fairtrade in Norway. Max Havelaar is promoting Fairtrade through their webpage and various different campaigns. Fourthly, the international organization FLO, along with its partner Alternative Trading Organizations (ATOs), is the administrative hierarchy above Max Havelaar Norway, promoting the Fairtrade network through various different channels. In particular, recent campaigns have been the promotion of Fairtrade towns, schools, churches and universities.

52 Such as the idea of Fairtrade; ‘Fairtrade seeks to challenge historically unequal international market relations and transform North/South trade from a vehicle of exploitation to a means of empowerment. Fairtrade works to alleviate poverty in the global South through a strategy of ‘trade, not aid’, improving farmer and worker livelihoods through direct sales, better prices, and stable market links as well as support for producer organizations and communities. This movement also works to educate Northern consumers about the negative consequences of conventional trade, offer fairly traded alternative products, and promote the selection of more ethical purchases’ (Raynolds and Long, pp. 15).

Other more independent marketing initiatives include the importers/roasters and distinguished NGOs. The importers and roasters are the vehicles of Fairtrade. They are realizing Fairtrade certified products through their expertise and position as established actors in the market. The independent organizations such as NGOs and development organizations support Fairtrade financially, or with a symbolic economic amount. In Norway, Norad is one of the main financer of Max Havelaar, whereas other organizations support with a symbolic amount. However, the value of their contribution must also be seen in terms of the symbolic value in terms of legitimacy and publicity due to their established position in the society.

The first communication method is the name; Max Havelaar, taken from a novel by Multatuli (pen name of Douwes Dekker) written in 1860 as a protest against colonial policies. In particular, the enforcement of a new cultivation system where Indonesian farmers at the former Dutch colony of Java were forced to grow commercially tradable crops such as tea and sugar instead of staple foods. Taxes were collected by the colonial powers, resulting in abject poverty among the Indonesian population (Mutatuli, 1901). Multatuli saw the importance of writing the story, through a novel he wanted to bring attention to the exploitative powers of the Dutch colonies;

…’’Sagen var den, jeg indsaa, der var en Fare, som truede med at ødelægge det hele Kaffemarked, og som alene kunde afværges, hvis samtlige Mæglere slog sig sammen. …som om ligeledes Skibsrederierne paa en vis Maade er interesserede i Sagen, ikke at tale om Koffardiflaaden. Og ogsaa Sejldugmageren og Finansministeren, Embedsmændene og de øvrige Ministrene… Min bog vedrører ogsaa Møllerne og Præstene, Apotekærne, Brændvinsbrænderne… Ogsaa Kongen, ja fremfor alt Kongen! Min bog maa ud i Verden53…’’ (Multatuli (Douwes Dekker), 1901:30, 31).

Multatuli’s words became well known. According to the Danish translator Carl Michelsen (Multatuli, 1901); ‘teksten vakte baade ved sin Form og sit Indhold, en umaadelig Opsigt. …Hans bog, der anses for det betydeligste Værk I Holland i nittende

53 The case was this, I realized, there was a danger, which threaten to ruin the complete coffee market, and which alone could be averted, if all Brokers collectively joined… as if also the shipownersin a certain manner are interested in the case, not to mention the coffee fleet. In addition to the sailcloth maker, and the minister of finance, the senior state officials and the other ministers… My book also affects the Millers and the Priests, the pharmacists and the liquor makers… And the King, above all the King! My book must reach the world.

Aarh. …ved sine Skildringer af Javanesisk Tilstande og sin Satire over amsterdamske filistre54.

Thus, the name Max Havelaar have played on a fictive figure who whose main aim was to point out the exploitative and unfair trade relationship between a colonial power and the local situation on the Dutch colonial island of Java. The weight of moral symbols in the name is extremely influential.

Secondly, the most visible symbol on the package and in retail is the label. Engdal et al (2007)55 highlight that the label represents a story for the consumer, the Fairtrade label create and communicate stories. The stories, or narratives, involve poor people in cooperatives, which increase their capacities through Fairtrade. The narratives are also communicated through photos. According to Engdal et al. (2007) the narratives are highly appreciated by consumer and play a central role in motivating behavior. ‘’The consumer buys consciousness, and receives a narrative. People in the West enjoy stories and narratives’’ (Engdal et al, 2007:40). The main distinction between a Fairtrade coffee and a conventional coffee, as will be collaborated later, is the label. The label of Fairtrade products is standardized and recognized in most European nations as the one below (see Image 3). Next to the image below is the original explanation of the logo given by the Norwegian Max Havelaar56;

54 His book, which is regarded the most prominent writings in the Dutch 19th Century… through its description of the Javanese situation and its satire of Amsterdams’ philistine.

55 In an interview with James Calcagnini, the president of East Coast Option Service Inc, a large broker firm at the New York Stock Exchange (Nybot).

56 Original tekst; Symbolet er tidligere logoer smeltet sammen til en jublende person som representerer folket bak Fairtrade, både forbrukere og produsenter. Friske og positive farger er valgt til symbolet, som skal vise forbrukere og produsenter som knyttes tettere sammen gjennom forbruk av Fairtrade-merkede produkter. Årsaken til at den er såpass abstrakt er at den skal fungere på tvers av både kulturer og tid (Max Havelaar Norge webpage).

IMAGE 3: FAIRTRADE LABEL The symbol of previous labels melted together to form a cheering person representing the people behind Fairtrade; consumers and producers. Fresh and positive colors are chosen to the symbol showing that consumers and producers are in closer connection through consumption of Fairtrade products.

The reason of such an abstract Figure is the

Reference 7: Max Havelaar Norway use across cultures and time

Thus, the label symbolizes a connection between consumer and producer where the connectivity is created through consumption of Fairtrade products. According to Bryant and Goodman (2004:360) the narrative romanticizes a connection reflecting a need for the consumer to be linked to the processes and effects of consumption on local ecologies and communities. The connectedness reflects a virtual engagement with ‘others’ relying on the structures of differences. Thus one may note the primary creation within the feminist dichotomies of self and others, North and South, poor and rich, consumption and production. According to Whatmore and Thorne (1997) the creation of connectivity is explained as the mode of ordering of connectivity. It is primary produced by the mediators. The aim of the label is to establish a connection between those who grow and those who buy coffee. However, the connection is based on dichotomies which are highlighted, or visualized, and then they diminish through ‘acting at a distance’, carried out by consuming Fairtrade coffee. The difference between the Northern consumers and the ‘others’ is rather celebrated in what Goodman suggest a ‘commodification of differences’ (Goodman, 2004:905). However, this commodification of differences is somehow sold to consumers as commodification of closeness. The product is more than coffee, more than core versus periphery, and the label is promoting a certain charity at a distance (Lyon, 2007). According to Max Havelaar Norway; ‘Fairtrade products create good stories’. Fairtrade-merkede produkter skaper gode historier. Noen historier er bedre enn andre. Og viktigere. Varer med Fairtrade-merket skaper gode historier, både blant de som har laget varene og de som forbruker dem (Max Havelaar Norway, undated; produkter). According to Lyon (2006) consumer demand might be grounded in relational ethics and the ability to care over distances, which is the narrative most often communicated through the label (Goodman, 2004).

Thirdly, the most visible actor of the Fairtrade network in Norway is the foundation Max Havelaar. According to Hammer (personal interview, 21.02.2008), director of Max Havelaar Norge, Fairtrade is ’an alternative trading system which enable the producer to support themselves and their family57’. Hammer believes Fairtrade is empowering the producers. They are empowered to understand the markets better and to understand the importance of product quality. Fairtrade enables the producers to improve their quality and improve their bargaining power on price, which strengthens the producers to become stronger partners of trade in the conventional market. ‘It is not the aim of Fairtrade to certify all the producers in the world, but to raise the floor’, expresses the inspired director of Fairtrade Norway (Hammer, personal interview, 21.02.2008).

‘Fairtrade is a certification and a niche market. We are a label system, we buy and sell products. But I mean we are creating a market opportunity. First and foremost for them who produce the products, but also for those who sell the products, it is opening a market opportunity. But we do not deal with the commercial part58 (Hammer, personal interview, 21.02.2008). The director recognizes that many Fairtrade producers do not know what Fairtrade or Max Havelaar stipulates and the difficulties of communicating information on such a level.

‘Few producers have knowledge of what stipulates Fairtrade. This is a familiar phenomenon which relates to many people being analphabetic, relating to an international market is abstract. Learning the world is round, north and south, coffee which end up in Norway, where is Norway? They are used to a coyote which squeezes them for what they are worth. It is various examples; where is this Max Havelaar, have never seen this Max Havelaar, never been here. This is quite foolish; the system is so much more59 (Hammer, director Max Havelaar Norway, personal interview 2008).

57 Det er et alternativt handelssystem som setter produsenter i stand til å forsørge seg selv og sin familie.

58 ’Fairtrade er en sertifisering og et nisjemarked. Vi er en merke ordning, vi både kjøper og selger produkter. Men jeg mener at vi er med å skape en markedsmulighet. Først og fremst for de som produserer produktene, men også for de selger produktene, det åpner seg jo en markedsmulighet. Men det er jo ikke vi som driver det kommersielle’ (Hammer, personal interview, 21.02.2008).

59 ’Få produsenter vet hva fair trade er. Det er et kjent fenomen som handler om at mange er analfabeter, det å forholde seg til verdensmarkedet, det er helt abstrakt. Det å lære seg at verden er rund, nord og sør, at kaffe havner i Norge, hvor er det? De er vant til en Coyote som tyner dem for det de er verdt. Det er mange eksempler, ja hvor er nå denne Max Havelaar, har aldri sett denne Max Havelaar, aldri vært her. Det er så

Thus, according to the director of Max Havelaar, apart from price is the importance of empowerment through producer organizations; learning their rights; strengthen the women, and creating possibilities where children do not have to participate in production; where the parents earn enough to send their children to school, buy schoolbooks and pay intuition fees. Hence, the complete Max Havelaar is more than the price. Fairtrade has managed to place focus on trade, and through Fairtrade the producers have increased their awareness. This awareness raising is an important part of Fairtrade, where traders need to take responsibility. They have a responsibility of not exploiting the producers. The goal of Fairtrade is not to be the ruler, but to exploit itself to the point where there is no use of continuing (Hammer, director Max Havelaar Norway, personal interview 2008).

Accordingly, Max Havelaar has reached its goal the day producers are empowered to bargain against the traders, when they have built quality laboratories supplying quality coffee at a better price, keeping their children in school and families have enough and varied food on the table. Essentially, Max Havelaar is a development strategy. The root to development is a social premium for the cooperative to increase their capacity and a price floor for producer stability60. Thus, the initial development narrative is increased market access through aid, where the aid is the social premium.

Fourthly, the most visible international actor is FLO-International and FLO-Cert, part of the network of ATOs named FINE. According to FLO-International ‘Fairtrade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing their rights of, disadvantaged producers and workers – especially in the South’ (FLO-International; about us).

Fairtrade is a new strategy of development through consumption following the concept of ‘trade, not aid’. Fairtrade creates awareness about unequal terms of trade and about

fordummende, for dette systemet er så mye mer’ (Hammer, director Max Havelaar Norway, personal interview 2008).

60 Long term contracts have proven only to work in theory (Smith, 2007) and pre-finance of the coffee harvest by traders have been difficult due to domestic and international laws (Barrecka, 2007).

difficult situations for producers. Through consumption of a Fairtrade coffee the consumer is reassured the minimum price and the social premium reaches the producer.

When one log on to the website of FLO Cert, the mission is quite clear;

CERTIFICATION FOR DEVELOPMENT

FLO-CERT GmbH is an independent International Certification Company offering Fairtrade Certification services to clients in more than 70 countries.

As such a company we assist in the socio-economic Development of producers in the Global South and help to foster long-term relationships and good practice with traders of Certified Fairtrade products.

Our Certification provides a guarantee to consumers of Certified Fairtrade products that they are contributing to the Social-Economic Development of people through their purchases

(FLO-Cert; about us, 2008)

The certification is sold as a guarantee to the consumer that he/she is contributing to socio-economic development of people through his/her purchase. The consumer, most likely in the Global North, is buying a narrative of charity at a distance, or economic, social and environmental development of the producers in the Global South. FLO International and FLO Cert seem to promote a more radical ideology than Max Havelaar Norway. The radical string would like to see Fairtrade result in a fundamental transformation of capitalist society (Jaffee, 2007). Goodman (2004) have presented a narrative of Fairtrade where consumers seek to fill the emptiness left by Northern Civil Societies distrust in aid by promoting ‘trade, not aid’. Fairtrade in this context is described as ‘a form of alternative development which has become the moral business of latte drinkers and other reflexive consumers in the North’. It is portrayed through a politics of redistribution, or Robin Hood in disguise of a coffee bean; ‘Robin Hood comes to town, latte in hand’ (Goodman, 2004:896). The ethical praxis of Fairtrade is knowledge intensive imaginary of aid through consumption practices (Goodman, 2004).

The general narrative of Fairtrade coffee is the contribution to alternative development for the producers through more equitable relations of trade. It is building on the notion of the failure of blueprint development projects (Roe, 1991) and the need for alternative

development through trade. This is essentially a view pursued by ideologically motivated NGOs such as Oxfam61, many Southern civil society groups and consumer activists (Jaffee, 2007) that argue the market to be structurally unfair; it is broken and needs fixing. This is essentially a market-redesign ideology where the problem is the unequal terms of trade; markets in rich countries have been closed up by ‘rigged rules and double standards’ (Oxfam, 2001). However, it does not seek to challenge the existence of the market, but to the way markets are administered and constructed and how they deliver economic benefits to participants. Usually the skeptics are cynical of whether the value added reaches the producer (see Table 5: Consumer confidence, pg. 123). Accordingly, the narrative communicated of the producer via the label creates a demand for the particular product. The political ethical consumer is somehow buying the narrative of the producer.

The representations shown above are key distinguishers of how the network is promoting itself. According to Lamb (2007), Director of the Fairtrade Foundation;

‘In all these differing activities and promotions, the Foundation has sought to emphasize the individual stories of farmers and workers and to ensure that they are as centre-stage in the marketing of Fairtrade as they are, of course, at the heart of the concept itself. Together with strikingly personal photos, examples of producers’ stories appear on posters, leaflets on product packaging and, importantly, on the Foundations’ well-visited website. The message has focused on the most tangible benefits of Fairtrade. Producers tell their stories in direct quotes, focusing on the difference Fairtrade has meant to them, their families and their communities. They have, for example, often spoken of investing the premium in specific projects such as schools, wells and primary clinics. The main focus has been on the Fairtrade pricing mechanism and the resulting concrete community achievements of which the public can readily relate’ (Lamb, 2007:73).

Thus, the conscious marketing of narratives has been at the heart of Fairtrade. In addition, the network has placed much emphasis on the media and multiple different modes of representation. By mid-2006, there were registered 200 Fairtrade towns, 29 Fairtrade Universities and around 2000 churches, along with a network of Fairtrade

61 Although I argue Oxfam is both in the radical transformative group and the pragmatic group.

schools (Lamb, director of the Fairtrade Foundation, UK, 2007). According to the director;

‘Clearly, the Foundation is succeeding precisely by maximizing the effectiveness of this grassroot strategy. Word of mouth and community networks have added value, local flavor and personality to the range of networking strategies and promotional offers developed by the licensees and retailers themselves. …The broadening appeal of the Fairtrade story has also contributed to rising year-on-year media coverage. Fairtrade has human interest, business and trade interest, consumer appeal, political and economic reach, and an international development agenda, but it also commands a strong presence, simultaneously pushing a wide variety of buttons for media outlets. The local activities of the Fairtrade towns and universities and churches give the story - which is international in intent - a local angle. The foundation and the licensee companies have also worked hard to ensure journalists have the information they need and above all, the chance to visit producers in developing countries whenever possible so that they can see firsthand the impact of Fairtrade for the farmers and workers themselves’ (Lamb, director of Fairtrade Foundation, 2007:68).

In September 2005, the Fairtrade Foundations’ achievements in building consumer awareness of the Fairtrade Mark were recognized by the Superbrands panel of brand experts. The Fairtrade Mark was named the winner of the Superbrands Special Recognition Prize in the Media and Service Category. According to the Chairman of the Superbrands Council, Stephen Chelioties; …’the Fairtrade Mark has gained considerable media and consumer awareness in recent years, owing to the persistent efforts of its founders and supporters’ (Lamb, 2007:64, 65).

Thus, the promotional activity carried out by the Fairtrade network is recognized as very successfully promoting their brand. According to the director of the Fairtrade Fundation in UK; …‘while the Fairtrade Foundation’s overall vision is to promote a general awareness of Fairtrade and to encourage the purchase of Fairtrade products - thereby boosting opportunities for disadvantaged farmers and workers in developing countries - a more specific objective is to focus on the critical role of the Fairtrade Mark as an independent consumer label (Lamb, 2007:69)

The first independent marketers of Fairtrade are the importers and roasters. They are the vehicles of Fairtrade but also contribute in developing a certain perception of Fairtrade. The importers and roasters have an independent interest in selling Fairtrade products in order to increase their market share. In addition, the Fairtrade product gains a marketing bonus promoted at their webpage according to social responsibility.

When one log on to a webpage of a roaster/importer, their social responsibility is marketed in the form of certified products from Max Havelaar or other types of certifications. These products are products with a label, but often represented as a total product (see Feil! Fant ikke referansekilden. and Feil! Fant ikke referansekilden.) as the images below.

IMAGE 4: FARMERS COFFEE Kaffebønnene som er benyttet i FARMER’s er dyrket av kaffefarmere som mottar en minstepris for sin kaffe. I en tid med meget lave kaffepriser vil det for mange mindre kaffefarmere bety en mulighet til å overleve som kaffeprodusent. FARMER’s kaffe er en blanding av de beste kaffebønnene som kommer fra disse små farmene, og har etter hvert blitt favoritt-kaffe for mange; både på grunn av den gode smaken , - og for sakens skyld.

REFERENCE 8: JOH JOHANNSON AS

IMAGE 5: FRIELE FAIRTRADE

Fairtrades logo garanterer deg at små-produsenter av kaffe i fattige land får gode handelsbetingelser og tryggere sosiale kår. Gjennom ordningen får bøndene direkte tilgang til vestlige markeder, og en garantert minsterpris for sin kaffe. Denne minsteprisen fastsettes av FN.

