Interview with Paul Rice, President & CEO of TransFair USA (this article is part two of a 4 part exploration of the truth behind Fair Trade Certified™. Please click here to go to part 1 if you have stumbled on part 2 first.)

Have you seen a change in foreign policy objectives during the Obama administration toward developing the type of internationally agreed upon standards that FLO and Transfair uphold? Have you seen it in some parts of the world more than others?

Not really. I have to say that fair trade is really a market-based approach to poverty, rather than a policy or a regulatory approach. As such, we really don’t have that much connection to governments, either with the U.S. government or governments in countries where we work. As you know, our primary focus is engagement with the business community, and the community organizations and NGOs, so frankly influencing the U.S. government either in this administration or its predecessors to become part of fair trade has not been part of our agenda. We do work with USAID, but it’s not a trade agenda, it’s a development agenda.

So tell me about your work with USAID.

USAID does not really get involved in trade issues per se, as you already know. They are focused on investment in poverty alleviation and sustainable development and environmental issues and women. So that is the context of our collaboration with them in Brazil. We have a fantastic project that is in its 3rd year, which is a joint effort between TransFair, Walmart and USAID in Brazil. USAID provides funding, Walmart provides funding and market support, and TransFair manages the project and the capacity building components of it. The project is helping 5,000 small family farmers improve the quality of their coffee and improve the business skills and management skills of the co-op so that they can sell a higher quality product in a reliable business-like way, and through that gain dramatically higher incomes. So farmers over the last couple of years have been able to improve their income so much as a result of this project that we are already seeing strong results in terms of education, health and housing in those communities.

I know you mentioned that you aren’t working with governmental officials, but are there any countries where you have stronger ties with government where they are also trying to promote their own regulations and policies on the same issues that these voluntary standards address?

No not really. The interaction with governments, to the extent that we have had any, has been focused on direct support to farmer-run co-ops or access to capital and technical assistance. In the case of this Brazilian project, I believe there has been some interaction with the Brazilian government, in particular the Ministry of Agriculture, which provides among other things, technical assistance services to farmers. We approached them in supporting the 5,000 farmers in this project on the technical issues as a complimentary component.

Let me just clarify, we are not a lobbying organization. We don’t really address trade policy.

In any event, our interactions with governments abroad are going to be with ministries of agriculture for direct support to farmer groups rather than addressing trade regimes.

It’s important to make the distinction I think that you are not pushing that these voluntary standards that the certification promotes and enforces need to become regulation at some point.

That’s why fair trade works within the current global trade regime without any issues. No one has challenged fair trade as being a barrier to trade precisely because as you just pointed out, it is a voluntary standard. Like organics, these are voluntary standards that farmers and companies can choose to engage in and which is ultimately not supported by government legislation, but by consumer demand. So if consumers woke up one day and said ‘we don’t care about third world farmers,’ fair trade, the whole model, would collapse. We’re not beholden to governments, and I think that is one of the strengths of our model. At the end of the day, we’re building something that is market-based and consumer-demand based, and this ultimately makes it more sustainable in the long run. It’s not based on the political whim of any given government.

I often read about the negative effects to economies that are overly politicized.

Last month, Michigan's Congressman Sander Levin declared his public support for fair trade; do you think that this can lead to any opportunities for fair trade?

This would not be the first time that fair trade has been acknowledged by a member of Congress. We have had the support of different members of Congress and Senators as well. One of the things that we have seen as a result of that is that we now have fair trade coffee and tea served in Capital Hill dining halls. And in fact, I was in D.C. and met with Senator Sherrod Brown and he is very interested in promoting our Fair Trade Towns program in the state of Ohio, which is his home state. Where the support of political leaders, whether they are local or national leaders, where that support is hugely relevant is in galvanizing community support for fair trade and nowadays that takes place in the forms of fair trade towns, which is our rapidly expanding program, which includes among the criteria a resolution by City Council in that given town. In that regard, we do find that the support of community leaders is tremendously important. It gives people a way to translate fair trade, which is this global model, into something that is more concrete and local by getting involved and promoting it in their local area.

Would you clarify the distinction between free trade agreements and fair trade?

