The Co-operative Nature of Fair Trade

Tadesse Meskela steps across the door thresh-hold onto a polished cement floor. “Look!”, he says, spreading his arms into the large sunlit empty room. “This is for the workers.” Tadesse points out the places where the workers' lockers will be, the washrooms and showers. Across the room and through an open air courtyard and into another large well glazed room he points out where the buses for the workers will pull in, the cafeteria and where the health room will be. “We will have someone to look after the workers health problems here”, he says, “they will be here when the workers are here.”

This is the first stop on a visit I made this summer to the new coffee processing facility being built by the Oromia Coffee Farmers Co-operative Union of Ethiopia, OCFCU. Tadesse is the General Manager of the union and its originator. The state of the art facility is located south of Addis Ababa. The union is a key supplier of fair trade certified Ethiopian coffee to the world.

The tour continues following the route a green coffee bean would take as it makes its way through the plant. First through the arrival warehouse, then into a massive automated coffee processing system, followed by a room of long tables in a bright, well ventilated area where women workers will hand sort the coffee, then to a bagging facility. The next stop is a large warehouse space where the coffee will rest before heading around the world in sealed shipping containers. A group of lab-coated workers are appointing the floor with yellow guide-lines as I wander about.

Outside, as the cement ramp to the warehouse is being poured, Tadesse points to a large multi-floored office building in the final stages of construction. “This will house the offices of the Union”, he says, “and our co-operative bank.”

Co-operative Bank?!

The processing facility, warehouse and offices are contained within a large fenced compound with plenty of room for expansion. “Where is the sign?” I ask. “Maybe it will come tomorrow,” he answers. We head off to inspect the office building.

OCFCU's new state of the art coffee processing facility, under construction.

 (photo courtesy of Bill Barrett, Planet Bean Coffee, 2010) 

When a consumer in a shop picks up a bag of coffee that has the certified fair trade mark on it, they most likely assume that the small scale farmer who has grown the coffee has received a reasonable price for their effort. The consumer may also have some vague notion that the mark also represents a form of ethical business. What they are likely not considering is that they are making a purchase that was, in most cases, facilitated through a farmer owned co-operative. They may therefore, be missing the bigger part of the fair trade story. There is no doubt that the improved and reliable farm gate price has a positive impact on the individual home economy, but from my observation, it is the social infrastructure created by the co-operative that has the major transformative impact on both the lives of farm families and their communities. It's not just about a higher price for an individual farmer. (For the sake of this article I am focusing on small scale farmers' organizations and their larger unions – not plantation worker organizations – we can save that discussion for another day)

A foundational element in the fair trade certification standards is the necessity for farmers to gather together in an organization that is collectively owned and democratically managed, most often this takes the form of a co-operative.

Co-ops are the logical organizational form given their long history of enabling marginalized groups of farmers, workers, and consumers to better their lives through collective action. The international co-op sector is massive. More than 800 million people are members of co-ops around the world and they all coalesce under the International Co-operative Alliance through their commitment to the internationally agreed upon seven principles of co-operation. These principles when married with the standards of fair trade certification create a powerful framework for ethical global trade relationships.

I first visited Tadesse and the OCFCU in 2003. It was before he and the Co-operative Union became famous through the documentary Black Gold. The office was on the top floor of an office building in Addis Ababa. The union, which formed in 1999, united 34 co-operatives and they were just beginning to sell some coffee through certified fair trade channels.

Tadesse became manager of the union after he had an opportunity to visit and study “free-market co-operatives” in Japan. Previous experience of co-operatives in Ethiopia were of those created by the authoritarian communist regime. These “authoritarian co-ops” were not democratically controlled by their members but rather by state functionaries. The economic benefits went to the state, not those forced into membership. Tadesse's experience in Japan opened a whole new perspective on the power of true forms of co-operatives. Japan has one of the largest consumer co-operative sectors in the world and it is extremely successful. (The certified fair trade standards emphasize the need for farmers groups to be autonomous and democratic. This naturally limits the participation of co-ops located in countries still clinging to the “authoritarian” style of co-op.)

Tadesse returned to Ethiopia with enthusiastic stories to tell the post-communist government about authentic co-operative structures. He was given the task of organizing coffee farming co-ops. With a borrowed truck he took to the hills to talk to farmers. It speaks well to his power of persuasion that he was able to get support from farmers whose previous experience of co-ops was one of coercion and exploitation.

	(Above) Local school children in Oromia. (Below) Oromia's newest high school, under construction.  (photos courtesy of Bill Barrett, Planet Bean Coffee, 2010)

In 2003 I took to the hills with Tadesse to meet and interview the coffee farming members of the co-ops. Since the union was new to certified fair trade and was only a few years into the export market, most of these farmers were focused on talking about the future - their dreams. Although these farmers talked about the impact a higher price would have on their families abilities to invest in new roofs, buy chickens and goats, even soap, what really got them going was talking about creating community infrastructure through the co-op. To a person they talked about the need for clean water supplies, schools and health posts. Things they could do together to improve the lives of everyone in their villages.