REFERENCE 9: FRIELE AS

In this sense it is not just a small label which speaks to the consumer of fairness, it is the entire product. Thus here one marks a new brand product, which is a social responsible product. The product is distinguished from other products where the consumer pays a premium for solidarity. The two images as shown above (Feil! Fant ikke referansekilden., Feil! Fant ikke referansekilden.) speak to the consumer in similar but different manners. Joh Johannson AS has highlighted the minimum price in terms of low coffee prices, and has further highlighted good quality coffee as a mix from different small farm. This is the case for Joh Johannson AS as they buy Fairtrade coffee from an agent in the Netherland, A van Weely. They mail a recipe to the agent and receive the flavor they are searching as a blend from different large suppliers of Fairtrade coffee (Glavin T., general manager Joh Johannson AS, personal phone interview, 28.03.2007). On the other hand, Friele AS highlights the logo guarantees the small producers in poor countries receive good terms of trade and more social security. Friele AS has a more direct contact with the certified second level cooperative Fedecocagua in Guatemala and procures all their Fairtrade coffee directly from the particular cooperative. However, incorrectly the company claim the minimum price is a price set by the UN.62. The argument is based on a niche product, a differentiated good quality social product.

A competing private initiative on the Norwegian market is Coop’s Café Futuro63, which is also a brand solidarity coffee imported from Fedecocagua. According to Hansen (Purchasing Manager, Coop Norway Kaffebrenneri), Coop Norway use their own private initiative due to the high cost of the organization Max Havelaar; ‘Vi har valgt å fremme et eget privat merke da Max Havelaar er en kostbar organisasjon og ikke nødvendigvis alle pengene går tilbake til produsentene’ (Hansen, personal telephone interview 06.03.2008). One first level producer cooperative under Fedecocagua highlighted that they export coffee as Café Futuro to Coop Norge …’ This year we sold to Futuro. It is good because we obtained a much better price. The price was 750 Quetzales per quintal

62 The minimum price is set by FLO Standard Committee and FLO Board in consultation with a number of producer organizations, roasters and importers in accordance to consumers’ willingness-to-pay (FLO- International; standard setting). Eventually, the fair trade price must remain close to conventional price as not to discourage ethical consumers in the north, thus not following an objective assessment of the ‘real’ costs of production or a living wage (Renard, 1999, Fridell, 2007).

63 Coffee for the future.

pergamino64. This represents a price increase of about 11 percent compared to their average price from Fedecocagua of 669 Quetzales per quintal.

Some critical authors and scholars argue the importers and roasters connect the Fairtrade label to other initiatives of Corporate Social Responsibility (CSR) where the commercial interest is the underlying principle (Fridell, 2007). Fairtrade is an adjunct to the market or a useful image-enhancement tool (Jaffee, 2007). Talbot (2004) characterizes this as ‘bluewash’; one of the main contradictions of Fairtrade which happened when the network went more mainstream. The term ‘Bluewash’ is derived from the more common term ‘greenwash’, but it differs from its predecessor as it symbolizes the color of the UN and mainly aims to counteract the negative social and human rights responsibility of corporations, but also environmental responsibility. Among others, Starbucks, Nestle and Sarah Lee have been criticized for using Fairtrade, along with their private initiatives, as ‘bluewashing’ their business. When the Coca Cola Company launched their coffee concept ‘Premium Brewed Beverages (PBB) in March this year Fairtrade was a recognized promoter of their coffee which is currently sold in the Deli de Luca chain in Oslo (Max Havelaar Norway).

In a discussion of coffee and Fairtrade with the manager of the US based coffee cooperative Patchamama with similar purpose as an importer, the manager highlights the value (economic) of the coffee is in the narrative. Accordingly, the main profit remains with those who create the narratives65. The cooperative was set up in 2001 with the aim of facilitating transaction and information flow in order for more direct partnerships between producers in Peru, Nicaragua, Guatemala, Mexico, and Ethiopia.

64 Este año logramos a Futuro. Esta bueno porque logramos un precio bastante mejor. El precio fue 750 Quetzales por quintal pergamino’.

65 ‘I think last year the price we paid to the farmer was US$1.85 per pound for greens. This year it is quite a bit more, it is going to be over US$ 2, prices are going up, actually, for everyone. But this is all the alternative market, we are buying the quality here, this is well above fair trade pricing, this price is based on the quality, and we are competing with all the other specialty coffee buyers here in North America. …I will give it (cost of roasting) to you as about 17% of our revenue. Well, this is in effect the cost of roasting. Well, no, I tell you; it is US$ 1 per pound. It is a dollar a pound and I sell that to the retailer for US$ 6 per pound, and so you got another dollar in shipping and packaging and maybe some high lurching cents for fair trade. In the end of the day, I am paying US$ 4 for the coffee. The cost per pound is going to be US$4 dollar per pound, a little bit more, for good coffee to the retailer who then pays me US$ 6. So this is a pretty good margin there. I mean, this is where the profit is, we are talking about US$2 per pound in profit.’ ( Patchamama Cooperative, General Manager, California, personal telephone interview Oct. 2007)

The cooperative is distributing specialty coffee in the US from its producer members, in addition to Fairtrade and organic labeled coffee. According to the general manager of the Patchamama cooperative based in California;

‘It is not just coffee but it is the whole experience that goes with it. It is about the customer service and the marketing, the packaging, of course the quality of coffee, well the story, and nowadays, the value is not in the coffee, the value is in the story, it is in the brand’(Patchamama Cooperative, General Manager, personal phone interview, Oct. 2007)

According to the sales representative from Friele AS who comprise the main responsibility of supplying Fairtrade coffee to the Norwegian University of Life Science;

‘I believe personally it is modest what reaches the farmer [with Fairtrade coffee]. Usually about 25 percent reaches the farmer; still there are too many links in the chain and a very expensive organization. I believe there are more social benefits with our education centre in Brazil66’ (Eide, S. sales consultant Friele AS, personal phone interview 21.04.2008).

The sales representative from Friele AS further claim that Friele AS usually charge the Fairtrade coffee NOK 3-4 more per kilogram to wholesaler than conventional coffee67. However, the Fairtrade coffee is a higher quality coffee and single origin (Guatemala) than their regular ‘Friele Frokostkaffe,’ which is a mix from eight different countries. The single origin coffee is typically characterized as specialty coffee with higher quality (Giovannucci and Ponte, 2005). Furthermore, Friele AS promotes their certified coffee, including Utz Certify and Fairtrade, as their social responsibility along with their educational centre in Brazil.

As a second group of independent promotional actors, the NGOs behind Fairtrade are important in distributing knowledge and promoting the label of Fairtrade. Oxfam is an NGO active in campaigning for Fairtrade. Oxfam is behind the Fairtrade network

66 ’Jeg mener personlig at alt for lite går til bonden. Det går gjerne 25 prosent til bonden, da det fremdeles er for mange ledd og en meget dyr organisasjon. Det er nok flere sosiale fordeler med vårt utdanningssenter i Brasil66’ (Eide, S. sales consultant Friele AS, personal phone interview 21.04.2007).

67 Similar amount was found in wholesale price-list, where fair-trade coffee was charged NOK 1 more per package amounting to NOK 4 per kilogram. The extra cost needs to cover fair-trade license fee of NOK 1.8 and the additional premium to the farmer, in addition to extra expenses of being channeled through Fairtrade.

simultaneously as the organization is campaigning for reformist strategies in the international policy arena such as the WTO. Oxfam argues for a restructuring of international trade rules for a ‘pro-development’ deal in international trade. International negotiating processes have been undemocratic and untransparent resulting in ‘rigged rules and double standards’ through limited market access and forced liberalization of own markets, among other issues (Oxfam International, 2001).

Furthermore, the ‘Coffee Rescue Plan’ launched by Oxfam in 2002 have, according to the director of the Fairtrade Foundation, had a large role in boosting the sales of Fairtrade coffee. Oxfam focused on problems in mainstream trade, highlighting the crisis in low coffee prices and the damaging policies and practices of major multilateral companies in particular. It published the report ‘Mugged: Poverty in Your Coffee Cup’ (Oxfam, 2002) explaining how falling prices affect the livelihoods of 25 million coffee producers. After explaining the falling prices and the coffee crisis Oxfam proposed a ‘Coffee Rescue Plan’ in 2002, to re-stabilize the market by encouraging the purchase of Fairtrade coffee (Lamb, 2007:66).

Furthermore, Max Havelaar Norway is represented by organizations such as the Norwegian Church Aid, SAIH, the Development Fund and Norad, where the latter is the main sponsor of the Fairtrade organization. These organizations are well established and recognized in Norway, and strengthen the credibility of the Fairtrade network. The Director of Fairtrade Foundation UK highlight regarding the supporting organizations; ..’from the outset, these organizations gave the foundation its moral authority, its credibility and its base in civil society, and they remain central to the trust placed in the Fairtrade Mark’ (Lamb, 2007:65).

According to Renard (2003) the ambivalence of the Fairtrade labeling model is reflected in the tension between different actors of what stipulates Fairtrade. It may lead to the compromise of ethical principles, and doubts arise about Fairtrade’s role in inducing social change. In particular, this is reflected in the two main strains of perception; the radical transformative conception and the more pragmatic mainstream-retail perception. It is argued that the former perceives the label as a tool of transition, more politically and ideologically weighted where the challenge consists of making Fairtrade the general rule. The latter group of perception aims more at increasing share of Fairtrade products and strengthening southern producer organizations (Renard, 2003).

’The social agency of the Fairtrade network as a whole, rests on the mobilization of a mode of ordering different from that of cost-minimising, self interested individual of neoclassical economic theory’.

The network rests marketing initiatives, of which Whatmore and Thorne (1997) discuss as network lengthening. The concept of network lengthening refers to the network of communication agents which distinguish Fairtrade from conventional trade (Whatmore and Thorne, 1997). Even though the aspiration and communication of mediators differ, their presence is indeed what makes the network durable.

According to Hammer, Fairtrade is more susceptible to critics as it is growing, but Fairtrade is able to handle this, unlike some other particular businesses. The exploitable manners of trade need to be visualized68 (Hammer, director Max Havelaar Norway, personal interview, 21.02.2008).

The narrative represented through public relations of Fairtrade is essentially an ideological narrative of exploitative trade relations which creates low income from coffee in producer countries. The marketing of Fairtrade aims at identifying exploitative relations of power within international trade and highlight the exploited position of farmers. It is positioned within a development narrative of low coffee prices which is to be corrected by a social premium, identifiable with aid. The communication strategies include a selective representation of the voices of farmers. The narrative pursues to create a ‘feel good’ factor from the consumer when buying the particular product. The main consumer targets are educated consumers and consumers with integrity. In particular, Fairtrade target educated consumers at universities, but also youth and politicians. The aim of marketing Fairtrade products is to convince the consumer to buy both the good and the narrative. Thus, the outcome of selling such a product has two possibilities, one active and one passive. Either the narrative serves a purpose to encourage consumer debates concerning international trade and exploitative trade

68 ’Fairtrade blir utsatt for kritikk etter hvert som de blir større. Og det er helt greit det. Vi er absolutt ikke noen bistandsorganisasjon eller noe nødhjelp, eller subsidiering av ulønnsomme produsenter. Nei, dette er markedsstyrt fra ende til annen. De som sier vi driver og grønnvasker selskap, vel, Fairtrade sertifiserer ingen selskap, vi sertifiserer produkter; produsenter. De som kommer med slik kritikk de må sette seg litt inn i hva Fairtrade er. Men det er klart, det blir jo en trussel etter hvert. Måten mange har drevet og handlet på må frem i lyset. Om du driver en handel som ikke tåler verdens lys, så er ikke dette særlig bra. Det er krevende, utfordrende og bra fremover. Men Fairtrade tåler dagens lys, absolutt’ (Hammer, director Max Havelaar Norway, personal interview, 2008).

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relations, or the product becomes a ‘pillow’ in which one may rest instead of active participation in reforming exploitable trade relations. However, the production of sign value and symbol value is highly visible. The creation of sign value is particularly highlighted where the functional benefit of Fairtrade coffee does not differ from a conventional coffee if one relates to a conventional coffee of equal quality, but the sign value of the coffee includes the narratives of aid and development. In addition, the symbolic value of Fairtrade coffee is highly constructed through the media and marketing of Fairtrade coffee, where a consumer may be influenced by the symbolic value of the coffee in relation to other subjects. Most important, through Fairtrade the responsibility of exploitable trade relations has been shifted to the consumer.

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6.2 PRODUCER NARRATIVES OF FAIRTRADE COFFEE IN GUATEMALA

‘Café es el consume hermano69’

(Member of first level producer cooperative)

When asking the producers how they perceived their situation as producers of coffee, they often highlighted similar views as the following quote;

’Well, in all, the problem of coffee is that the price of coffee is very unstable. One year it increases and the other year it decreases. There is another problem as well; when the price increase a lot, everything increases; fertilizer, labor, grains, everything. And suddenly, the coffee [price] decreases, and the demand decreases, but everything is still expensive. It is a special characteristic of the coffee. All the work is hard at the farm, and one has to pay the workers. The prices are like this, low, and we have to pay the workers. When we receive low prices we have to reduce the salary of the workers. ..We pay the workers 40-50 Quetzals (USD 5.3 – 6.6 per day). We try to help the workers a bit because the work is really hard, and they have families, they are poor as well 70(focus group, Fairtrade producers, Guatemala).

Thus, the respondents highlight the situation as problematic, with uncertainty in the coffee market and unstable prices. The current price for coffee is quite good, but producers are used to the unstable prices and thus expect prices to vary. However, the quote above illustrates the importance of growing coffee for producers. Furthermore, it is important for them to receive a good price for their coffee in order to provide the basic needs for their families and to pay a decent price to the workers. The minimum wage in Guatemala is 44.58 Quetzals (USD 5.94), which is in the range of what farmers pay their workers. However, according to the Report on Human Rights Practices 2007

69 Coffee is a brotherly consume.

70 ‘Pues, de todo manera, el problema de café es como el precio de café son inestable. Un año se sube otro año se baje. Hay otro problema tambien, que cuando el precio de café sube mucho, todo sube; fertilizante, mano de obra, granos básicos, todo. Y de repente, el precio de café se baja, y todo de demanda baja, pero todo queda caro. Es un cárstica especial de café’ Todas los cosas son duro en el campo, y una tiene que pagar los trabajadores. Los precios vienen así, como bajo, y nosotros tenemos que pagar los trabajadores. Quando tenemos precios más bajo tenemos que miniar los salarios de los trabajadores. …40-50 Quetzales pagamos los cortadores. Pero tratamos de ayuda un poco los trabajadores porque el trabajo es muy duro, y ellos tienen su familia, son pobres también’. .. (Member of first level cooperative board).

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‘The minimum wage is not providing a decent standard of living for a worker and his family’ (Country Report on Human Rights Practices 2007, 2008).

In the quote ‘café es el consume hermano’, it is highlighted that coffee is a social production system. However, in order for the farmers to act out according to their social obligations, such as paying the workers a decent wage as highlighted above, the farmers rely on a decent price for their coffee. According to one producer; ‘mentally, coffee is our life’71. Thus, the respondents define themselves as coffee farmers, where many of them have inherited the land through generations. Coffee is a social and cultural commodity, very important to the farmers.

When I asked the producers represented at first level cooperative in Guatemala, why they started with the certifications, a common perception was as highlighted below;

‘Since we already have coffee, we want to look for ways to improve, to sell more in order to improve our economic resources. If there is no market, or if there is no business, there is no sale72’(focus group, Fairtrade producers, Guatemala).

‘Every day the situation becomes more difficult, right. But we have been told that certified coffee will always be better. But FLO is only operated through Fedecocagua. But similarly, Fedecocagua demand a good quality coffee’ 73(focus group, Fairtrade producers, Guatemala).

The respondents in Guatemala define their situation as difficult where coffee prices and market access are the key determinants for enhancing their economic resources. The response signifies that they have been told that the certifications will bring benefits, therefore they believe in it. They highlight that according to Anacafe74, all coffee have to be certified in order to find a buyer for the product. Hence, they are responding to an ethical or certified demand from consumers.

71 ‘Mentalmente viven nosotros solo por café’

72 ‘Como tenemos café, queremos ver como mejoramos para vender más para obtener nuestros recursos económicas. No hay mercado, no hay negocio, no se venden.’

73 …’Porque cada día el situación es más difícil verdad. Pero hemos dicho que el café certificado siempre va a estar mejor. Pero FLO es solamente lo que trabajan Fedecocagua. Pero es la misma de que Fedecocagua nos exige de hacer un buen café’.

74 The national Coffee Association in Guatemala.

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The farmers in the area had different certifications of their coffee. When I asked about their perception of Fairtrade, or FLO, the producers highlighted similar views as the quotes below, highlighted from two separate cooperative focus groups;

‘We have Utz (Certify) and Starbucks (CAFE practices), they are the certifications. We sell to Fedecocagua and Fedecocagua sell to a fair market’75.

…’well, it is Fedecocagua that exports the coffee, and sell to the fair market. The (our) cooperative, the associates deliver (coffee) here in the cooperative. We sell to Fedecocagua, and Fedecocagua distribute to the consumers’76.

By saying this, the farmers highlight that Fairtrade is not a certification, it is a fair market. When we collectively discussed certifications, the farmers referred to other certifications they had, such as Utz Certify, Rainforest Alliance and Starbucks CAFÉ practices. Fairtrade, on the other hand, is not a direct choice from the producers or the first level cooperative. Fairtrade is managed through the second level cooperative, and all producers sell their coffee to their local/first level cooperative which sells to Fedecocagua. Therefore, discussing Fairtrade, producers usually referred to the Fair market. This is not just a matter of language; one may just as well say ‘comercio justo77’ as ‘el Mercado justo78’. Furthermore, FLO Central America, the providers of Fairtrade certifications, uses the term ‘Fairtrade’ or ‘comercio justo’. The use of the term ‘fair market’ is directly a result of the producer’s experience. Fedecocagua is the exporting cooperative, thus when Fedecocagua is the certified Fairtrade cooperative, the producers perceive Fairtrade as a fair market. In Guatemala in particular, the first level cooperatives felt separated from Fairtrade, the other certifications which had more standards in production they also had more knowledge about. Furthermore, the second level cooperative in Guatemala does not differentiate between a conventional coffee and a Fairtrade coffee when they buy it from the producer. This is evident due to the fact that

75 Tenemos Utz y Starbucks, son las certificaciones. Nosotros vendemos por Fedecocagua que venden por una Mercado Justo75. (Cooperativa Nuestro Futuro)

76 ‘’…bueno, Fedecocagua es que exportan el café, y vende a mercado justo. La cooperativa pues, los socios entrega aquí en la cooperativa. Nos vendemos a Fedecocagua, Fedecocagua distribuye a los consumidores76 (Cooperativa La Todosanteria).