We don’t typically get involved in the polemics around free trade agreements. I would argue, that from my own experience in the field, that it’s probably inaccurate to say that fair trade is the antithesis of free trade. I actually don’t agree with that. From my perspective, fair trade helps make free trade work for the poor. Within this global market economy, fair trade is not a carve out, it is embedded in the global economy and in the rules of free trade, but if you go to any backwater coffee village in the world, you will find a set of farmers who are isolated from the market and are forced to sell in the local market to local middlemen who pay pennies on the pound and who have no way to access the benefits of free trade. They are not trading, they are delivering their product in an unprocessed form to an intermediary who typically dictates prices.

Frankly, those kinds of farmers are victims of the global economy. They are not empowered competitive actors within it. Fair trade allows them to become empowered competitive actors within the global economy. It’s not that we are taking them out of the global economy - we are not creating a parallel system. Fair trade is embedded within fair trade, but it makes fair trade work better for people who right now are being left behind.

It’s great to hear this, because even though people hate hearing ‘level the playing field’ over and over again, it’s just not a bad mantra and I agree with you that seeing fair trade in the way you describe it will be appreciated, since you do not see fair trade and free trade as antithetical. A lot of policies that are governmental do not consider the micro-businesses like TransFair and NGO’s do, so a lot of people are frustrated that it seems there is an apartheid system economically, which makes it very difficult for poorer people to compete on a market that from the get-go requires a large sum of money and a definite market share.

Do you think there is any work you could do with development programs with the UN?

There may well be opportunities there particularly with on the ground development work, and supporting farmer capacity building. I have to say, that early in our history we made the assumption that farmers were going to be able to tap into support services from the NGO community and what farmers really needed was access to markets. So we focused exclusively on building the U.S. market for fair trade, building corporate partnerships, getting companies on board, and raising consumer awareness so that farmers would have a better market to sell to at a better price.

What we found along the way, is that when big companies signed up for fair trade they wanted some reassurance that the certified farmers in our system could produce the right quality of product and were serious business people and could deliver on time. That led us ultimately to develop capacity building programs that we launched five years ago and the Brazil program is the largest of these programs we have right now. These aim to build farmer capacity to take full advantage of the fair trade market as it grows. And so, within that framework, absolutely some of the United Nations agencies, like UNDP and FAO are organizations that would be relevant for that kind of on the ground capacity building focus. We have reached out to them. We have not been able to secure project collaboration yet, but that is definitely something that we are interested in as we go forward.

I wanted to ask you about personal incentives and the consumer demand that you mentioned earlier. If people woke up tomorrow and said to themselves “I’m tired of doing good for the world and thinking whether or not child labor is being minimized and I’m tired of thinking about social standards being upheld and environmental ones for that matter,” you’d need to create some incentives for them. I know a few people who are hard sells frankly and they go against the flow constantly when it comes to social and environmental consciousness, so that I have to work hard to get them to agree that it’s possible to meet our consumer needs and also provide a fair system for workers. Sometimes, they’d rather talk about convenience and say “I don’t care. I just want to buy what is available to me.” So tell me, what do you find works as a personal incentive for these hard sells who aren’t as dedicated as ethical consumers who don’t question their buying habits?

The data on this suggests that more and more people are awakening to the world’s problems and challenges. More and more are awakening to climate change, to poverty and the roots of those issues and furthermore, more and more people in this country are awakening to the fact that the products that we buy, the shopping decisions that we make every day are directly linked to the state of the world, to these social and environmental problems that we see growing. And so, that is what gives me so much hope. That consumers are using their purchasing decisions as a way to make a difference in the world. They are starting to vote with their dollars for a more sustainable environment and for a more just social and economic deal for workers and farmers.

In that regard, while there is a core, a trend setting group of consumers who are very passionate about these issues that are deeply committed, I would also say that society in general is changing very rapidly now. There is a lot of data on this available to indicate this. Consumers say that they expect companies to take care of the environment and workers. Consumers say that they are actively looking for companies that are demonstrating that they are good corporate citizens. Consumers say that they will stop buying products from companies that are not perceived as good corporate citizens. So I actually think that this whole mindset is very rapidly going mainstream.

I have several Facebook friends who are very conscious consumers and read everything they need to in order to be more informed, but I still run into the ones who seem impossible to persuade since they believe that consumption habits all boils down to convenience, so how would you try to persuade them?