77 Fair trade

78 Fair market

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firstly, all producers are certified Fairtrade, which is not the case for the other certifications. Secondly, there have not been any specified differences in price. Thirdly, Fairtrade coffee is not separated from conventional coffee at the processing plant, or the miller, where all coffee exported by Fedecocagua is processed. This is further not the case for other certifications where Fedecocagua have one processing plant for conventional coffee and one processing plant for certified coffee.

Therefore, one can argue that direct certified coffees, such as Utz Certify, Starbucks and Rainforest Alliance, do hold attributes directly in the production. The attributes are due to a differentiation of product, not price79. The general narrative of Fairtrade by the producers in Guatemala is Fairtrade as a fair market, not a certification. One can therefore argue that the production site of Fairtrade coffee is at the second level cooperative, where the buyers distinguish and demand Fairtrade coffee.

However, if the certified product is differentiated according to product, one should also find a difference in exchange value. When I asked the producers of the difference in economic exchange value, they responded in the following manner;

…’ we started three years ago with the certifications. With FLO more years, but Utz and Starbucks are the certifications. We are still waiting for something (benefits) in return; if it does not come we’ll see what we will do. We have to learn because we do not have much knowledge of this. One have to ask to learn... Well, this (FLO) is another thing that confuses us. It’s not clear; we don’t know the benefit that the cooperative receives. It goes directly through Fedecocagua, they have not told us anything apart from this price of coffee80’ (focus group, Fairtrade producers, Guatemala).

79 According to Kopytoff (1986) it is possible to trace attributes of the commodity where the product is distinguished as differentiated.

80…’iniciamos desde tres años con las certificaciones. Con FLO más años, Utz y Starbucks son las certificaciones. Estamos esperando de que se viene algo (beneficio), si no, vamos a ver de qué vamos a hacer. Porque tenemos que aprender, no sabemos muy bien. Una tiene que preguntar para aprender… ..Pues, eso (FLO) es otra cosa que estamos confusos. No es claro, no seamos el impacto que se vengan directamente a la cooperativa. Se venga directamente a través de Fedecocagua, entonces, no han dicho alguna aparte de ese precio de café80.

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‘Well, I cannot say this (that there is a difference in price). Because to say, the price we sell for; we pick up the telephone to sell the coffee the day it is sold. They say that today (the price) is high, and one sells it’ 81(focus group, Fairtrade producers, Guatemala).

The producers and representatives of first level cooperatives often expressed a sense of hope that they would receive a difference in exchange value. Essentially, this was the reason that they initiated the certifications. However, they are still waiting for economic benefits. They initiated the certifications in the spirit of receiving a better price and improve conditions, though they are still waiting for the economic incentives from the certifications.

Furthermore, the quote above highlight that Fairtrade is separated from the other certifications. This is further highlighted below, where producers told me they had sent a letter requesting information;

‘We sent a letter as well, where we demanded explications of why we they did not give us a surcharge. They did not respond. This was for CAFÉ practices and Utz. We did not reclaim to FLO because this started many years ago. In reality we do not understand this, well, I don’t understand really what this FLO is. I think that FLO works well, it is good what they do, but here - , in theory - , well, in practice it is nothing’ 82(focus group, Fairtrade producers, Guatemala).

Accordingly, the producers have requested and would like more information concerning the certifications. However, FLO is not understood as a certification in which they have something to claim. Therefore, Fairtrade has been left out in the quest of information. Fairtrade, or FLO83, is not part of the discussion of the certifications. FLO is managed through Fedecocagua and the farmers feel separated from FLO. They do not understand

81 Pues, yo no sabría de decir bien (que hay una diferencia en precio por los certificaciones), porque sea, el precio de nosotros vendemos, el día de venden damos el teléfono para vender el café. Dicen que el día de hoy (el precio) es tanto, y se venden.

82 Enviamos una carta también, una carta donde exigíamos explicar, de que porque no damos un sobreprecio. Y no han respuesta. Eso es lo que es CAFÉ practices y Utz. Ya lo que es FLO no reclamado de nada porque eso ha venido desde muchos años. No entendemos en realmente, bueno, yo no entiendo realmente lo que esta FLO. Lo que parece yo es que FLO trabaja bien, es bien lo que hacen, pero aquí, - Pues en la teoría pues - En práctica no es nada.

83 The term FLO (Fair trade labeling International) is used in order to refer to the fair trade system.

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it, nor do they receive any direct benefits. In addition, they were requesting more information; some more knowledge of the system and a higher price floor. A few of the cooperative managers were interested in the fair market during discussions. They calculated on the price floor and the social premium. They concluded that the fair price was really low; the prevailing price in the conventional market was USD 1.36, whereas the fair price is USD 1.21. ‘FLO is really low,… here we are waiting for a price more fair, right. Against what are they setting the price84?’ Out of the given price the cooperatives subtract 15 percent which is the fee paid to Fedecocagua for transportation and security. However, the fee is 30 percent for a certified coffee, which adds to the costs of certified coffee. But it also highlights the separation of certified coffee from Fairtrade coffee, where the fee for Fairtrade is only 15 percent. Furthermore, the certified coffee is sold in sacks with different colures, in order for easy separation at the processing station. Fairtrade coffee is not in the differentiated sacs. However, if the social premium would be given directly to first level cooperatives they would have been able to see some benefits, perhaps invest in social causes and appreciate the fair market system.

However, do the producers feel content about the certifications and about Fairtrade in other terms, not only economic? A central inquire includes; ¿Se vale la pena85? This is a term commonly used in Central America, but due to its directness it was difficult for the respondents to answer.

Well, the certifications (Utz and Starbucks) have good effects on the farms, for the environment, we use good farming practices. It is good practices, and we benefit from it. But economical, we have not received any economic benefits. Not as of yet. We are in the second year of Utz and Starbucks, but we have not received any economical incentives’ 86(focus group, Fairtrade producers, Guatemala).

84 FLO se queda abajo. … Pero ahí nos esperamos un precio más justo, verdad. ¿Sobre qué se marquen el precio?

85 Is it worth it?

86 Pues, las certificaciones (Utz y Starbucks), en el campo si tienen un bueno efecto, por el medio ambiente, utilizamos diferentes buenas prácticas agrícolas. Son buenas cosas, nos beneficiados bueno. Pero económico, no ha ido un beneficio económico. Hasta ahora, no. Estamos en la segunda año con Utz y Starbucks, pero no ha ido un incentivo económico.

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On one hand, the key responses, as also highlighted above, to this phrase were usually presented chronologically. Firstly, ‘yes, well, I think it is worth it’. Secondly, ‘the certifications are worth it because we are learning to take care of the environment’. Thirdly, in economic terms the certifications are not worth it. The certifications are recognized as receiving the same price as for the conventional coffee and include more work. On the other hand, it is important to highlight that these responses points at the certifications, not Fairtrade. Fairtrade is not really understood, they do not feel any requirements nor do they experience any direct benefits. However, the respondents mention that they have been told certifications are the future. They give the impression that they are scared of missing out, and that certified coffee is what the current consumers are demanding.

The lack of knowledge regarding FLO is present for most producers in this research. However, it is important not to draw any immediate conclusions. Responding to the relation they had to Fedecocagua, most producers highlighted the following;

‘Fedecocagua is a lot better than the people that only would like to make profit. Currently, Fedecocagua gives us a better price. We can say that we receive 30-35 Quetzales above the (New York) Stock Exchange (NOK 21.3-24.8 per quintal/100 pounds of coffee pergmino)’87(focus group, Fairtrade producers, Guatemala).

Thus, there are indirect benefits to the producers, such as an overall better price and access to markets through Fedecocagua. The producers feel content and appreciative about working with Fedecocagua. Indeed, the coffee from Guatemala usually fetches a good price and the producers are content about selling to Fedecocagua, highlighting that the overall price is better than the conventional price.

However, if there are economic benefits of the certifications and the fair market, there is a need to highlight them for the producer cooperatives. In one focus group, they

87 Fedecocagua es muchísimo mejor que este gente que solo quieren hacer dinero. En ese momento, Fedecocagua nos dan un mejor precio. Podemos decir que hemos tenido 30-35 Quetzales arriba la bolsa.

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collectively desired the following; ‘Put in your papers that the cooperatives would like to receive the social premium directly88’.

This was mentioned by all the focus groups carried out with first level cooperatives in Guatemala. However, according to one group;

‘Well, another issue is that, like when you come here to do research. Then, with all the negative responses that you might get, or at least here, other places you might find positive things. But all this that we are discussing might result in that they may remove the certifications from Fedecocagua. What we are saying is that they should continue with the certifications but perhaps manage it a bit different so that we receive something directly 89(focus group, Fairtrade producers, Guatemala).

The anticipated higher price as mentioned before makes the respondents somehow scared of telling the truth about the certifications and Fairtrade. It is a certain scare of missing out, of losing the certifications or of losing the FLO market. Thus the certifications and FLO gives them a certain hope. They want to continue with the certifications, but they would like to see some direct economic benefits.

The marketing manager of Fedeocagua explained how they used the economic benefits from Fairtrade and the social premium. He highlights that this is used to improve the quality of the coffee or to be able to compete with conventional prices from coyotes where money laundering from drugs or other dirty business is becoming a problem of offering high prices for coffee;

‘Until now, the numbers have been red. In order to improve the standards the producers need to do additional inventions, additional strengths, which is not necessarily compensated in the price. The only price which is compensated is Fairtrade. This is due to two fundamental reasons; One because it has a guaranteed minimum price. The other is because of the social premium, which today is ten (US cents) but used to be five. The social premium that we receive, we are not able to use for hospitals, schools or similar because it

88 ‘Ponga ahí que las cooperativas les gustaría que el premio social venga directamente’.

89 Pues, otra cosa es que, como Usted viene aquí para hacer investigaciones. Entonces, con todas las respuestas negativas que tal vez va a encontrar. O por lo menos aquí, en otros lugares podría encontrar cosas positivas. Pero todo eso lo que estamos hablando puede hacer que algún día los quitan estas certificaciones de Fedecocagua. Lo que decíamos es que siga la certificación pero mejor que se manejan un poco diferente para que vengan a nosotros algo directo.

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is not significant in macro terms. Then, two things happen; if the local speculation in Guatemala raises (We have speculation of that someone thinks that the price will increase due to washed money from drugs and other illegal business) we use these five or ten cents and give it to the producer in the price.. In order to compete… The other thing is that the social premium goes to the operation of Fedecocagua, and to improve our office and processing plant. …Every year we receive between USD 300 000 and 450 000 from the social premium. This volume goes to the operation of Fedecocagua, about USD 30 000, in addition to improve our office and processing plant/warehouse. This in order for our producer of 2 hectares, insignificant in production, can obtain high quality coffee and be able to present the coffee in the Scandinavian market, which is a market that recognizes high quality coffee. The coffees that we sell to Joh Johannson, Friele, Coop, have passed an exam regulated by quality. In addition we have a department of sustainability and technical assistants that work with producers in the fields’ 90(Personal interview, de Leon, marketing manager of Fedecocagua, Guatemala).

In short, the social premium is used for the operation of Fedecocagua, to improve the quality of the coffee through improved technology and technical assistance in the field and for competitive prices so that producers are not offered higher prices by the coyotes. It is not used for hospitals or schools because the premium is not significant enough. Fedecocagua have been criticized for their use of the social premium, including penalties such as suspended certifications;

90 … ‘Hasta ahora, los números están rojo. Porque para mejorar los estándares el productor tiene que hacer invenciones adicionales, es fuerzas adicionales, que no está compensando necesario en el precio. El único precio que esta compensado es fair trade. Por dos razones que esta fundamentales: Una porque tiene un precio mínimo garantizado, que ahora no está funcionada porque el precio mínimo esta menor de el mercado. La otra cosa es el premio social, que hoy es 10 que ante serán 5. El premio que recibimos no podemos utilizar en hospitales, escuelas o cosas de ese tipo, porque no es significante, digamos en términos macros90. Entonces, dos cosas pasan; si en Guatemala el especulación local sube (Tenemos especulación que alguien piense que el precio va a subir, dinero lavado de producto de drogas o cualquier otro negocio ilícito, que significa que dinero negro va a comercio normal, si café) tomamos ese 5 o 10 sentados, y damos al productor en el precio… para puede competir. ... La otra cosa que pasan es que el premio va a la operación de Fedecocagua y mejorar nuestra bodega y nuestro beneficio…’Año por año puede recibir entre US$ 300 000- 450 000 por premio social. Ese volumen va a la operación de de Fedecocagua de US$ 30 000. También hemos mejorada nuestro bodega y nuestro beneficio. Para que nuestro pequeño productor de 2 hectáreas, insignificante en la producción, puede obtener una muy alta calidad de café y puede presentar el café en el mercado Escandinavia, que es un mercado que conoce una muy buena calidad. ..Digamos, los cafés que nos vendemos a Joh Johannson, Friele, Coop, son pasada por un examen régulos por calidad. También tenemos el departamento de sostenibilidad y asistencia técnicas que están trabajando con los productores en el campo’ (de Leon, marketing manager of Fedecocagua, personal interview Dec. 2007).

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‘They criticize us, saying ‘You are large, you sell commercial and professional’. True, but if we do not have income we are not able to go to school, or to the doctor, nor to move. Then, sometimes people are confused, because they do not see any social causes; they see us as a business. I might be idealistic, You as well, but without income we are not able to change anything’91(Personal interview, de Leon, marketing manager Fedecocagua, Guatemala).

According to the marketing manager of Fedecocagua, technical improvement is the first step of development for the producers; therefore the social premium is used for this. This view is in direct opponent to the general perception of the farmers, who only wish to receive something directly. Their suggestions for improvement of the certifications and Fairtrade were the first level cooperative to receive the social premium directly.

Thus, to summarize the general narrative of Fairtrade by the producers it is important to highlight why they initiate the certifications. On one hand, the producers are told by the ANACAFE that the certifications will bring economic benefits and contribute to market access. On the other hand, Fairtrade is not a choice by the producers at this level because the FLO certification is initiated by Fedecocagua. Thus, the producers are disappointed they do not receive any economic benefits from the certifications where they require more work. However, the disappointment is not as large regarding Fairtrade. They do not see any direct benefits from Fairtrade, but they do not have any obligations in production, less knowledge, thus in general they do not understand Fairtrade more than a market termed fair, which Fedecocagua export to. They have knowledge of the minimum price and the social premium, but they do not understand it as the minimum price is as low as not to have any impact, even during times where low coffee prices dominates the coffee market. Furthermore, they do not understand the social premium because they cannot see it. However, indirectly, they are able to sell their coffee through Fedecocagua for better prices and are content about the relationship to Fedecocagua.

91 …nos critican porque dicen que; ’Ustedes son grandes, Ustedes se venden comerciales y muy profesionales’. Sí, pero no tenemos ingresos no podemos ir a la escuela o al médico, o mover. Entonces, alguna veces se confunden los personas, porque no se ver alguna cosas social, nos vemos comerciales. Yo puede hacer muy idealista, Usted también, creemos en el mundo, en la naturaleza, pero sin ingresos no podemos cambiar (de Leon, marketing manager of Fedecocagua, personal interview Dec. 2007)

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6.2 PRODUCER NARRATIVES OF FAIRTRADE COFFEE IN NICARAGUA

The story from the cooperative in Yali, Nicaragua must be read recalling the difference in organizational structure from the cooperative in Guatemala. The Fairtrade certified cooperative in Guatemala worked on a national scale, whereas the cooperative El Polo in Nicaragua works on a local scale, perhaps more the size of the first level cooperatives under Fedecocagua. The organizational structure is very different as the cooperative El Polo is directly certified Fairtrade as a first level cooperative with exporting license. Furthermore, the cooperative El Polo has been certified Fairtrade for only two years, whereas Fedecocagua has been certified Fairtrade for ten years.

When I asked the producers how they perceived their situation as producers of coffee, they often highlighted similar views as the following quote;

‘…with the current prices of coffee, if it was not devaluation here in Nicaragua, would have been excellent. But currently it (the coffee) has surpassed the beans, almost equal to 2 quintals of coffee. 1 quintal of beans is about the same as 2 quintals of coffee. Rice as well. The oil which we buy to fry the food for the workers and ourselves, is about double the price as well’ 92(personal interview, coffee producer, Nicaragua).

…’Currently, the life in Nicaragua is very hard. We depend on the coffee market, right. All living expenses are really high. …we hope the harvest this year will be good’93(personal interview, coffee producer, Nicaragua).

…’the price (of coffee) is not connected to the costs in Nicaragua… At least, last year the beans costed 1000 Cordobas, and the coffee have to cover all of this, the food – beans and rice. …it is difficult because it is very expensive, everything Then, we are looking for other methods in order to survive. Coffee is good to combine with livestock, potatoes and other products. It is good to cultivate because it is an area with shade. Yes, one has to adjust to

92 …’los precios que están ahorita del café, se no viene una desvaluación aquí en Nicaragua, podría ser excelente. Pero ahorita ha despajado (surpassed) el frijol, casi al mismo de 2 qq de café; 1 qq de frijol sale como 2 qq de café. Si, el arroz también. El aceite que compramos para freír la comida de los trabajadores y de nosotros, sale por el doble también

93 Ahora hablamos, la vida en Nicaragua es muy duro ahorita. Nosotros dependimos de mercado de café, verdad. Todos los costos de vida esta muy alto. ..este año esperamos que tenemos un mejor cosecha.

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the situation here. This is nice, but the prices will not be good because everything has increased in price’94(personal interview, coffee producer, Nicaragua).

All the producers highlighted the difficult situation they currently experienced. The coffee producers were extremely preoccupied with explaining the current situation of inflation and highlighting the importance of receiving a higher price for their coffee. Visiting the producers and living among them, I also experienced the difficult situation firsthand. The storm Felix destroyed the local harvest, and in addition inflation and increasing petrol prices pushed the prices through the roof. Vegetables were almost impossible to find and the village survived on corn and beans, or frijoles and tortillas. The price of rice, the remaining staple, was unaffordable.

‘You see, the beans are very expensive. The beans are about 1300 Córdoba. In addition, corn, rice, everything has increased almost 100 percent. It means that this year we are going to sell the coffee cheaper than last year. Cheaper because everything is more expensive such as food, labor, diesel, everything. One bag which was worth 5 Córdoba last year, we buy for 10 Córdoba this year. Everything was cheaper; 1 kg of beans was 400 Córdoba’s last year. The farm is expensive as well, and how much is the coffee worth in the end? After investments of cleaning, of foliating, of meals, of paying the cook, of food, it is nothing left95’(personal interview, coffee producer, Nicaragua).

This was the main concern of the producers. They claimed the current price of coffee to be good in relation to earlier years. However, in relation to the current situation with inflation, it was very difficult. According to the media, the inflation rate was the highest experienced in seven years. The two national newspapers that reached the village had different explanations for the causes of the inflation;

94 El precio no esta conectado los costos en Nicaragua. …Por lo menos el año pasado los frijoles cuesta 1000 Cordoba, y el café tiene que gastar todo eso, el comida – frijol y arroz. …Es difícil porque es tan caro, todo. …Entonces, estamos buscando otros medios para sobrevivir. Con el café es bien con ganadería, papas o otros productos. Es bueno para cultivar porque es un area con sombra. Ya uno se acostumbre ahí. Es bonito, pero si los precios no va a estar muy bien porque todo ha subido.

95 El frijol es caro, mire. El frijol sale como C 1300. También el maíz, el arroz, todo ha subido casi 100 porciento. Significa que este año vamos a vender el café más barato que el año pasado. SI, mas barato porque todo va más caro; el insumo, el mano de obra, diesel, si todo. Un saco que valía el año pasado 5 Córdobas, ahorita nos estamos comprando a 10 Córdobas. Todo fue más barato, un kilo frijoles valía 400 Córdobas. …Una finca esta costoso también, y cuanto sale al final un carga de café? Cuando hay invertido en limpias, en foliar, en comida, en pago de cocinera, en alimentos; no queda por nada.

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‘The Central Bank recognizes that inflation reaches its highest level in seven years. The inflation has accumulated in October this year up to 10.7 percent. Increases in the prices of basic foodstuffs and fuel are situations that will undoubtedly be paid by the consumer. The hurricane Felix and the rain which has plagued the country in recent weeks have been determining factors for inflation’ 96(Hoy Nacionales 13.11.2007).

The situation of inflation is an international trend related to the price of fuels on the world market and is confirmed where all of the continent's economies recorded increases in inflation rates. … Nicaragua is the country which recorded the highest inflation rate of the Central American region, followed by Honduras with 8.3 percent, Costa Rica with 7.65, Guatemala with 5.74. … Furthermore, this pressure is forcing an extension of the agricultural frontier in the world, where every day it requires more land to grow inputs for ethanol and biofuels97’ (La Prensa 13.11.2007).

The newspaper ‘Hoy Nacionales’ recognizes natural domestic causes of the inflation, whereas ‘La Prensa’ recognizes the inflation as an international trend related to the international increase of fuel prices and pressure for more land to grow ethanol and biofuels. To the rural producers, very politically interested, this was the main subject on the porch in the evenings; along with speculation of which price they could liquidate for their coffee. Would the coffee prices be high enough to supply their families with rice, beans, corn and oil for the next year, of what they did not grow themselves? More often than not the respondents would show great remorse for the seasonal workers that came with their families to pick coffee cherries during harvest. The expression which always came during questions of the pickers and their salary was ‘Pobrecitos’. It is an expression meaning you feel sorry for them. However, the ending of the word –citos, directly translated as small, means so much more than that. It means you feel sorry for

96 El Banco Central reconoce que inflación llego a su nivel más alto en siete años. La inflación acumulada hasta octubre de este año al 10.7 por ciento. Los aumentos en los precios de los alimentos básicos y del combustible son situaciones que sin lugar a dudas pagara el consumidor. El huracán Felix y las lluvias que han azotado al país en las últimas semanas han sido factores determinantes en el proceso inflacionario’ (Hoy Nacionales 13.11.2007).

97 La situación de la inflación es una tendencia internacional relacionada con el precio de los combustibles en el mercado mundial y afirmo que todas las economías del continente registran aumentos en los niveles de inflación. … Nicaragua es el país que registra en índice de inflación más alto de la región centroamericana, seguido por Honduras con 8.3 por ciento, Costa Rica con 7.65, Guatemala con 5.74. … Además, esta presión está obligando a una ampliación de la frontera agrícola en el mundo, ya que cada vez se requiere de más tierra para sembrar los insumos para etanol y biocombustibles (La Prensa 13.11.2007).

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the workers in a personal sympathizing matter, genuinely remorse. The producers were often expressing a hope of higher coffee prices so that they were able to pay the workers sufficient to survive. The increased food prices had hit the workers hard too, even harder as they did not own any land to grow food for themselves. At the moment of research the producers of coffee would normally pay the seasonal pickers 12 cordobas (USD 0.66) per ‘lata’, which is a measurement system referring to a certain size basket (the size of the basket varied from Nicaragua and Guatemala) with red coffee cherries, including one meal. A good picker would, during a long working day, usually fill three such baskets, depending on the coffee plant and the amount of mature cherries. Other respondents reported paying seasonal pickers 35 Córdoba a day (USD 1.94) including one meal and permanent workers 50 Córdoba (USD 2.7) per day including one meal. Total income from coffee was difficult to estimate, but around 30 000 Córdoba (USD 1666.66) annually for a farm producing 30 quintals, which is twice as much in terms of volume as the average farm in El polo. A further subtraction of costs was difficult to estimate for respondents. According to the Human Rights Report (Country Reports on Human Rights Practices 2007, 2008), there are no universal minimum wage in Nicaragua, but a minimum wage scale. In the agriculture sector this is 1 025 Córdoba (USD 55) a month. Thus, permanent workers receive within the minimum wage scale but not the seasonal workers. According to the Country Report on Human Rights Practices 2007 (2008), ‘the minimum wage is about 25 and 67 percent below estimation of basic urban family’s need’.

When I asked the farmers about Fairtrade, and if they perceived Fairtrade as a means of improving the current situation, they highlighted the following;

‘The fair market means a good price and focus on the environment. We have been working with this more or less five years. But we are hoping that maybe the politics of fair market will increase the price. In our country now, everything is very expensive’98(personal interview, coffee producer, Nicaragua).

’I am in agreement with the fair market, it is a good market. The difference to the conventional market is that they give us a bit more. But the problem we have here is

98 ‘El mercado justo significa un bueno precio y enfocado al medio ambiente. Tenemos más o menos cinco años trabajan con eso. Pero, esperamos que tal vez las políticas de comercio justo se suba. Porque aquí en nuestro país ahora, todos los cosas son carísimo’.

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perhaps the country we have. Our government, there are no incentives for the producers like in Costa Rica. The government is not preoccupied with this. In Costa Rica and Honduras it is different because they subsidize and have technical assistance’99

Thus, the producers say Fairtrade is good100. However, they do not claim any direct economic benefits from the fair market. By highlighting their situation and government policies it is easy to understand that they do not believe Fairtrade could be a viable instrument to improve the current situation. The unnoticeable difference in price is also evident where the conventional price has been equal to the Fairtrade price for as long as they have had the Fairtrade certification. In addition, as noted above, the producer above who claims five years of cooperation with Fairtrade, which in reality it is only two years. Furthermore, it is a small amount which is sold to the Fairtrade market. The producers seemed shy to express negative aspects of Fairtrade. They associated me (the interviewer) with the buyer from Sweden101, and I was many times relying on transportation, thus I was accompanied by the technical assistant. The quote below highlights the view of one producer without the presence of a technical assistant;

‘No, everything is the same price. I am seeing that in other departments they pay according to quality. They pay the excellence of coffee. Why don’ t we have quality, I say. And on the other hand, the fair price, the fairness for us is nothing. All the companies, the private companies, are paying the same price. Because with Fairtrade, the only fair they can do for us is that if the coffee (price) falls they will maintain it. But first the coffee (price) has to fall. Now I do not see any advantages for us. The cooperative receives assistance directly from Fairtrade, but we don’t receive assistance. A fair price for us, it has

99 Yo estoy en de acuerdo con mercado justo, es un buen Mercado. Porque la diferencia de mercado convencional es que nos andamos poco mas. El problema de nosotros es tal vez el país que nos tenemos. El gobierno de nosotros, no hay incentivos por los productores como en Costa Rica. El Gobierno no preocupe por estos cosas. En Costa Rica y Honduras, son diferente porque son subsidiado y tienen asistencia tecnica.

100 It is important to highlight that the research I was conducted was not understood by the farmers as objective. One of the main reason for this is that I came to know the cooperative through one of their main buyers from Sweden. Thus, for the members of the cooperative board it became important to highlight they were pleased with Fairtrade because the importer from Sweden is currently the main buyer of their Fairtrade coffee. However, for the rural producers I visited who had no relation to the cooperative board, this was less important as they had no knowledge of the consumer, less so the international market.

101 I was often told to say my Greetings to Philippe Barrecka, the representative from the coffee company Arvid Nordquist in Sweden.

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to depend on the cost of production. With the premium we have, it does not compensate for the cost per quintal of coffee’102(personal interview, coffee producer, Nicaragua).

Thus, the respondent quoted above was expressing his feeling towards the concept of Fairtrade. He strongly disagreed with the use of the term ‘Fair’ market, where he had experienced other buyers paying quality premiums on the coffee. Thus, he did not understand why selling to a fair market could be any fairer than other farmers which received a direct price incentive on their coffee due to good quality103. The private commercial company Exportadora Atlantic was able to confirm that there was no price difference between the Fairtrade price and the commercial price at time of research104, where the conventional price was above the Fairtrade price floor adding the social premium within105. All informants reported liquidation of prices based on New York prices. This is not peculiar as the cooperative only have been certified with FLO for two years, and during these two years the NY price has been far above the Fairtrade price. However, the difficulties experienced by the villagers highlight the low price floor operated by FLO. This is, as explained before, in adjustment where the price floor will increase by USD 0.05 by June 2008.

When discussing Fairtrade with producers who was not active participants in the cooperative, or who did not attend the annual assembles, the views as highlighted below from three different producers was a general view;

102 No, todo es el mismo precio. Estoy mirando que en otros departamentos le paguen por calidad, le pagan la excelencia de café. Porque no tenemos calidad, digo yo. Y por el otro lado, el precio justo, la justo para nosotros no hay nada. Porque todas las empresas, los comerciantes que son privados, están pagando el mismo precio. Porque por el comercio justo dice que lo único justo que puede hacer por nosotros es que cuando el café se caiga, se mantiene. Pero, primero tiene que caiga el café. Ahora no digo ninguna ventaja para nosotros. … La cooperativa esta reciben ayuda directamente de comercio justo, pero nosotros no recibimos ayuda. …Un precio justo para nosotros, hay que depender de los costos de producción. Con este premio que tenemos, no compensan los costos por quintal de café

103 Particularly interesting to note from the above quotation is how the producers distinct themselves from the cooperative. Currently, the manager of the cooperative received a new truck sponsored by FondeAgro with aid assistance from the Swedish aid agency. This created a sense of jealousy in the small community of Yali which further divided the gap between the cooperative leaders and the producers.

104 They confirmed the same price as the producers were able to liquidate at that point ‘ El precio son 1720 Córdoba la carga. O 860 Córdoba por quintal.’

105 Thus, it is plausible the Fairtrade price floor was calculated as a set price including social premium, not then following the conventional Price and adding the social Premium on top. The cooperative sold their Fairtrade coffee for USD 1.26 last year, which was the lowest price they received but equal to the price paid by Starbucks. A third quantity was sold at the specialty market for a higher price.

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‘Some say that this, the fair market, will raise the price a bit for the members, but no, who knows. We are not with this now, I do not think so. But this year I have not gone to the reunion because I do not hear what they talk about. That’s just how it is’106( personal interview, coffee producer, Nicaragua).

‘The fair market, at least if the coffee price decreases it is a price which is stable. And if the price increases they pay that price. But if it does not, they would pay the current price. That’s the fair market107’(personal interview, coffee producer, Nicaragua).

Social obligations, what? It is only the price in the fair market. Premium? The premium is this cap and this t-shirt. But what you are saying is that they will pay more? Hehe, it will not happen. I believe that the fair market is how you buy it over there, right?108’(personal interview, coffee producer, Nicaragua).

The quotes highlight how some farmers, situated further away geographically and with fewer resources, had close to no understanding of the fair market. The far distance and lack of resources made it particularly difficult to attend the annual meeting. The latter quote highlights an important aspect of the fair market. The fair market is how it is bought ‘over there’. The fair market is in the North, it is the Northern consumers who demands fairness, who are willing to pay for fairness. Therefore, they produce for the ‘fair market’; according to market demand.

When I asked about obligations in production, farmers usually responded in a similar manner as below;

‘There are requirements of things that we need to do. No child work, and many things that they require. And it is certain that we will do that. But there (with FLO), it is not an

106 ‘Alguna dice que este, mercado justo, va a subir un poco al socio, pero no, quién sabe. Ahora no estamos con eso, creo que no. Pero este año no he ido a la reunión porque no escuche que están hablando allí. Así es la cosa’.

107 ‘Mercado justo, por lo menos, si baje el café, hay un precio que está estable. Y si sube, pues, lo pagan el precio que esta, pero si no, siempre lo paga el mismo precio. Eso es el mercado justo’.

108 ¿Obligaciones sociales, como de qué? Solo es el precio en el mercado justo. ¿Premio? El premio es esta gordita y una camiseta. Pero que le va a decir, ¿qué les van a pagar más reales? He he, no le sale. ¿Lo que parece es mercado justo es como le compran allá verdad?

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obligation yet. I feel obliged to do it as a person, but it is not required of me109’ (personal interview, coffee producer, Nicaragua).

Obligations in production were unknown to the majority of producers. However, the cooperative managers viewed the system as promoting good agricultural practices. This was extended to the field in terms of technical assistance provided by the cooperative. In terms of direct environmental and social standards in production, the perception was to follow this where opportunities and resources were available. However, the producer quoted above highlights an important aspect which perhaps defines the situation for the farmers with one foot in subsistence farming and another foot in the international coffee market. Their main aim is not to increase profit, but rather to have enough income from coffee as to afford what they cannot grow themselves. Be able to afford cooking oil, rice and beans for their family, and be able to pay their workers enough money to survive.

The lack of knowledge and democratic representations are seen as a consequence of the low levels of education prevalent in the rural village. According to the manager of the cooperative;

‘We still have people that do not know how to read or write. FLO and all the certifications need registers. Then, we need to bring many registers to the farms. And the problem is that if they do not know how to read or write, we have difficulties when we bring these registers to the farms110’( personal interview, cooperative manager, Nicaragua).

The manager further explains the confusion according to the high levels of poverty and low levels of education in the area. Not all producers are interested in meeting at the assembly. For some, it includes taking a day off work, organizing transportation and then be present at a meeting where they may have difficulties to hear and understand the discussion. Some of the producers also acknowledged shyness as a reason for not attending or not asking questions regarding FLO and the social premium at the annually assembly.

109 ‘Si hay requisitos por cosas que tenemos que hacer. No trabajo de infantil, muchas cosas que les piden, pues. Y es cierto que vamos a hacer. Pero por ahí, no es una obligación ahorita. Me siente obligado hacerlo como persona, pero no es algo me obligue.’

110 ‘Tenemos todavía gente que no saben de leer ni escribir. Entonces, FLO y todas las certificaciones necesitan registros. Entonces, en la finca tenemos que llevar mucho registro. Y el problema es que si ellos no saben escribir sino leer, tenemos dificultas cuando lleva esta tipo de registro en la finca.‘

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When asking the manager of the cooperative about Fairtrade, he highlighted the following;

‘It is a practice very good and convenient for the producers. Well, for the producers, for the environment, for everyone, because it is a chain. But the problem we have here in this zone is the low level of education. We still have people that do not know how to read and write. In addition, currently, with the high costs of production, the minimum price is very low. They have to correct it regularly. If they do not, the future will not be sustainable111’(personal interview, manager El Polo, Nicaragua).

According to Martinez de la Cruz, the manager of the cooperative, the main problems with Fairtrade are the lack of demand; the lack of economic incentives for quality; the inflexible nature of the system regarding price and instance of selling in addition to the evolution of stricter obligations in production and the low minimum price. Furthermore, the many forms and registers that need to be filled out by producers are very complicated due to low levels of education and illiteracy. However, he is very satisfied with Fairtrade and the progression made by the cooperative in recent years112.

Thus, to summarize the general producer narrative of Fairtrade in Nicaragua, Fairtrade is insufficient to engage in the challenges that face the producers. The Fairtrade price floor is low and it does not correspond to the costs of production. Furthermore, they sell a low quantity of coffee through the Fairtrade channels, which is actually less important as there is no difference in price. The producers highlight the importance of Fairtrade mainly through market access. However, in general they are preoccupied with political challenges within their country. It is mainly upon their government to improve their situation, not a Fair market. They highlight the importance of stability through a minimum price by referencing to the coffee crisis, but these prices are seen as an exception to the rule. The current problem is the high food prices of which the coffee prices are not able to compensate. Though the fact that they had not seen any direct

111 ’Es una práctica muy bonita y muy conveniente para el mismo productor. Para los productores, para el medio ambiente, para todo el mundo, porque es una cadena. …Pero el problema que tenemos en esta zona es el bajo nivel de escolaridad. Tenemos todavía gente que no saben de leer ni escribir. …También ahorita, con la tan de costos de producción, el precio mínimo está muy bajo. Tiene que corregirlo regulatoriamente. Porque si no, en el futuro no va a hacer sostenible’.

112 As explained earlier, the progression made by El Polo is indirectly through fair trade, but directly financed through SIDA with technical assistance from FondeAgro.

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benefits due to the currently high ‘C’ price made discussing Fairtrade quite diffuse. However, they highlighted that a fair price for them needs to correlate o the costs of production, the current FLO price is not fair. It is by no means related to the current living expenses and costs of production.

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6.3 CONSUMER NARRATIVES OF FAIRTRADE

‘’Demand emerges as a function of a variety of social practices and classifications, rather than a mysterious emanation of human needs, a mechanical response to social manipulation (as in the model of the effects of advertising in our own society) or the narrowing down of a universal and voracious desire for objects to whatever happens to be available’’ (Appadurai, 1986:48).

Appadurai (1986) emphasize the importance of the consumer in the social biography of food, demand being socially regulated. Unfortunately, my analysis of consumer narratives relies on secondary data such as consumer analysis in Norway by Research International (2006), and Medborgerundersøkelsen113 (2001) (c.f. Strømsnes, 2005 and Terragni et al., 2006). In Medborgerundersøkelsen carried out in Norway in 2000, the archetypical ethical political consumer is well educated, usually female and young adult, living in cities. Additionally, youths and university students are frequent buyers of fair or ethical coffee. Political ethical consumption (PEC) is part of a society with a high standard of living, where primary needs are covered (Strømsnes, 2005). Therefore one can argue PEC is part of post-material values, (Terragni et al., 2006) limited to certain members of the society.