We’re talking about societal trends, and what shapes behavior within society and I definitely think that there is a macro trend in place around awareness about social and environmental problems and the perception that we all can make a difference in small ways through the shopping decisions that we make. I would say that there is another macro trend in place that the industry identifies as the health and wellness trend. That is, people are increasingly aware of the link between health problems and diet and lifestyle. Obesity is being talked about a lot now. People are looking for natural methods of medicine and healing as a compliment to traditional western medicine. Organics are on the rise. There is a strong link between the social issues that fair trade addresses and the health and wellness that one acquires from food. It’s kind of a no-brainer. If farmers are not getting a decent price for their harvest and third world farmers are struggling just to survive, they are not going to put the same care and attention into their same crops as they would otherwise. That has implications for food safety. It has implications for quality. So, these things all come together.

Taking care of the farmer, making sure that the farmer is able to produce a healthier product, a safer product and probably a more delicious product helps the consumer. So, if you are asking for a self-interest piece of the persuasion, it’s product quality, safety and health and wellness, which links back to the social issues that fair trade tackles.

I think that trendiness works for many people on this issue, but that the hard sells, the people who do not care about trends and are more prone to go for convenience, might be willing to change their buying habits if it becomes known that it could affect their health and wellness, their safety and that they get a better quality product. Good recommendation.

Would you like to mention some newsworthy items that come from your recent travels?

Well, thank you for that. Two thoughts come to mind. The first is around the impact of fair trade and the other is around the issue of the credibility of the monitoring system. In terms of impact, every time I go abroad I see the incredible difference that our work is making in the lives of those who otherwise would not have much reason for hope at all. And the difference is, as you can imagine that in the midst of a global economic recession the difference within the fair trade model, that knowing that people are buying your products. There’s stability in terms of that sale and furthermore there’s stability when it comes to the price. And that is incredibly important to the farmers and it allows them to invest in their crops with a greater degree of certainty. It allows them to invest in the quality of the product with a much higher degree of certainty. And it allows them to take care of their families and invest in their families, knowing that at the end of the harvest there’s going to be a price in place that will help them sustain their families for another year there.

I was in Ecaudor recently, and I was visiting with families who were sending their kids to high school. High school in the developing world is still such a luxury. The village school typically goes through sixth grade. After sixth grade, kids are twelve, they are out in the fields. For these families in Ecuador, to be able to keep their kids in school and send them on to high school is good stuff. The first ones are graduating and getting ready for college. With all of this becoming possible from a scholarship that the co-op had set up with fair trade money, with the extra money that came in from their fair trade sales, in a very real and tangible way it drove home for me how effective the fair trade model is in lifting people out of poverty and giving them the ability to dream of a better future. So much, of the work the big agencies like USAID are really aiming at is impacting poverty for the next generation. In the future, five, ten, twenty years from now, they won’t live in such hardship.

What we’re finding, I would argue that in fair trade, that because of the market linkeage, because of the market component, it is a much more dynamic and quicker response to poverty, so it links farmers into that market directly, makes sure they get a better price, and allows them to accelerate the process of improving their living standard and preparing their kids for a better future. I love that! I always get reinspired, because I get to see it and meet people who have their own stories and who are ultimately living through the process of transformation in their communities.

Are there any personal stories that you would like to share in terms of families that you have seen impacted by fair trade?

Of course, on this trip in Ecuador with the story of education, I had a particular family in mind. Victor Sezlama and his family. The elder Victor, Victor Sr., was the classic farm kid, and grew up on his family farm, very, very poor, and he studied through the second grade and so he never really learned how to read and write that well. He’s been a farm hand ever since. He saved up his money and bought a small farm, 2 acres a number of years ago and he joined a co-op and that’s when things started to change. He grows bananas. His co-op, which is called El Guabo Co-op got Fair Trade Certified™ eight years ago. Since then they have been getting a dramatically higher price for their bananas and we’re an important part of that, because we opened up bananas five years ago. Whole Foods and Sam’s Club and other retailers who we’ve reached out to are starting to sell bananas from these co-ops. It’s an amazing thing to see the direct impact of Transfair team and its work, moving these bananas.

For Sezlama, the transformation of his life and his family, has been incredible. Starting with Victor Jr. who went through the local school through 6th grade and dropped out. He was out of school for 7 to 8 years and when the co-op formed from the scholarship fund, even though he was now quite a bit older, he asked his parents for permission to go to school and they gave it to him, and so he’s just finished high school in December. He is now applying to college. Nobody in his village, not just in his family, has ever graduated from high school. He’s the first!