According to a quantitative market analysis of Norwegian consumption of Fairtrade products (Research International, 2006) there have been an increase in knowledge of Fairtrade products from 30 percent of the population in 2004 to 40 percent of population in 2006 (n = 1000). Furthermore, the percentage of population with knowledge of Fairtrade coffee who never buys the product has decreased from 36 percent to 11 percent. Around 17 percent of those who have knowledge of Fairtrade associates this with more equitable trade relations with producers in producing countries, whereas 5 percent associates Fairtrade as trade with developing countries (see also Table 5). The share of respondents who is familiar with the Fairtrade logo is 46 percent (n=1189). The most important reasons of Fairtrade buying behavior is a desire to support a good case (47 percent), a desire to support the producers (44%), causal (29 percent), due to good savor (19 percent), environmental considerations (12 percent) (n=467). However, 6 out of 10 respondents who did not buy Fairtrade coffee responded

113 Norsk Samfunnsvitenskapelige Datatjeneste’s medborgerundersøkelse, 2001

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it was not likely they would buy Fairtrade products in the future. The reason for this is not given in the analysis (Research International, 2006).

TABLE 5: CONSUMER CONFIDENCE

Agree Disagree Statements of consumer confidence (percentage of (percentage of total, total, n = 1186) n = 1186) Max Havelaar improves living conditions for poor 53 % 6 % producers in developing countries. Max Havelaar and Fairtrade makes international trade 48 % 7 % fairer When a product is labeled Max Havelaar I know that the 40 % 11 % producers benefit from the money. Max Havelaar is a trustworthy certification which 43 % 8 % guarantees Fairtrade. REFERENCE 10: RESEARCH INTERNATIONAL, 2006

According to the same analysis (see Table 5) more than half of the respondents agree that Fairtrade improves living standard for poor producers in developing countries, and close to half of respondents have confidence in that Fairtrade makes global trade fairer. The main motivation for buying behavior was to support a good case and to support the producers. The results further show that motivation of Fairtrade consumption is grounded in a connectedness to the poor. The Fairtrade product engenders a connection between Southern producers and Northern consumers. Thus, it reflects a desire for the consumers to be linked to the processes and effects of consumption on local communities. It is possible to identify a consumer culture based on social justice, where the Fairtrade label has received high credibility at the consumers. By consuming a fair coffee, more than fifty percent of the consumers are confident they improve living conditions in poor countries. Thus, the label ‘Fairtrade’ is identified with aid to the producers.

The complex network of actors promoting the Fairtrade network gives high credibility to the product. These actors are not regular marketing actors. In relation to Wilhite and Lutzenheiser (1998), advertisement is only one element which creates demand. Demand is also created by agencies, community structures, cultural system of meanings, habits

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and practices, and institutionalized professions. There was no demand of Fairtrade coffee within the producer countries of Guatemala and Nicaragua. Thus, the demand of Fairtrade coffee is constructed within consumer societies with a highly constructed consumer demand, situated geographically far away from production.

The communication strategy is based on a certain connectivity between the consumer and the producer, appealing to a certain relational ethic for the consumer (Bryant and Goodman, 2004), where the narratives play a key role. Goodman (2004) argues that by consuming Fairtrade one consume a narrative. The narratives the consumer connects with are stories of producers which are handpicked by the Fairtrade foundation. Highlighted above, the most influential medium of information about Fairtrade in Norway is the media (Research International, 2006). According to Lamb, director of the Fairtrade Foundation; …’the marketing methods …seek to realize the core objective of bringing the organized consumer closer together with disadvantaged, organized producers. Together, these techniques have made Fairtrade fashionable ’(Lamb, 2007:55). Thus, through various mediums of communication strategies, as explained in earlier sections, the consumer culture of Fairtrade coffee has been constructed. Furthermore, by building the Fairtrade mark around moral issues, it has created demand on a certain ‘feel good’ factor, where it is possible to use consumption in the reflexive project of the self as a person who is resisting the international forces of economic globalization.

..’On the basis of focus group research conducted by Dragon Brand Agency, ‘There are no barriers to the concept’. While many people have many questions about how Fairtrade works, practically no one ever disagrees with the fundamental proposition of a fair deal for poor producers. Both Dragon Brand Agency and repeated qualitative research have found that belief in the cause and the resulting emotional feel-good factor that consumers receive by purchasing a Fairtrade product is a key driver to grow the Fairtrade market … Focus group research by Research Works Limited found that the main motivation for buying Fairtrade was a willingness ‘to do my bit’ (Lamb, 2007:59)

Thus, consumer demand of Fairtrade coffee is influenced directly by the extensively marketing of Fairtrade. According to Bryant and Goodman (2004: 355, 356) the moral discourses are produced through narrative strategies on the labels. The Fairtrade network actors’ are functioning as go-betweens and are the main suppliers of information about the producers to the consumers (Whatmore and Thorne, 1996). Thus,

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in a network where ‘caring at a distance’ becomes the main motivation of buyer behavior, this is directly attributed the mediators who are the suppliers of the connection or connectivity (Whatmore and Thorne, 1996). This is also highlighted by Lyon, in her study of the Fairtrade market in the US (2006:455);

‘During the past 6 years, US Fairtrade advocates followed the lead of other consumer campaigns and advocacy groups and used the rhetoric of globalization as a symbolic resource (Cunningham, 1999:599). Fairtrade market advocates and non-profit organizers at Global Exchange and Transfer USA consciously framed (Keck and Sikkink, 1998) Fairtrade as a means to channel consumer anti-globalization sentiment into concrete action’ (cf Lyon, 2006:455).

Thus, marketing strategies have played a great role in defining the Fairtrade product, of which consumers are influenced. Thus, it is simplistic to claim the Fairtrade market as a direct result of political choices and consumer reflexivity. The narrative most Norwegian consumers identify with is the narrative of aid and development, which is an indirect attribute of the representation narrative as described above. However, it is important not to draw any conclusions out of the consumer behavior research presented here as it does not state the reason behind skepticism of Fairtrade, nor does the analysis discuss independent perceptions of Fairtrade114. According to other consumer studies of Fairtrade, the most important determination of Fairtrade buying behavior is the quality, not quantity, of Fairtrade information, and the overall attitude towards Fairtrade (De Pelsmacker and Janssen, 2007; De Pelsmacker et al., 2005). Thus, better and more credible information of Fairtrade stimulates buying behavior.

According to theory from Macintyre (1985); ’There is no such thing as ‘behavior’ to be identified prior to and independently of intentions, beliefs and setting. …And what would be utterly doomed to failure would be the project of a science, say political behavior, detached from a study of intentions, beliefs and settings (Macintyre, 1985:208, emphasis in original). Thus, in order to draw the narrative of Fairtrade consumption one needs to look at the intention of behavior. The above section on representation strategies has highlighted the diverging ideologies of the network incorporating Fairtrade, in which the

114 This is most likely due to the quantitative nature of the research. However, the reason for the chosen statements should be provided.

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consumers are motivated. Moreover, according to Jaffee (2007) the perception of the nature, goals and practice of Fairtrade differs in more than ideological terms; they reveal fundamentally different conceptions of alternative trade to the larger global market and to free trade policies (Jaffee, 2007). The diverging ideologies represent a challenge for the Fairtrade system, but also play a role in maintaining its inclusiveness. The Fairtrade market ideology works against the neo-liberal market simultaneously as it works in the neo-liberal market. This becomes an important factor where it becomes possible to use consumption in the reflexive project of the self and as protesting against the market.

Essentially Fairtrade is based within the ideology and logic of consumption as the basis of society. Consumption is central to the contemporary life-worlds and the creation of society (van Binsbergen, 2005). Lifestyle politics may contribute to an understanding of the reason behind such a buying behavior. Lifestyle politics reflect the social and cultural construction of consumption as the medium of influence. The Northern consumer chooses a Fairtrade product over a conventional product despite the fact that the Fairtrade product is more expensive. However, the price difference is also an important contributing factor of the validation of the label where the Northern consumer identifies the extra crown spent on a Fairtrade coffee as ‘aid’ to the producer (Hammer,personal interview, 21.02.2008).

Avoiding a discussion of identity (see Brubaker and Copper, 2000) it is more appropriate to discuss how the consumer identifies with the product. According to a study by De Ferran and Grunert (2005) of French Fairtrade consumers, the main consumption motives was a desire for equity between humans and in human relationships, secondly a desire for hedonism by the consumption of good products and thirdly, a wish to protect oneself and the environment (De Ferran and Grunert, 2005: 226). The analysis use means-ends approach, which focus on escalating results therefore avoiding pre-determined statements such as the former study presented on the fair trade market in Norway. Even though the results by no means can be externalized115, it is important to note that the desire for self-indulgence by consumption of Fairtrade products and a wish to protect oneself and the environment were results that differed from the Norwegian analysis. I will use the results of this independent study in order to

115 The analysis was carried out on French Fairtrade coffee purchasers (n=54), thus not to be externalized but important to note in terms of future studies of Fairtrade consumers in Norway.

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argue the intention of Fairtrade buying behavior. Thus, the following arguments will be based on Fairtrade consumption in relation to equity, hedonism and the wish to protect oneself and the environment.

Firstly, the wish by consumers to protect oneself and the environment is, according to Goodman (2004 b), attributed a turn by consumers away from industrial food provision towards quality. Such a quality turn includes the move to organic and Fairtrade practices, new premium quality food production, place based production, marketing initiatives and farmers markets (Goodman, 2004 b: 4). According to Goodman (2004 b), these developments are attributed episodic food ‘scares’, and enhance reflexivity by consumers (Guthman, 2003). ‘Mistrust of standardized foods produced by industrialized agriculture, and processed and distributed by highly concentrated, globalised agro- industrial corporations, it is suggested, has given added salience or weighing in consumer knowledge practices to transparency. …This is met by schemes to assure quality provenance and traceability’ (Goodman, 2004 b: 4, 5).

Thus, the argument of protection is attributed the mass production of food and the impact this has on local ecologies and ourselves. It is related to Fairtrade as many consumers relate Fairtrade to ecological and environmental products, as was evident in the study of Fairtrade consumers in Norway.

Secondly, the equity argument is highly constructed because it is, as argued above, directly an influence of the representation narratives. The Fairtrade network and the media are the main providers of information which motivate Fairtrade buying behavior (Fridell, 2007; Lyon, 2006). According to Fridell (2007), at the heart of the Fairtrade system is essentially a certain perception of consumer sovereignty and consumer power; the willingness to buy justice. Thus, in a sense, Fairtrade consumption creates a feeling of stepping out of the system (Fridell, 2007), based on the ideology of Fairtrade working in and against the market.

The argument of hedonism is related to consumption within the post-modern society. According to van Binsbergen (2005) consumption is a strategy used to delay the incomplete construction of meaning within the current society. Thus, Fairtrade may be

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seen in relation to the concept of ‘narcissism’116 (Fridell, 2007; Gould, 2003). According to Lasch (1979) against the feeling of narcissistic anxiety and loneliness, capitalism offers consumption as the cure. Thus, consumers accept Fairtrade as they have also accepted consumption, but the use value of Fairtrade to consumers seems to be strong. Voting with our trolley becomes central in a society where economic system is based on consumption. Gould (2003) highlight the new consumer demand, searching self- improvement with means of life-style centers, eating organic and ethical food and getting in touch with some inner self through practice of yoga among other117. This is related to Giddens (1991) work on late modernity, and the project of self reflexivity118. Thus, in relation to Fairtrade one may discuss demand rising out of a notion of a reflexive consumer, where consumption becomes a political act, or passive resistance. In discussing the reflexive consumer, the consumer necessarily have the choice to choose a Fairtrade product over a conventional product. This is in accordance of Giddens (1991) ‘lifestyle politics’ which is essentially a politics of choice. The reflexive project of the self (Giddens, 1991) is related to how consumption becomes a material extension of the self (Wilhite and Lutzenhiser, 1998). Consuming a Fairtrade product becomes part of the personal narrative of identifying the self as an ethical responsible person. Thus, it is only meaningful to discuss Fairtrade consumption within the reflexive project of the self by recognizing the importance of symbolic and sign value. Symbolic value is the value that a subject assigns to an object in relation to other subject. Hence, within the consumer culture, the symbolic value, or the social construction of value relative to other subjects, is indeed of very high importance when the consumer chooses a Fairtrade product. The

116 ’Operating within the context of conventional consumption patterns, many ethical consumers likely purchase Fairtrade goods in part for the same reasons that they or others purchase ‘unfair’ commodities produced by conventional corporations; to buffer up their own sense of self validation. Awareness of this psychological motivations lies at the heart of contemporary advertising strategies and is frequently depicted by corporate marketing experts as deriving from people’s allegedly ‘natural inclination towards selfishness’’ (Fridell, 2007:88, argument originally from Dawson, 2003).

117 ‘’Feeling powerless and anxiety-ridden, ethical consumers can turn toward purchasing Fairtrade goods on the market, both to somewhat appease their feelings of powerlessness and to construct their own self-identity as ‘ethical’ people. In essence, Fairtrade entails the commodification of social justice and allows consumers to channel their desire for a more just world into purchasing goods on the market to validate their own self- esteem’’ (Friell, 2007:89).

118 ‘Each of us not only ‘has’ but lives a biography reflexively organized in terms of flows of social and psychological information about possible ways of life. Modernity is a post-traditional order in which the question, ‘How should I live?’ has to be answered in day-to-day decisions about how to behave, what to wear or what to eat’ (Giddens, 1991:14).

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narrative of the self becomes important in relation to others (Macintyre, 1985). The sign value is the value of the object in relation to other objects, thus the sign value reflects the narrative of aid, which is one of the most important determinants of ethical buying behavior in Norway. The symbol and sign value is very high in relation to the Fairtrade product. These values do not necessarily reflect the typical exchange value of the product, but have interestingly been quantified by the Fairtrade network through various willingness-to-pay analyses of consumers. Thus, one have come up with the conclusion that the price need to be higher in that consumers need to feel they pay a certain aid, but it needs to be close enough to the conventional price as not to scare off potential consumers. Thus, the quantified symbolic and sign value set the stage for the fair price to the producers119.

Both Fridell (2007) and Gould (2003) highlight the magnitude of Fairtrade to the consumers. The discursive narrative of connectivity and aid provided by the broader Fairtrade network is essential for consumer demand (Whatmore and Thorne, 1997; Raynolds, 2000, Lyon, 2006; Goodman, 2004). Thus, it is significant not to neglect the value of Fairtrade to the consumer when discussing the impact of Fairtrade. As described above, the economic value of Fairtrade to the producer is modest, but the symbol and sign value highly increases the use value of the product. Perhaps Goodman (2004) indirectly argue for this value when he highlights the importance of only ‘polishing the surfaces’ of commodities for not to inhibit demand of ethical products120.

The consumer culture is important in understanding the impact of Fairtrade coffee. Coffee is of high importance to Norwegians with one of the world’s highest consumption per capita (Giovannucci and Koekoek, 2003). Simultaneously, the new consumer culture is valuing consumption of narratives and a sense of ‘doing the right thing’, where the consumption of Fairtrade coffee may be just as meaningful for the consumers as it is for the producers. Giddens (1991) argue the project of self-actualization, where the focal questions of existence become everyday praxis through ethical consumption. However, this is probably only possible through the existence of mediators. The narratives and

119 This is because the total income in the chain is reflected by the exchange value at initial point of sale, here related to retail. The minimum price must therefore stay close to conventional price due to the consumers’ willingness to pay for the product.

120 But how then, are we able to search for improvements of the system, when academics are supposed to ‘polish surfaces’?

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assumption regarding Fairtrade consumption need to be recognized in order for a comprehensive project of reflexivity and identification. According to Giddens (1991) people rely on expert knowledge (which in this sense referred to as imaginary) when we create, maintain and revise our biographical narratives. Our biographical narratives are the stories of who we are, our roles and lifestyles (Giddens, 1991).

Fairtrade have in many cases been studied as to lift this ‘veil’ of commodity fetishism, accordingly placing politics at consumer surface where the consumer is to act upon (Goodman and Cohen, 2004; Hudson and Hudson, 2003; Bryant and Goodman, 2004; Goodman, 2004; Moberg, 2005). However, the argument of lifting the ‘veil’ of commodities is continuing the production-centered approach (Goodman and Dupuis, 2002). Thus, if one argues Fairtrade as de-fetishizing the commodity one necessarily neglect the importance of marketing and the creation of demand. According to Baudrillard, it is rather consumption which creates classes. Thus, when the Fairtrade network obviously target educated people, universities and people involed in advocacy work of development and Fairtrade, one may see the creation of a class. By targeting certain segments in the society, the social construction of demand becomes obvious. Those who seek a narrative of themselves as reflexive, educated consumers will appreciate the product, in many cases perhaps feel obliged to the product. Thus, it seems that the Fairtrade network rather add a new fetish to the product. This may be seen as a moral fetish such as commodification of new realms, which are created through symbol and sign value of the product. Importantly, through Fairtrade consumption, the producer and consumers are connected. These two actors are perhaps the most passive actors in this chain. Through selective representations of producers and extensive marketing campaigns, the chain disappears. The Fairtrade network are not marketing agents, pushing certain buttons for consumer demand, they are knowledge providers. The roasters and importers are rarely mentioned, and they are passive in the network where the Fairtrade product has become a new brand. The producers are at the front at the network, without mentioning that currently the majority of certified cooperatives are second level cooperatives working at national levels. The two visible actors in the chain are the consumer and the producer, where the responsibility of unequal terms of trade and exploitation is left at the consumer.

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6.4 EXAMPLE: LIDL DISTRIBUTING FAIRTRADE COFFEE

The Fairtrade chain, presented above through commodity cultures, is by no means separated as such. I will bring in a short example of a large actor within the Fairtrade debate to highlight the interconnectedness of the chain. The large transnational discount store Lidl (The Schwarz Group) started selling Fairtrade products in 2006 (Network on European Worldshops, 2006). This is a highly controversial issue as Lidl have been criticized in regard to breaking basic labor rights. A Joint project between UNI Commerce (Union Network) and ver.di., the world’s largest independent trade union (German Service Sector Union ver.di., undated), investigated employment conditions and labor relations in Lidl (Union Network Commerce, Global Union, 2004). The investigation resulted in the publication of ‘The black book on Lidl’ (Harmann and Giese, 2005) where commerce unions have accused Lidl on serious labor rights violations and violations on trade union rights (Union Network Commerce, Global Union, 2007). This is particularly in Lidl’s home country Germany, where workers have been denied the right to organize in unions and a strong surveillance apparatus of employees have been used. Evidence of the same strategy has been found in other European countries, particularly in Eastern Europe. Norway is one of the exceptions as Lidl workers were able to get collective agreements (Union Network: Global Unions, 2007). The entrance of Fairtrade products in Lidl stores came shortly after the publication of the Black Book on Lidl, and was highly appreciated by FLO International, which is mainly concerned with the creation of new markets for Fairtrade products.

The director of Fairtrade (Max Havelaar) in Norway, commented by highlighting the system is open for everyone. If an actor requires selling Fairtrade products, the actor has to fulfill the criteria; to pay the price of the product. The director comments that it is better they are with ‘us’ then against ‘us’, ‘if we have to decide who is politically correct for the system it would be extremely complicated’ (Hammer, personal interview, 2008). This is quite controversial to the constructed meaning of Fairtrade, which indeed seems political. Apparently, the concept does not apply to the complete supply chain. However, as Lidl is a transnational company, Fairtrade in Germany encountered a different problem when Lidl requested Fairtrade products. The discount store demanded such a large quantity that Fairtrade Germany had to negotiate the price up in order for the consumer to understand the price difference of the Fairtrade product. Lidl was paying

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the price they should, but the large quantity they requested resulted in a minimum price difference of the products (Hammer, personal interview, 2008). According to Hammer ‘In order that the customer was to understand that it was a Fairtrade product, that one pays some more, Fairtrade Germany needed to discuss this with Lidl121’ (Hammer, personal interview, 2008).

Thus, the case highlights five difficulties with the system of Fairtrade. Firstly, the Fairtrade criteria are criteria of a minimum price, not a fair supply chain. Thus, the Fairtrade product does not imply fair trade criteria to all parts of the supply chain, only a minimum price and a social bonus to the producer cooperative which is certified. Secondly, the interest in buying large quantities follows market logic, thus pressing the prices down. The fair trade price floor acts as a strating point of bargaining price. But the Conventional coffee price is usually higher than the Fairtrade price floor, this becomes a bargaining issue related to volume. This leads to the fourth argument; large importers who control the majority of the coffee supply chain are interested in buying large quantities of coffee. Therefore, second level cooperatives distributing large quantities of Fairtrade coffee with good quality and trace records will supply the majority of the Fairtrade market. Smaller first level cooperatives are not able to compete and will eventually lose out. This leads to centralized effects of the Fairtrade system if not any special measures are put in place and. Fourthly, the price of Fairtrade coffee needs to be higher than conventional coffee in order for the consumer to believe the extra amount paid for the coffee reaches the producer. However, the price must not be as high as to scare off consumers. Thus the price does not reflect costs of production, but consumer willingness to pay. Fifthly, the producer and the consumer are in the foreground of the chain, which strengthen the alienation of the rest of the supply chain. This is highlighted by the strategy from Lidl, when beginning to distribute Fairtrade products after major criticism of unfair trade relations.

121 Hammer express she does not know how Fairtrade Germany and Lidl resolved the particular case. However, such an increase in price leads to increased profit somewhere in the supply chain and is a thought of consideration when discussing large actors’ impasse with Fairtrade certifications.

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7.0 CONCLUSION

In the conclusion I would like to draw attention to the objectives and the intent of my study. I wanted to interpret the value of Fairtrade coffee and how the value has been created. The Fairtrade network is growing, claiming a larger share of the market for products, in addition to Fairtrade towns, schools, universities and churches. However, is the Fairtrade network growing on behalf of the impact it has on producers or in accordance with the impact it has on producers? Does Fairtrade have the ability to challenge the exploitative manners of international trade? The study uses coffee as an example, which is also the product with most attention and largest market share within the network of Fairtrade products. Thus, by bringing the results of this study together, I argue that as the Fairtrade network has evolved and increased its share in the market, the value of Fairtrade coffee has increasingly been created, and remains, in consuming countries.

I have interpreted Fairtrade according to the production or construction of value. The production of Fairtrade coffee occurs in different stages, though what separates the Fairtrade coffee from a conventional coffee is the narrative of aid, produced through communication strategies. The economic value was explored through the global value chain. The global value chain recognized the income generated throughout the chain by each key actor. The economic organization of the network showed that the economic income from Fairtrade coffee is mainly made in producing countries. According to the GVC analysis I have carried out, about 90 percent of the total income of Fairtrade coffee remains in Norway, whereas the income remaining in producer country was around 10 percent. However, this was according to a supply chain involving the second level cooperative in Guatemala. According to my analysis there are clear differences in income and distribution of benefits between the cooperative in Nicaragua and in Guatemala. A larger percent of income remain in Guatemala (about 10 percent) compared to Nicaragua (about 6 percent), however, the producer income in the two countries are very close. Actually, the producer income in Nicaragua (3.5 percent) is slightly higher than the producer income in Guatemala (3.4 percent).

During the study, the direct economic premium to the producer cooperative from the Fairtrade network was NOK 0.038, or 3.8 øre per package of Fairtrade coffee sold. This has currently increased to NOK 0.073, or 7.3 øre. However, the direct income of the

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Fairtrade organization per package of Fairtrade coffee is NOK 0.45, or 45 øre, six times the amount received as bonus by the producer organization. Furthermore, the comparison highlighted is in terms of the producer organization; the producers themselves did not see any direct economic incentives from the Fairtrade network. The reader should keep these figures in mind while reading the remaining part of the conclusion.

The varieties of meaning invested in the network have been explored by investigating how the structures of narratives are constructed among producers, consumers and in marketing strategies. These I have labeled ‘’commodity cultures’’. From the producer culture one can draw lines between geographical similarities and differences. There are certain main similarities that require prominence in order to draw a common producer narrative. I will also draw parallels to similar results from empirical studies. Even though running the risk of presenting certain realities at production sites (Cook and Crang, 1996; Goodman, 2004), I see the importance of drawing a conclusion rather than ‘polishing the surfaces of commodities’ (Cook and Crang, 1996; Bryant and Goodman, 2003; Goodman, 2004). There cannot be any ‘myths’ because history(ies) are always myths, or subjective interpretations (Friedman, 1992).

The effect of professionalization of Fairtrade, or the growth of Fairtrade within market logic, is central in comparing the two Fairtrade certified cooperatives. The centralized effects of Fairtrade becomes clear where some cooperatives have been highly successful selling the majority of their coffee through the Fairtrade market and smaller cooperatives, most in need, are losing out. According to Smith (2007:90) ’The unevenness of impact is not intentional but result from the way the Fairtrade market works. Fairtrade only certifies producing cooperatives and purchasing companies122, and leave producers and purchasers to contact one another’. Thus, through market logic, and as a response to increased quantity demanded, more experienced and larger producer cooperatives seem to dominate the Fairtrade market. This is due to effective communication strategies, experienced Fairtrade producers, track records through websites or other vendors, established record of consistent delivery and high quality products. The result is highly efficient second level cooperatives distributing Fairtrade coffee through importing

122 According to Ragnhild Hammer fair trade do not certify purchasing companies.

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agents. However, according to Fridell (2007) this has been rather one of the barriers to enter the Fairtrade market instead of a result of the Fairtrade market. However, it may be further strengthened through the Fairtrade market, where the social premium is used to increase competitiveness both in the conventional market and in the Fairtrade market. Thus, those first level cooperatives that do not have the capacity to organize themselves within consortiums of national level cooperatives will be weakened in this relation.

The centralized benefits are evident by looking at the market of Fairtrade coffee in Norway, where 85 percent of the Fairtrade certified coffee originates from effective second level cooperative, a majority from the cooperative Fedecocagua in Guatemala. The key to the success of Fedecocagua is, according to the marketing manager de Leon, the institutional capacity and structure of Fedecocagua. It resembles a professional company in structure, and the producers usually refer to it as the federation. Fedecocagua is headed by Ulrich Garner from Switzerland, have a highly professional institutional structure and is experienced in dealing with international markets. Fedecocagua sell almost 40 percent of their production under Fairtrade, limited only by consumer demand. They also hold certifications such as Utz Certify, Rainforest Alliance, organic certification, the program of Starbucks CAFÉ practices and 4C in addition to smaller private initiatives such as Coop’s café futuro. About 75 percent of total production is under these other certifications whereas 100 percent is Fairtrade.

The structure of Fedecocagua, the view of the certifications and the use of the benefits draws a narrative culture of professionalization123 of certifications as a niche market. Similar finding are highlighted by Smith (2007) and Fridell (2007). The former in her study of the cooperative COOPABUENA under the consortium of cooperatives named COOCAFE in Costa Rica, and the latter in his study of UCIRI in Mexico, the co-founder of the Fairtrade network. Smiths’ (2007) findings show the failure of Fairtrade to deliver the promised benefits for the producers and the increasing demand of the Fairtrade market, whereas Fridell (2007:220) highlighting the success of UCIRI with Fairtrade, acknowledging the importance of already highly developed institutional structure

123 According to Escobar (1988:430), the term professionalization refers to a set of techniques and disciplinary practices through which the generation, diffusion, and validation of knowledge are organized, managed, and controlled; in other words, the process by which a politics of truth is created and maintained (Escobar, 1988:430).

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before entering the Fairtrade network and ‘an international interlocutor’ for gaining access to the Fairtrade network and developing contact with Northern partners. Furthermore, according to Fridell (2007) UCIRI shows the greatest achievements that the Fairtrade network has thus far been able to attain, as well as the most significant limitations that the network faces (Fridell, 2007:221) The limitations are seen as market limitations, pressure for efficiency and productivity in a satisfied Fairtrade market where strong established cooperatives like UCIRI share the main benefits. In addition, the fair trade price floor is limited by market imperatives; although the price has increased income for its producers it has not been significant to combat general poverty. It is important to highlight the success of Fedecocagua and UCIRI, along with other consortiums of cooperatives such as COCLA in Peru. The consortiums of cooperatives have in common that they have professional management and are associated more as a firm than a small cooperative. They professionalize Fairtrade and other certifications, evident in the following example of Farmers Coffee. Large second level cooperatives such as Fedecocagua in Guatemala, COCLA in Peru, Huatusco in Mexico and APECAFEQ, Quincha, export certified Fairtrade coffee through an agent, A. van Weely in Holland. Collectively their coffee is present in the latest Fairtrade ‘mix’ called the ‘farmers’ coffee’ from Joh Johannson AS in Norway (Glavin, marketing manager Joh Johannson AS, personal telephone interview, 28.03.2007). Joh Johannson AS mail a recipe to the agent in Holland and receives a particular blend of Fairtrade certified coffee from different consortiums of cooperatives in different regions. The blend is roasted and packaged following Norwegian savor, the license fee is paid to Max Havelaar, and the coffee is readily distributed to retail packed with ethical responsibility. Thus, what one note is that; ’some producing cooperatives are big winners, selling the lion’s share of their coffee in the Fairtrade market, whereas others remain on the outside looking in, trying to break into this lucrative and promising market’’ (Smith, 2007:97).

In comparison, the cooperative El Polo in Nicaragua have established, through assistance from FondeAgro, direct contact with an importer; Arvid Nordquist in Sweden. The main concern of El Polo is the lack of demand. Whereas Fedecocagua in Guatemala exports 630 containers annually, El Polo exports seven containers through Fairtrade channels. Fedecocagua sell Fair trade coffee to many large importers, including in Norway; Friele AS, Joh Johannson AS, Den Gyldne Bønne AS, Pals AS and Coop Norway AS, whereas El Polo sells Fairtrade coffee to Arvid Nordquist in Sweden. In addition, El

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Polo sell coffee to Starbucks CAFÉ practices, about 40 percent they sell through the conventional market. According to Martinez de la Cruz, the manager of the cooperative, the main problem with Fairtrade is the lack of demand, the lack of economic incentives for quality, the inflexible nature of the system regarding price and instance of selling in addition to the evolution of stricter obligations in production and the low minimum price. However, he is very satisfied with Fairtrade and the progression made by the cooperative in recent years124.

According to marketing agents, Fairtrade makes international trade fairer through a certain aid to the producer, which is associated with development. It is crucial for the Fairtrade product to have a higher retail price in order for the consumer to believe the product brings aid to the producer (highlighted above in the example from Lidl). The impact of the aid is presented by selective producers’ stories, or certain ‘success stories’ by the Fairtrade network. This is highly a marketing strategy rather than the general perception of Fairtrade among producers. Fairtrade does not challenge international trade because, firstly, the potential social benefit of the Fairtrade system lies in the cooperatives ability to distribute benefits. Fairtrade does not directly benefit the producer, more the producer cooperative, or in many cases the national consortium of cooperatives. Drawing on empirical evidence, similar findings about the cooperatives’ central role in distributing social benefits have been reported from different producer impact studies (Milford, 2004; Lyon, 2007; Giovannucci and Ponte, 2005; Murray et al., 2006; Giovannucci and Ponte, 2005; Fisher, 2007; Smith, 2007; Slob, 2006). Secondly, the two case studies highlight market access as the key producer benefit, which have been reported from other studies (Lyon, 2006; Raynolds, 2002; Renard, 1999). This is further highlighted by farmers using the term ‘fair market’, contradicting FLO Central America, the main transporters of knowledge, who employs the concept ‘Fairtrade’125. Thirdly, due to inflation and high prices in both the study in Nicaragua and Guatemala, the Fairtrade price floor is insignificant. The Fairtrade price floor is inactive because the current conventional price of coffee is higher; producers are surprised of such a low ‘fair’ price which did not reflect the name. However, the fair price is more connected

124 As explained earlier, the progression made by El Polo is indirectly through fair trade, but directly financed through SIDA with technical assistance from FondeAgro.

125 The concept of a ‘fair market’ is also recognized in the study by Whatmore and Thorne (1996).

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with consumers than it is with producers. This was highlighted in the example from Lidl, the Fairtrade price is essentially restricted by market logic. The Fairtrade price necessarily needs to stay close to the conventional price in order to obtain a large enough demand for the product. The controversy of a fair price is acknowledged by other impact studies where Fairtrade is argued to only have short term financial gains during periods of really low conventional coffee prices (Raynolds et al., 2004; Giovannuci and Ponte, 2005, Killian et al., 2006; Zehner, 2002). Fourthly, the short term financial gains are not significant during coffee crises for achieving development objectives due to the little amount sold through Fairtrade channels (Ponte, 2002; Fisher, 2007; Smith, 2007; Slob, 2006; Bacon, 2005). Nevertheless, in accordance with most empirical research, Fairtrade create indirect benefits through increased institutional capacity of the cooperative. Some empirical evidence highlights direct producer benefits through higher prices at the farm gate (Giovannucci and Ponte, 2005; Lawson, 2004; Bacon, 2005; Slob, 2006; Raynolds et al., 2004).

According to market agents, Fairtrade works for trade justice. According to the presented data from the economic value chain, the power imbalance which is evident in conventional coffee trade still persists in the Fairtrade network. Thus, in line with empirical evidence and as a preliminary conclusion, Fairtrade does not challenge conventional trade where the basic problem reflect power conditions from importers and roasters (Hira and Ferrie, 2006; Lyon, 2006; Fisher, 2007; Smith, 2007; Zehner, 2002; Ponte, 2002). The power gap between producers in the South and Northern filiere actors (importers, roasters and retail) is particular evident from the impasse of large TNCs, marking the shift when Fairtrade went mainstream.

According to Starbucks; Starbucks and Fairtrade share the common goal ‘…to help ensure that farmers receive an equitable price for their coffee and strengthen their farms for the future’ (Starbucks homepage, undated). This is done as; …’Starbucks works with several organizations to make credit available to coffee growers, which enables them to postpone selling their crops until the price is favorable’ (Starbucks homepage, undated). Starbucks do not note for which particular partner the price is favorable. According to the manager of El Polo, the favorable partner becomes very clear; ‘I believe, for what concerns Starbucks, Starbucks always sends contracts when the New York ‘C’ price is at the ground, when the prices have fallen. When the New York ‘C’ price is high, Starbucks never

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sends contracts. This year, when the price has been this high they have not sent me a contract. Today the price is USD 127-128, when it was USD 140, I asked Atlantic to bring me the contracts so that we could affirm it. They could not bring them to me because the price was too high. It is the tricks of the market. They (Starbucks) are specialists on the market126’(la Cruz, manager of El Polo, personal interview, 2007, Nicaragua). The specialists in the market have the majority of power in the coffee market and receive the majority of income from the coffee market, in the conventional market as well as the Fairtrade market.

The Fairtrade network argues the low prices of coffee are the cause of producer’s poverty. Highlighted by Zehner (2002), low prices is the symptom of the imbalance of power in the value chain. The Fairtrade network is not able to combat the imbalance of power where it is positioned within the conventional market (Hira and Ferrie, 2006; Lyon, 2006; Fisher, 2007; Smith, 2007; Zehner, 2002; Ponte, 2002). Seemingly, there has been some confusion between the Fairtrade network and the Fairtrade movement as a reformist social movement campaigning against the imbalance of power in international trade. The evolution of the Fairtrade network from the Fairtrade movement and the different routes they have taken where both continues to exist seems to have produced differentiated perceptions and expectations for the two. The different positions not only creates confusion for the consumer, it also represent challenges as for evaluating success of the Fairtrade network and the aim of the movement as part of or distinguished from the network; whether Fairtrade should constitute an alternative to the market, a transformative alternative within the market, or a strategy to use the market to improve the lot of those it has long excluded (Jaffee, 2007:30). It is particularly difficult to distinguish these two when an NGO as influential as Oxfam is ideologically working in both areas promoting the network and the movement (Fridell, 2004) without separating the two by concepts. Consequently, the information communicated through the same label differs because the movement and the network are mistaken as one and the same.

126 …’pienso yo, de que lo está pasando con Starbucks es que Starbucks siempre manda contractos cuando la bolsa de Nueva York esta por el suelo. Cuando el precio están caída. Cuando la bolsa de Nueva York están por arriba, Starbucks nunca manda contractos. Este ano, cuando la bolsa está arriba, no me han mandado… … Hoy está como 127-128, cuando llega a 140, yo le dije a Atlantic, traerme un contracto de Starbucks para nos afírmanos. No, no me puede traerlo porque la bolsa esta tan alta. Entonces, son tricos de mercado. Son especialistas en mercadeos ellos.’’

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…’the Fairtrade movement is comprised of a set of groups which are linked through their membership associations-the Fairtrade Labeling Organizations International (FLO), the International Federation of Alternative Trade (IFAT), the Network of European Worldshops (NEWS!), and the European Fairtrade Association (EFTA)… together identified as the FINE network’’ (Raynolds et al., 2007:4).

According to Fridell (2004:421) these are the organizations working for the Fairtrade network. As outlined before, these are the ‘professionalization’ of Fairtrade, the actors whose main aim is to gain participation of conventional corporations and TNCs in the network and enhance managerial and marketing strategies common to mainstream corporations. Consequently one needs to divide between the network and the movement, where the former is a network consisting of many marketing agents promoting certain Fairtrade products, unable to challenge the power relations of international trade of coffee. The latter is a social movement with an aim of reformist strategy within the relations of international trade.