Now he wants to go to college, wants to study agronomy, and his dream is to get the skills to be able to come back to his village and to his region and share new techniques and skills to help farmers be more productive and sustainable. He’s totally into the whole organic thing. His father went organic a number of years ago so all the bananas on their farm are organic. It’s like a new generation of bright, promising, hopeful young people who have just been given the opportunity to dream of something bigger and better. It’s all part of this incredible fair trade model that brings consumers, retailers and farmers together to produce a more sustainable product and give people like Victor Jr. a totally different life’s journey than he might otherwise have.

Anything about the Fair Trade Wine night?

Come! I’ll be there!

I think it’s cool to see wine get the fair trade label.

The wine that we certify comes from South Africa, Argentina and Chile and each one of those countries and the communities there have fantastic stories. The one in Argentina is part of the wine night. The co-op in Argentina that we are working with is where I just came back from. I just came back from Buenos Aires. Buenos Aires, the city, looks like New York, very modern and developed. A lot of people think Argentina is a prosperous nation and yet even in a country like Argentina with a relatively high per capita income, you have these huge regions of rural poverty where farmers typically only get $3 a day in income. In this one region, in La Riojana, the grape farmers there have 1-2 acres of land each and would typically deliver their grapes to local middlemen at a very low price. And those grapes would be bought up by local wineries in turn and made into local wine and guess who would make all the money? The winemakers, not the grape growers.

A number of years ago, about 500 farmers in the La Riojana community organized a co-op and set up their own winery. So now they are delivering their grapes to their own wine-making business, they are making the wine and brought in experts to figure out the quality. It’s delicious wine and they got certified fair trade two years ago and it’s brought in extra community development money. The first thing they did with that money was they sunk a deep well and brought fresh and clean drinking water into the village for the first time. Now the history of health in that community has been that the primary health problem is gastrointestinal diseases of one kind or another, linked to the fact that their water was contaminated.

Their water sources were not potable and they weren’t safe. The community had been lobbying the regional government to come in and build a new water system for years. This is a classic problem. Communities look to local governments or big aid agencies to solve their problems. Well, the co-op got Fair Trade Certified™, got more money back and they said they were going to fix the problem themselves and they sunk the well and built out the distribution system. Everyone now has clean drinking water running directly into their homes and guess what? They reported fewer incidents of childhood diarrhea and all these problems that they historically had. So for me, it’s a two-part message that is directly related with our work with fair trade wine. One is that farmers’ incomes are going up and it allows them to do things like bring clean drinking water to their village for the first time. There is a direct health benefit there. The other story is all that benefit they were able to accomplish without anybody’s charity. It was simply based on a simple notion: a good price for a good product. When you taste the wine, wine experts have said that this is really good stuff.

Sometimes when there is governmental foreign aide, there is a tendency for it to come with strings attached. Often times, it appears that many people from various countries are tired of that. They ask that if you are going to help us with foreign assistance to build up an industry, how about with fewer strings attached. Otherwise, they go ahead and do it in other ways. Fair trade is a perfect way to do so, since it allows them to be empowered by their own process, but still getting a lot of education through peoples’ initiatives like yours. It all shows how globalization isn’t a dragon. It’s not the cause for so many problems. Globalization has a lot of positive impacts in helping people reach each other through economic means such as yours.

Can you tell me about the monitoring process for the Fair Trade Certified certification and its reliability?

Basically, fair trade today is the largest and certainly most rigorous social certification program in the world. There are other financial auditing organizations that are bigger than us but in terms of auditing and verifying social norms, we’re the biggest and it is a very robust system. It spans 60 countries in the global south and 20 countries in the global north. In the 20 years of existence globally speaking, 11 years here in the U.S., it has never had a major scandal around fraud or negligence in that regard, because the methodology that we have developed, I’m talking about FLO, FLO-CERT and TransFair. They go to the co-op headquarters, they’ll meet with the management, they’ll meet with the accountants, they’ll meet with the board of directors, there will be interviews, there is an open-book policy so they get to audit the books and see where the money is going.