The Fairtrade movement has declined radically over the last few years, parallel to the growth of the Fairtrade network (Fridell, 2007). However, it is important not to draw any preliminary conclusions of impacts between the two. The Fairtrade movement has been shrinking as a reformist movement of reconstruction and limiting power of TNCs and powerful international institutions. One recall the aftermath of Seattle in shrink or sink the WTO, that future WTO negotiations are to be made ‘democratic, transparent and inclusive’ (Buckman, 2006, Barlow and Clarke, 2002). Furthermore, requirements of major overhauls of the WB and the IMF were made, of openness and accountability of the Bretton Woods institutions, not a silent whisper of drinking a certified coffee (Fridell, 2007). The movement calls for regulation and accountability of TNCs whereas the Fairtrade network embraces partnerships with TNCs. As explained earlier, the breakdown of the ICA had many causes, but one very important cause was lobbying from TNCs such as Procter & Gamble and Sara Lee. These large TNCs currently show growing support for Fairtrade coffee. Furthermore, Sara Lee owns 49 percent of Friele AS, one of the main coffee importer and roaster in Norway, and one of the main suppliers of Fairtrade coffee. The distinction between the movement and the network needs to be addressed in order to discuss the effectiveness of the two. Needless to say, the movement may still support the network but the network cannot claim the radical

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movement as it embraces partnerships with global financial corporations. Similarly explored by Mare (2007) ‘…the narrative of trade justice, which informs the fair trade movement, influences the practices of people involved in the Fair Trade partnership, leading to a diversity of individual Fair Trade stories’ (Mare, 2007:70). Challenging global market power is in the nature and the aim of the Fairtrade movement.

Importantly, one cannot think of the movement and the network as static concepts; they are both evolving and responding to demand and participation. The Fairtrade network has, as noted before, grown as a response to success measured as growing demand for their products. The number of coffee producers in certified cooperatives has increased rapidly, from 374 077 in 1999 to 684 077 in 2004 (Transfair USA 2006:4, cited in Smith, 2007:90). According to FLO-International and FLO-Cert; ‘FLO-CERT certifies products with a retail value of about 2 Billion € per year, representing close to 2000 clients in more than 70 countries around the Globe, empowering over 1 Million farmers and wage workers’ (FLO Cert-about us, 2008). …‘To ensure that producers comply with the standards, FLO-CERT works with a network of over 60 independent inspectors that regularly visit all producer organizations and report back to FLO-CERT’ (FLO- International, about us, 2008). According to Hammer, director of Max Havelaar Norway, it has been a challenge to respond to the growing demand for Fairtrade products and certifications127. However, it is somehow misleading to represent this challenge as a problem in past tense. Certainly it is demanding for the 60 inspectors to visit the 2000 clients or one million farmers and wage workers in more than 70 countries around the globe. The FLO organization has not responded to enquiry regarding this issue128.

According to the Fairtrade network, producers and consumers are brought closer together through Fairtrade; the consumers receive connectivity with the producers. Obviously, this is a symbolic notion, where consumers rarely go and visit producers and vice versa. The importance of the connectivity is in the North. The mediators bring the producers ‘home’, or close, through selective stories. The producers, on the other hand, are not given the same opportunity to stories of Northern consumers drinking their

127 … ‘Antall sertifisører øker hele tiden, i takt med økningen. Men det har vært litt vokseproblemer i organisasjonen, fordi organisasjonen har vokst så fort. Og så er det jo også dette med å få finansiering, for å holde tritt med veksten i etterspørsel. Det har vært en utfordring’ (Hammer, Personal interview 21.02.2007)

128 The author has requested information concerning the issue via electronic mail.

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excellent quality coffee giving an extra crown for more equitable trade, without assuming they would like such a narrative.

During fieldwork only few of the informants knew what Fairtrade was. Those who did, characterize it as a ‘mercado justo’, a fair market. Many informants shared the same view as Fairtrade is something which is bought ‘over there’, accordingly in consumer countries. Similar findings are also reported by Lyon (2007). Furthermore, during discussions with producers on the meaning of the Fairtrade label, all farmers communicated that they had good quality coffee due to their high altitude. Some mentioned improved methods of production, where only the few mentioned the consumer should think about the fairness issue. However, the general issue was quality and market access; that the consumer buy more of ‘our’ coffee because ‘we’ have a really good coffee. It was evident, however, that the first level cooperatives sought more information regarding Fairtrade, even though they did not in particular request information regarding the consumer.

Thus, a rather obvious finding needs clarification; the Fairtrade narratives created by the Fairtrade network serve a purpose for consumers. According to Gould (2003), an enthusiastic supporter of Fairtrade, expressing his personal account of Fairtrade consumption; ‘Having met in person producers like Mario, I wonder if they truly realize what they are doing for us in terms of joy and confirming our own humanity’ (Gould, 2003:). Goulds’ (2003) notion is supported by empirical research of Fairtrade consumption which highlights its importance in terms of hedonism (De Ferran and Grunert, 2005).

Even though producers were not given the experience of connectivity with consumer, they experienced closer contact with traders. Still, a clear distinction can be made from experiences of the cooperative Fedecocagua in Guatemala and the cooperative El Polo in Nicaragua. In Guatemala, the marketing general of Fedecocagua reported that representatives from Friele AS had visited producer farms. However, none of the first level producer cooperatives that I visited during fieldwork mentioned the connection to a Norwegian company129. In Nicaragua, the El Polo cooperative increased their closeness

129 Even though most producer cooperatives knew about Norway, which was connected to the fertilizer they buy. Most producer highlighted that Norway is where their very expensive fertilizer comes from, the one with a Viking ship on.

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to consumers when the manager participated in a trade mission to Scandinavia in 2005 among other representatives from cooperatives in Nicaragua. The trade mission was organized by AgroNegocios under FondeAgro to promote coffees of Nicaragua. A similar mission was carried out in 2006, organized by FondeAgro in cooperation with ‘Asociación de Cafés Especiales de Nicaragua130’, where delegations from Swedish and Icelandic companies visited producer cooperatives in Nicaragua, including the El Polo cooperative (Solorzano, 2007).

However, the closeness of producers to consumers in this regard cannot be seen as directly attributes to Fairtrade, more in cooperation with Fairtrade. It was sponsored and organized through FondeAgro, a government organization in Nicaragua funded by Swedish Aid, SIDA. On the other hand, it does show promising opportunities for cooperation between developing organizations and Fairtrade. Importantly, one should not take the desire of connectivity between producer and consumer as two dimensional. The producers did not in particular pursue connectivity to the consumer, rather more knowledge of the system and perhaps confirmation of their coffee being high quality.

Following the argument of connectivity is the claim of Fairtrade coffee as a de-fetishised product. By analyzing Fairtrade coffee from a production centered view, the demand for Fairtrade product is inherent in the capitalist system. Thus, the consumers would like to pay more for a product due to the argument of connectivity and visible social relations. The consumers are educated about their producers and trade becomes more as a relationship between people. In some instances, the environmental aspect have also been a reason, thus the consumer pays more for less damaging environmental practices. However, it is insufficient to argue Fairtrade consumption within a production centered view due to four main reasons. Firstly, consumer demand for Fairtrade products is not inherent within the society. Consumers are highly affected by advertisement and marketing. Secondly, the Fairtrade network is not educating the consumers, because the representations of farmer’s voices are not general representations, they are selective representations. Thirdly, the connectivity is created through communication strategies, and is only for the consumers, thus there are no direct relationships between the consumers and the producers. Fourthly, and most importantly, Fairtrade obscures the

130 The Association of Specialty Coffee in Nicaragua.

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power gap within the chain. Fair trade does not challenge the transfer of surplus to consuming countries; controversially Fairtrade hides the transfer of surplus to consuming countries by placing the responsibility of fair trade upon the consumer. Thus, within a production centered approach, Fairtrade coffee is not a de-fetishized product, even though it is constructed to resemblance a de-fetishized commodity.

Analyzing consumption through a production related approach includes looking at the social construction of demand. The role of public relations, or marketing, is central to the Fairtrade network. The existence of the marketing actors and the network of agents working to promote Fairtrade is what distinguish Fairtrade from capitalist commerce131. However, the purpose of these particular actors is the essence of understanding Fairtrade. According to actors involved in the Fairtrade network, and by winning the ‘Superbrand’ marketing competition, the main role of these actors has been to increase sale through marketing. Through research on consumer demand, the Fairtrade network has promoted Fairtrade through various different channels. In particular targeting educational institutions and educated people in the society, gaining power and influence through institutions such as Norad and other developing agencies. The purpose of the network is to promote a sense of closeness and awareness to consumers, in order to get them to buy the Fairtrade product.

The Fairtrade networks’ role can thus be seen as provider of narratives, and one may draw connection to other alternative geographies of food such as the organic and health food market. The narratives are representations of the farmers. Nevertheless, the view does not go unproblematic. If one accepts the view of the narratives created by the Fairtrade network as such, the view is compatible with producers’ narrative. However, because the narratives are produced separately it becomes necessary to agree with the commodification of new realms132. The commodification argument have been discussed as commodification of activism (Fisher, 2007), commodification of social and

131 ‘It is the modes of network strengthening that are analytically distinctive between the orderings of Fairtrade and capitalist commerce and that open up economic and political possibilities for configuring alternative geographies of food. …In this mode of ordering, stories are told of partnership, alliance, responsibility and fairness, but performed in very different ways to the neoliberal encoding of these terms. This is a mode of ordering concerned with the empowerment of the marginalized, dismissed, and overlooked voices, human or non human’ (Whatmore and Thorne, 1997:295).

132 Commodification has been argued within the production centered approach as a process of which something requires an exchange value (Fisher, 2007).

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environmental values (Byrne et al., 2006), commodification of morality (Fisher, 2007), commodification of differences (Bryant and Goodman, 2004; Goodman, 2004) and commodification of social justice (Fridell, 2007).

The narratives presented, or produced by the Fairtrade network, be it any re- commodification narrative, is necessarily positioned parallel to the narrative of the capitalist cost-minimizing, self interested neoclassical economic theory of the market (Whatmore and Thorne, 1997). The social agency of the Fairtrade network depends on the mobilization of a different narrative in order to exist and distinguish itself from a conventional product. Nevertheless, there is a substantial tension between the presented narratives and the narrative of market logic in which they operate, being incompatible in several manners.

Firstly, the low amount of coffee sold through Fairtrade channels and the required high quality is not necessarily compatible with the narrative accrued by the Fairtrade network. If the coffee is of low quality (reasons like rainfall, pests, fermentation) it will not be suitable for the Fairtrade contracts and farmers are forced to sell to the conventional market.

Secondly, if the conventional price is high, where for example the coffee harvest in Brazil is devastated by frost, or the coyotes offer high prices due to speculation and money laundering, farmers see limited benefits in selling to the cooperative. In particular they do not see direct economic benefits from selling to the fair market. In the latter case, which was evident in Guatemala, the social premium is spent by the cooperative in order to compete with coyotes, thus not in democratic decision by producers. Hence, the two narratives become incompatible.

Thirdly, the social premium is currently the key difference for the producer cooperative selling to a fair market. Indirectly, the social premium strengthens the institutional capacity of the cooperative in order to become more competitive. However, even for a large scale producer such as the cooperative in Guatemala, the social premium is not significant in macro terms for developing social causes. Producers highlighted that they would appreciate the fair market if the social premium went directly to the first level cooperative. However, as long as it is not required that the social premium goes directly

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to first level cooperatives, the economic incentive of Fairtrade is not directly visualized, and the narrative of connectivity becomes one dimensional.

Fourthly, the increase in the Fairtrade market highlights the ineffective nature of Fairtrade working within the market. As the demand of Fairtrade products is increasing, the pressure on certified cooperatives regarding quality, volume and reliability makes small first level cooperatives not able to compete against large consortiums of cooperatives. Thus, the large consortiums of cooperatives will supply the majority of the Fairtrade coffee which concentrates the benefits, and further strengthens large cooperatives and their competitiveness in the market.

Thus, a second preliminary conclusion is that Fairtrade works in the market, based on an ideology of working against the market, but as it grows it is limited by the market. The increase in Fairtrade products and the increased demand have occurred due to its placement within the market, but on behalf of the benefits to producers and will continue if not effective strategies are put in place. Thus, Fairtrade is limited by market imperatives.

Continuing from the above conclusion, Fairtrade is a product constructed within our current consumer society. Analyzing consumption through a consumption related approach includes looking at commodification as the ways in which things and social relations are affected by the market133 (i.e. are commodified) (van Binsbergen, 2005:11). Thus, the social construction of demand is not only attributed by advertisement and

133 Van Binsbergen (2005: 45, 46) defines a commodity as:

1. a domesticated object, i.e. a part of the physical world that has been defined, classi-fied, and appropriated by humans.

2. The domesticated object becomes a commodity, is commoditized, through ‘ex-change’,1 i.e. through a process of detachment, in space and time, from the immediacy and multiplex nature of the total network of social relations in which a person’s spe-cific form of access to a specific item in the surrounding world is generally embedded, – replacing such access by generalized exchangeability and convertibility. The latter become thinkable, once (beyond the horizon of the local community, its network of so-cial relations and its system of classification and evaluation) a much wider, in principle unbounded space of circulation is conceived. Here the object, released from the social context in which it was originally domesticated, and shedding its original meaning, becomes socially and culturally placeless, ready to be appropriated in po-tentially distant and unknown meta-local contexts, and to be measured there – not against the particularising evaluations of a historic local social network, but against the universalizing standards of a meta-local medium of exchange (of which money is the principal example), thus being endowed with a new meta-local meaning.

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marketing as such. According to Appadurai (1986: 31) demand is the economic expression of the political logic of consumption, drawing attention to consumerism as the major factor of economic growth. Then the political logic of consumption must be understood as a constructed concept. According to van Binsbergen (2005:18) consumption is a strategy to defer being confronted with the incomplete and unconvincing construction of meaning that is typical for global, mediatized society today. Accordingly, we use consumption to postpone being confronted with unconvincing constructions of meaning within the current society. We place meaning on things, or we construct meaning to things, as well as the things themselves become important for our identity creation. Thus, in relation to Fairtrade coffee, we use consumption as a means to obtain meaning within a materialistic society. We place moral meaning to a product and define our narrative as a moral person (Macintyre, 1986). In the end, it is clear that we are not challenging power relations in the chain which actually is the reason behind unethical trade relations. But we use consumption both as a means to incorporate moral issues into the narrative of ourselves and as the method we have to influence systems. Thus, consuming Fairtrade products become a passive protest within the political logic of consumption.

Fairtrade works within the market, building on a narrative of working against the market, and is limited by market imperatives as the network is growing. The Fairtrade network does not challenge unequal terms of trade, the network rather obscures these power inequalities through placing the responsibility upon consumers. The majority of the value (exchange value, sign value and symbolic value) of the Fairtrade product is produced and maintained within consuming countries. However, one should not neglect the benefits of consuming Fairtrade products for the consumer. The feel-good factor is very important, in addition to the educative work on trade channeled by the the Fairtrade network. However, it is important to understand the narratives created by the Fairtrade network and the purpose they serve. The narrative of Fairtrade of working in the market and against the market, is a narrative limited to imaginary. The narratives may perhaps be accredited as Max Havelaar itself; a novel. As the opening of Multati’s Max Havelaar;

‘’Jeg er Kaffemægler og bor I Amsterdam ved Lavrbær Kanal Nr. 37. Det er ikke min Vane at skrive Romaner eller sligt… Ikke blot har jeg aldrig skrevet noget, der smagte af roman..

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Jeg har i en lang Aarrække spurt mig selv, hva sligt skulde være godt for, og jeg undrer mig over den Frækhed, hvormed en Digter eller Romanskriver drister sig til at binde en noget paa Ærmet, som aldri er sket og for det meste aldrig kunde være sket134 (Multatuli (Douwes Dekker), 1901:1).

134 I am a coffee trader and live in Amsterdam, by Lavrbær canal No. 37. It is not my habit of writing novels or the like… never have I written anything which assimilates a novel, I have for years wondered what a novel would achieve, or the impudence in which a novel writer would bind something up his sleeves which never have happened and most likely never could happen.

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APPENDIX 1: CALCULATION OF ECONOMIC INCOME, PRODUCERS GUATEMALA

Cooperative Production 1. Price 2. price 3. price 4. price 5. price 6. Price to 7.Subtracting 8.Assumed 9. Assumed 10. Assumed 11. 2006/2007 (Quetzal/qq (Quetzal/qq (US$/lb NOK/lb NOK/kg producer interest of exporting exporting exporting First (qq pergamino) oro) oro) oro oro of toasted pre-finance price price price level pergamino) coffee NOK/kg coop NOK/kg Fedecocagua Fedecocagua Fedecocagua US/lb GBE NOK/kg GBE NOK/kg TCE

Cooperativa 6884,41 674,25 842,81 1,11 5,98 2,72 3,23 2,42 1,33 3,25 3,86 0,81 Nuestro Futuro

Cooperativa 10200 739 923,75 1,22 6,55 2,98 3,54 2,66 1,45 3,55 4,22 0,89 la Todosanteria

Cooperativa 1900 640 800,00 1,05 5,67 2,58 3,07 2,30 1,26 3,09 3,68 0,77 El Milagro

Cooperativa 21903 669 836,25 1,10 5,93 2,70 3,21 2,41 1,32 3,22 3,83 0,80 Adelante Chanmagua, CADECH R.L.

Cooperativa 1080 740 925,00 1,22 6,56 2,98 3,55 2,66 1,45 3,55 4,23 0,89 el Pensativo

Cooperativa 20000 710 887,50 1,17 6,29 2,86 3,40 2,55 1,39 3,41 4,06 0,85 integral agricola Acatenango R.L.

Average 10327,90 695,38 869,22 1,14 6,16 2,80 3,33 2,50 1,37 3,34 3,98 0,83

Method;

1. Price given by producer per quintal pergamino.

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2. The given price is multiplied by 1.25 in order to get the price per quintal green coffee (Where 1 qq green coffee is 1.25 qunital pergamino).

3. The price is calculated over to US dollars per pound, with an exchange rate for Guatemalan Quetzal of 7,6 (average for the period Nov.-Feb. 2006/2007 from el Banco de Guatemala) to the dollar; and where 1 quintal green coffee is 100 pounds of green coffee or 45kg) (Ex: (842.81/7,6)/100 = 1.11)

4. This is then converted to NOK per lb of green coffee with the exchange rate of 5.39 to the US dollar.

5. This is then converted to NOK per kg by dividing by 2.2 (1 kg = 2.2 pounds)

6. This is then multiplied by 1.19 in order to see the price paid to producer of the toasted coffee, all other variables held constant. Where 1.19 kg green coffee is 1 kg toasted coffee (Talbot, 1997, 2004).

7. Then, subtracting pre-finance, which is 25 percent (focus groups, managers of first level cooperatives, Guateamala, 2007).

8. The exporting price Fedecocagua is calculated from the income of 1st level cooperative in UDS/pound oro (step 3), adding 15 percent of transportation and insurance fee and social premium (USD 5 0.05), as stated by first level cooperative members. Not including costs of processing or domestic transportation (de Leon, marketing manager Fedecocagua, 2007).

9. The assumed exporting price Fedecocagua is converted from USD/pound to NOK/kg by multiplying with 5.39 and dividing by 2.2.

10. The assumed exporting price Fedecocagua is converted to toasted bean equivalents by multiplying by 1.19.

11. Income of first level cooperative is calculated as the 25 percent pre-finance paid by cooperative, the difference between step 6 and step 7.

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APPENDIX 2: CALCULATION OF PRODUCER INCOME, NICARAGUA

Name Total 1. Price 2. price 3. 4. 5. price 6. price 7. Price to 8. Subtracting production Cordoba pr. Cordoba por US/qq price NOK/lb green NOK/kg green producer of 1 interest of (2006/2007) 200 carga (1 quintal oro oro US/lb coffee coffee kg toasted pre-finance QQ oro qq) pergamino coffee NOK NOK/Kg TCE

Vidal Mendez Lumbi 160 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58

Alejandro Zeledon 150 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Vargas

Brihido Senteno 40 1600 2000 111,111 1,11 5,99 2,72 3,24 2,43 Zeledon

Davis Zeledon Vargas 15 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58

Raol Elias Rodriguez 150 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Zeledon

Elvir Rodriguez 200 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Zeledon

Freddy Adulfo Torrez 8,50 Zelaya

Guillermo Veralta 100 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Castro

Rosiendo Rodriguez 600 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Tinoco

Jose Rodolfo Ojuala 180 1850 2312,5 128,472 1,28 6,92 3,15 3,75 2,81 Donodon

Siro Manuel 50 1850 2312,5 128,472 1,28 6,92 3,15 3,75 2,81 Monetengro Cruz 165 Mantonio Duarte 80 1500 1875 104,167 1,04 5,61 2,55 3,04 2,28

Fuentes

Lucio Otillia Duarte 100 1600 2000 111,111 1,11 5,99 2,72 3,24 2,43

Agner Mendozo 20 1500 1875 104,167 1,04 5,61 2,55 3,04 2,28

Fernando de la Cruz 30 1800 2250 125,000 1,25 6,74 3,06 3,64 2,73 Airate Rivera

Buena Ventura Zeledon 300 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Varga

Benito Zeledon Arau 14 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58

Trinidad Medarlo 25 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58 Sentena Zeledon

Rafael Ridera Zeledeon 80 1700 2125 118,056 1,18 6,36 2,89 3,44 2,58

Hector Perez Vlandon 35 1730 2162,5 120,139 1,20 6,48 2,94 3,50 2,63

Pedro Paulo Perez 15 1600 2000 111,111 1,11 5,99 2,72 3,24 2,43 Melgara

Hilbert Antonio Perry 45 1800 2250 125,000 1,25 6,74 3,06 3,64 2,73 Hiron

Exportadora Atlantic 0,00

Erwin Horedon 20 1500 1875 104,167 1,04 5,61 2,55 3,04 2,28 Zeledon

Eric Zeledon 10 1450 1812,5 100,694 1,01 5,43 2,47 2,94 2,20

Average 101,1458333 1669,41 2091,30 116,184 1,16 6,26 2,85 3,25 2,54

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Method;

1. Price given by producer per quintal pergamino (parchment coffee).

2. Multiplied by 1.25 in order to get the price per quintal green coffee (Where 1 quintal green coffee is 1.25 quintal pergamino). Calculations excludes price of processing and transportation.

3. Then the price is calculated over to US dollars per quintal green coffee, with an exchange rate for Nicaraguan Córdoba of 18 (average for the period nov-feb 2006/2007 from el Banco Nacional de Nicaragua) to the dollar.

4. The figure is then calculated to pound by multiplying with 100 (where 1 quintal green coffee is 100 pounds of green coffee).

5. This is then converted to NOK per lb of green coffee with the exchange rate of 5.39 to the US dollar.

6. This is then converted to NOK per kg by dividing by 2.2 (1 kg = 2.2 pounds)

7. This is then multiplied by 1.19 in order to see the price paid to producer of the toasted coffee, all other variables held constant (1.19 kg green coffee is 1 kg toasted coffee)

8. Subsequently, subtracting interest of pre-finance, which is 25 percent, leaving the price paid to producer in TCE.

9. The producer difference in price is calculated out of an average price to cooperative for the agricultural cycle 2006/2007, given by Solorzano and the manager of the cooperative (see Agricultural Cycle 2006/2007), converted to TCE by multiplying with 1.19.

9. Producer coop difference in 10. Producer interest NOK/kg TCE 11. Producer coop total price NOK/kg toasted coffee income NOK/Kg TCE

0,332 0,86 4,439

10. The producer interest is the 25 % pre-finance interest, which becomes income of the cooperative.

11. The total income of the cooperative is calculated as adding step 9 and 10, in addition to total producer income.

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AGRICULTURAL CYCLE 2006/2007

From socios area Productividad produccion Produccion produccion QQ oro Venta en el Venta al Solorzano; manzana/productor total qq oro total qq oro exportable qq oro exportable mercado mercado productivity qq oro imperfecto acopiado volumen differenciado 2006/2007 qq oro

260 4,88 14,02 17793,41 14 946,46 2846,95 10471,7 9450 8475 (no acopiado 4474,70)

Producer coop Price and Esperanza Exportadora Arvid Average difference Difference Difference quantity Coffee Atlantic Nordquist price to in price in NOK/lb NOK/kg exported group S.A coop US/qq

1237,50 qq 5750 qq oro * US 2475 qq oro * oro * US 126/qq oro 126/qq oro 138/qq oro

170775 724500 311850 127,5693527 11,386 0,613693425 0,28

(Solorzano, 2007)

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APPENDIX 3: CALCULATION OF INCOME FROM FAIRTRADE COFFEE, UNIVERSITY OF LIFE SCIENCES

Value Chain UMB 1. Price 2. Price per liter coffee (one 3. Total price per kg coffee (1kg (pr cup ex. VAT) cup =2 dl) coffee=16liter coffee)

Price coffee 6 30 480

4. Direct price 5. Total income 6. value added (percent of total) (NOK/kg TCE) (NOK) Small cup of coffee

Siås cafeteria a 480 380 79,167 %

Max Havelaar license fee b 1,8 1,8 0,375 %

Friele AS c 100 90,95 18,948 %

2nd level cooperative d 7,25 3,92 0,817 %

1st level cooperative e 3,33 0,83 0,173 %

Producer f 2,5 2,5 0,521 %

1. Price per cup of coffee bought at Siås cafeteria (ex. VAT). 2. Price per liter of coffee, multiplied by 5 (where one cup is 2 dl.) 3. Total price per kg of coffee, multiplying price per liter by 16 (where 1 kg of coffee is 16 liters of coffee). Not including costs of processing. 4. The income is calculated from NOK/Kg. a. Total price, Siås cantine as described in previous steps (step 1-3). b. Max Havelaar license fee is NOK 1.8 per kg of toasted coffee sold (Hammer, manager of Max Havelaar, 2008). c. Friele AS direct output price is given as NOK 20 per 250 gr. (Edie, Friele AS sales consultant, personal telephone interview, 21.04.2008). d. Direct output price calculated out of average value received by 1st level cooperative, adding 15 percent transportation and insurance fee and the social premium. e. The price given by cooperative as stated by the cooperative management, following calculations as Appendix 1. f. The price given by cooperative as stated by the cooperative management, subtracting 25 percent pre-harvest finance.

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5. The total income is calculated in NOK TCE from direct difference in input and output price, all other factors held constant. a. The given total output price, subtracting cost of coffee (not including cost of processing). b. Max Havelaar license fee is NOK 1.8 per kg of toasted coffee sold (Hammer, manager of Max Havelaar, 2008). c. The difference between ‘wholesale price’ and import price, where import price is calculated as in Appendix 1, from the income given by producers. Converted to TCE by 1.19 (Where 1.19 pound of green coffee is equal to 1 pound of toasted coffee). d. The income generated by the second level cooperative is calculated as the 15 percent pre-harvest and security paid to second level cooperative by producers, adding the social premium (De Leon, marketing manager Fedecocagua, personal interview, 2007, Guatemala City). e. The income generated by first level cooperative is calculated as the given income from coffee (or the price sold), converted as in Appendix 1, subtracting total income of producers (focus group, Guatemala, 2007). f. The income generated by producers is calculated as given by the 1st level cooperative board, subtracting pre-harvest finance.

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APPENDIX 4: CALCULATION OF HYPOTHETICAL PRODUCER INCOME FROM ONE CAPPUCCINO

Actors 1. Average income 2. Average price NOK per 3. Price to producers 4. Percentage of total NOK/kg TCE gr. Toasted coffee cappuccino (7 gr. coffee) cost of cappuccino (32NOK)

Producers Nicaragua 2,54 0,00254 0,01778 0,056 %

Producers Guatemala 2,5 0,0025 0,0175 0,055 %

Total value producing country; 7,25 0,00725 0,05075 0,159 % Guatemala

Total value producing country; 4,48 0,00448 0,03136 0,098 % Nicaragua

1. The average income NOK/Kg TCE from coffee is calculated in Appendix I and Appendix II. 2. This is converted to average income per gram TCE by dividing by 1000. 3. This is multiplied by 7, where it takes 7 grams of coffee to produce one cappuccino (Barista Norway). 4. The percentage of total cost of cappuccino is calculated where the price of one cappuccino is NOK 32.

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APPENDIX 5: CALCULATION OF INCOME FROM FARMERS COFFEE

Joh Johannsson 1.Direct price 2. Green Bean 3. Value added 4. Value added Equivalent (NOK/Kg) NOK/kg TCE (percentage of total)

VAT a 14,1275 14,1275 19,091 % retail b 74 62,185 10,24 13,838 %

Max Havelaar Norway c 1,8 1,513 1,8 2,432 %

Joh Johannson AS d 63,76 53,580 54,71 73,932 %

Agent e n.a. #VERDI! #VERDI!

2nd level cooperative f 7,25 6,092 3,92 5,297 %

1st level cooperative g 3,33 2,798 0,83 1,122 %

Producer h 2,5 2,101 2,5 3,378 %

1. Direct price NOK/Kg TCE is calculated where a. Value added tax is calculated as 25 percent of the value added by Joh Johannson AS (though not distinguished within the value chain as this is only an assumption. b. Retail value as of March 2008. c. Max Havelaar license fee NOK 1.8 per kilogram coffee sold. d. Wholesale price given by Joh Johannson AS (Glavin, personal telephone interview, 2008). e. The figures from agent A van Weely in the Netherlands where not available, thus absorbed within Joh. Johannson AS. f. Direct output price calculated out of average value received by 1st level cooperative, adding 15 percent transportation and insurance fee and the social premium. g. The price given by cooperative as stated by the cooperative management, following calculations as Appendix 1.

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h. The price given by cooperative as stated by the cooperative management, subtracting 25 percent pre-harvest finance. 2. The Green bean Equivalent is calculated as dividing the numbers by 1.19 (1.19 kg green coffee is 1 kg toasted coffee). 3. The value added is calculated where a. The VAT is the same as given above (1. A.), here absorbed within retail value due to indirect benefits from tax. b. The retail value is calculated by subtracting cost of coffee (wholesale price) from direct output price. c. The value added Max Havelaar is constant NOK 1.8 per kg of coffee sold. d. The value added Joh Johannson AS is calculated as the difference between the export value of second level cooperative (see Appendix 1) and wholesale price. e. The figures from agent A van Weely in the Netherlands where not available, thus absorbed within Joh. Johannson AS. f. The value of second level cooperative is calculated out of the difference between income from second level cooperative and first level cooperative as calculated in Appendix 1. g. The value of first level cooperative is calculated as the difference between producer income and first level cooperative as calculated in Appendix 1. h. The value of producers is the income generated from coffee, not subtracting cost of production. 4. The value added as percentage of total is calculated as the value added divided by total income (retail price).

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APPENDIX 6: VISUALIZED VALUE CHAIN ANALYSIS

Value added (% of total)

1 % 0 % 3 % retail (13.84%) b 5 % 14 % 3 % Max Havelaar Norway (2.43%) c Joh Johannson AS (73.93%) d

agent (n.a.) e

2nd level cooperative (5.30%) f

1st level cooperative (1.12%) g

74 % producer (3.38%) h

INCOME BY SECTOR: FARMERS COFFEE (RELATING TO TABLE 2, PG.79)

Value chain UMB: small coffee 0,173 % 0,817 % 0,521 %

18,948 % Siås cantine (79.167%)a Max Havelaar (0.375%)b Friele AS (18.948%)c 2nd level cooperative (0.817%)d 1st level cooperative (0.173%)e producer (0.521%)f 79,167 %

VALUE BY SECTOR OF FAIRTRADE COFFEE SOLD AT UMB (RELATING TO TABLE 3, PG.81)

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APPENDIX 7: INTERVIEW GUIDE; PRODUCERS

Guía de Entrevista: los pequeños productores

Introducción: Soy una estudiante de Maestría en Manejo de Recursos Naturales y Agricultura Sostenible en la Universidad de Agricultura en Noruega. Estoy haciendo mi investigación para el grado de Maestría en la Universidad en colaboración con el Centro de Investigaciones Tropicales (CATIE) de Costa Rica y el Centro de Competitividad de EcoEmpresas (CeCoEco), CATIE. La investigación se refiere a los estándares de sostenibilidad del café, y cómo los estándares y normas se comunican, desde la producción en América Central hasta el consumo en Noruega y Suecia. Estaría muy agradecido si pudiera pasar algún tiempo conmigo, en respuesta a mis preguntas. Sus respuestas serán totalmente confidenciales y no se puede trazar a usted. No voy a utilizar su nombre en mi informe.

Cuestiones Económicas (entrevista estructurada de la información cuantitativa)

Número de Cuestionario

Fecha

Nombre del entrevistador (e Silje Johannessen intérprete)

Hora de inicio, tiempo de terminar

Nombre de la aldea

Distrito / condado

Café

Método de producción

Nombre

Producción Total QQ oro (Ciclo Agrícola 2006/2007)

Total venta a la cooperativa

El precio por quintal de café, de la cooperativa

Hay una diferencia en precio (por cualidad) para su café

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en la cooperativa

Precio venta afuera cooperativa, ultimo ano?

El precio ha mejorado en los últimos anos, si o no?

Total costos anual

Fuentes de financiamiento

Total anual ingresos procedentes de café?

Otra ingreso aparte de producción de café?

Cambio en la calidad y cuantidad del café, ultimo anos?

Cambio en los ingresos de café, ultimo anos?

Tiene Servicio de;

Agua

Electricidad

Letrina

Comunicación (cell)

Acceso a servicio de salud

Escuela cerca

Método para moverse

Beneficio Húmedo o seco

Factores para determinar los Cantidad Costo costos:

Mano de obra

Regulacion de sombra

Poda (recepto)

Resiembra

Aplicación de Fertilizantes

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Aplicación de pesticida

Fertilzante (nitrogena/urea, foliar, Glifosato)

Mantenimiento-cercas, caminos y drenajes.

Seguridad de finca

Insumos completo

Servicios

Transporte de insumos

Transporte de agua

Asistencia técnica

Beneficio húmedo

Beneficio seco

Limpia (de terrena)

Preparación de bolsa

Conservación de suelos

Preparación de plantacion

Resiembra (5%)

Combustibles (Gasolina, Diesel)

Aceite

Costo producción de cafe

Corte o cosecha

Salario de cortadores

Capataz

Apuntador

Canastro

Sacos

Transporte de cortadores

Transporte interno

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Transporte a beneficio humedo o seco

Caminos interno

Equipos y maquinarias

Edificios

Otros

Administración (10% de costo)

Financiamiento pre corte

Financiamiento corte

Financiamiento industrial

Comercializacion

Captación y certificación

Transporte a cooperativa

Costo Total

Percepción agricultores (Semi – estructurado, parte la información cualitativa)

1. ¿Usted tiene certificaciónes en producción de café, cuáles? 2. ¿Costos o gastos anuales de certificaciones? 3. ¿Porcentaje de café que se vende como Comercio Justo? 4. ¿Como fue el cambio con la certificación para Usted? 5. ¿Como fue la comunicación de los estándares y el implementación por la organización? 6. ¿El Comercio Justo, se vale la pena? 7. Lista 3-5 principales temas o preguntas que Usted quisiera mas información con respecto a los impactos de las iniciativas de sostenibilidad. 8. ¿Como se decidió a aprobar los estándares de sostenibilidad? 9. ¿Alguna problemas? 10. ¿Conoce a este etiquete?

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11. ¿Qué le gustaría que se comuniquen a través de los estándares de sostenibilidad o comercio justo? 12. Lo que sería un precio justo de su café?

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APPENDIX 8: SURVEY IMPORTERS/ROASTERS

Questionnaire-English (original in Norwegian)

I am a student from the Agricultural University of Norway and I am doing research for my MSc degree in Management of Natural Resources and Sustainable Agriculture, in collaboration with CATIE and the Centre of Competitiveness of Eco-Enterprises in Costa Rica. My research aims to better understand the value chain in fair-traded coffee and each actors’ perception of the system. I would be grateful if you would answer my questions (this will not take for than 15 min. of your time). The information will be used for mapping the value chain in fair traded coffee. Your answers will be confidential and cannot be traced back to you. I will not identify your name or the company in my report.

Importers/Roasters in Norway

1. Name of company and contact person: 2. Name of Fairtrade product sold: 3. Is the product(s) also certified organic? 4. What FT-certified raw materials do you source and who are your suppliers (s) 5. What are your requirements for supplies regarding (quality, volume, price, certification, contractual arrangements, others?) 6. Services / incentives that you offer to your suppliers for completion with these requirements? 7. The produced quality and volume of your Fairtrade product 8. The price of purchase and sale (ie, per kilogram of Fairtrade coffee) to date 9. Fluctuations of demand and price over past 5 years 10. What are sources of friction/conflict with your suppliers? 11. What are you limitations to expand purchases of Fair Trade coffee? And how do you plan to address these limitations? 12. What does the Fairtrade certified coffee represent for your company (increased sales, marketing, preferential access to raw materials, etc.)?

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