That’s what is at the heart of fair trade: more money back to fair trade. Our promise to consumers is more money back to the co-op and to farmers. We need to know that the co-op has good financial management systems and we need to know if they have good financial transparency. So, the teams that go in and inspect the co-ops, have financial accounting and auditing expertise as well as social and environmental auditing expertise. So, we’ll do an administrative office audit and look at the books, the financial flows, at the control systems to see if they are robust. For example, all the co-ops are required to have an audit committee that is independent of the management team. So we are looking at their own ability to police themselves as it were as a co-op. Then, there is a field component where our inspectors are spending usually several days in the field on randomized visits on co-op members to talk to them with what is going on. During the field visit is where we verify the data that was collected during the office audit. We audit all the financial flows and talk to individual growers like Victor and see how much they received for their bananas in the last six months. If the number he says is different than what we got during our office audit, then we have a discrepancy that leads to a deeper analysis to find out why we have different data points. In terms of checks and balances, this is typical of the auditing world, and we’ve had professional audit firms design our systems.

So, again you always compare data for different sources to see if you are getting a straight story or not. Then, we will look at the environmental piece, because if Victor is using prohibited chemicals or if he is not implementing the soil and water and forest conservation measures that are part of the criteria, they need to get these certified. So all of those go into both independent evaluations that the farmers themselves have characterized as the most robust and rigorous certification around. Often, fair trade farmers have experience with multiple standards, like the organic certification, and multiple audit systems, not just the fair trade system. If you interview them, what you will find is that they might be complaining but kind of proud in saying that the hoops that we have to jump through are far and above what other systems require.

Every year, we do detect farmers from that side of the world and companies in the U.S. market that for one reason or another are not meeting fair trade criteria. So, if you are asking if 100% of those who apply get in, the answer is no. If you ask me if 100% of last year’s certified farmers or companies get recertified this year, the answer is no. We decertify people every single year because of the results of these inspections when we find that they are not meeting the standards and if it is gross violation. If it is a minor violation, we give them a set of remediation measures that they have to implement and often, there will be a reinspection with a shorter time line.

For example, if there is an inspection of a co-op and we find that there aren’t sufficient financial management controls in place so that nobody can steal money, then we’d give them a list of things they would have to implement and return in 60 days. This is something that consumers are very interested in: trust and credibility. There are a lot of great companies in the U.S. economy, Ben and Jerry’s and Starbucks who are trying to do the right thing and who are doing the right thing, and yet consumers tend to be somewhat skeptical when a company tells the world, “I’m paying fair prices to people.”

Consumers want independent verification. They want an independent assurance that when a company says that it is doing the right thing that they are doing it. So, that’s the real value add of TransFair’s work and fair trade certification in general. That is the most important thing that we do. That is why we invest more money in it. We do more to push ourselves in terms of best practices in the industry, because at the end of the day that is where we add value to the companies and the farmers in their pursuit of a more sustainable model.

This tells us what is behind the logo and the label. It’s not just a marketing ploy. You’re independent and it’s not just fooling people. The ones who don’t meet the high standards have to jump through more hoops and reapply and make changes to meet consumer demands.

How often do people report a label or language use violation?

We capture label abuses through our website, and it’s rare that a company would use our label without being certified to do that. In 11 years, this has only happened a couple of times and as soon as they get a letter from our attorneys saying you are using someone else’s trademark label in an authorized way, they immediately stop. Typically, in both cases when it happened, we reached out to them, 'we would love to have you use the label in a legal way, so wouldn’t you like to sign up and actually do fair trade and then you could use the fair trade label' and they wanted that. They told us that it was sort of inadvertent and thought they had the right to use the label when in fact they didn’t. Because we have legal control of our label, it is unlikely that companies will want to use it in an unauthorized way.

Where companies sometimes get into trouble is when they use the label in a way that is confusing or misleading to consumers. Like if they have one product line that is fair trade, but a poster suggests that all of their product lines are fair trade, then that is a different area of label abuse and that has to do with clarity and truth in advertising. Since our contracts give us control over how companies use our label, we simply call those companies up in a case like that and say they are using the label in an inappropriate way and we think it’s misleading and we request that they change that. Since they are contractually bound, they do. So we have tight control over how the label is used by the companies we work with. That allows us a lot of leverage in terms of ensuring that there is clarity and balance in the way that it is portrayed to consumers.

I think that this addresses the skepticism that consumers have shared with me and provides much relief.

Click here to go to part 3 of 4 of Talking to TransFair USA and fair traders to address skepticism (in 4 parts)