I also visited a very basic coffee processing facility in which more than 100 woman sat on a dirt floor in a dark dusty warehouse hand sorting beans. A far cry from the new facility described above.

The certified fair trade system makes it necessary for farmers to formally organize to get the higher price and to administer the fair trade premium. This necessary organization may or may not have existed before the fair trade opportunity appeared, but certainly receiving a fair price and a shared premium creates a major incentive to create a co-operative. The co-op creates a forum for community dialogue that may not have existed in the past. All manner of collective initiatives have emerged from these dialogues. The co-op provides a place to study business and economics. It is a place to develop governance skills and to develop strategies to work with the state or explore non-governmental partnerships. A place to develop product quality, and ecologically sustainable practices. It creates a way to meet the market in a stronger and more sophisticated way and bargain with traders with collective strength. Most importantly it creates a community focused organization in remote places that the state has often little capacity to service.

An important service that usually emerges as co-operative economies develop is the need for a co-operative bank or credit union. During my visit to Ethiopia, I climbed up to the top floor of the then still unfinished offices of the OCFCU and their co-operative bank. The bank was initiated by the union in 2005 and it has grown to more than 40 branches. For Tadesse,

“our biggest challenge is to find a way to provide credit to farmers who have no collateral. Also, we need to get the services into the coffee growing communities. Now the branches are in the cities.”

He is looking at recent initiatives in India where bank service is provided to very poor farmers in remote areas through cell phones. “Another problem is that the government does not have regulations to govern co-operative banks. We need co-operative banking regulations because now we have to use the conventional commercial banking regulations. We also need co-operative insurance for the farmers” Clearly the co-operative sector in Ethiopia is booming.

Keep in mind these coffee farmers are among the poorest people on earth. Their co-operative project, from my perspective, is phenomenal.

Co-operatives address one of the major social ills created by poverty – alienation. They bring individuals out of their atomized isolated lives into a social structure that is illuminated by hope through collective action.

Standing on the top floor of the OCFCU office building looking over the bustling construction site I am reminded of another co-operative union I visited a decade earlier in Mexico. It was a similar view from a high perch that revealed the central compound of the Union De Comunidads Indigenas De La Region Del Istmo, UCIRI, in the state of Oaxaca.

UCIRI, started in the early 1980's, may be described as the grandmother of fair trade co-ops, or at least a great auntie. Fair trade certification standards literally grew up around UCIRI, a history well worth looking into. The union, also focused on coffee production, is made up of more than 2000 indigenous families located along a mountain valley.

Many of the dreams articulated by the Ethiopian coffee farmers I visited in 2003 had long before been actualized by the co-operative efforts of UCIRI. The compound in the late 1990's contained warehouses, coffee processing facilities, a dentist and health centre, education facilities, a consumer retail co-op, transport trucks and an office staffed with support workers. UCIRI had also involved itself in major road improvements and even created a bus service serving communities through the valley. The co-op now plays an important role in local and state politics. Social and economic infrastructure created in a vacuum by very poor and marginalized people through a collectively owned and governed organization.

The success of UCIRI's organization has rubbed off on other co-ops involved in certified fair trade activities in the region. One phenomena of co-operatives is that they create unions of co-ops and then seek out and work with other co-ops. This co-operation amongst co-ops is one of the seven international principles of co-operation.

As fair trade co-ops grow and work together they create new dynamic democratic organizations. One interesting initiative is the CLAC an association of Latin American and Caribbean democratic cooperatives of small producers involved in fair trade. The CLAC is just the kind of provocative organization of co-ops that one would hope would emerge in the fair trade movement as it matures. It is a reflection of the movement's success in creating a self-reflective and self-critical democratic landscape that brings producers, and I would argue co-ops, to the fore.

The Mado Dube family in front of their home.

 (photo courtesy of Bill Barrett, Planet Bean Coffee, 2010)

When I returned to the coffee growing areas of Ethiopia this past summer I visited and interviewed the same farmers I met in 2003. Their houses had certainly been improved with stronger walls and metal roofs. A few of their children were now able to attend high school or even college. But they still gathered wood for their cookstoves, carried water to their homes and food security remained a challenge for many. They we quick to point out however, the improvements made to their communities. The local schools, health posts, roads, flour mills, and clean water supplies. These were their projects, initiatives of their co-operatives, their decisions driving the process. I have no doubt that the OCFCU will be a key leader in Ethiopia's economic development. The union has already been recognized by the Ethiopian government as a top generator of foreign currency through international trade and the union's success is stimulating a growing co-operative sector.

In 2003 there were 34 co-ops in the union, in 2009 there were 171, representing nearly a half a million family members. Of these co-ops 28 received the fair trade premium, but all benefited from their local co-op's infrastructure and the union's capacity to avoid intermediary traders and find markets for the coffee. As new co-ops join they are able to work toward fair trade certification using the expertise in the union and increase the volume of certified fair trade coffee available to the market over time. Volume from fair trade certified sales is like adrenalin into the veins of the co-operative union.

Leaders of the Nager Gorbetu Co-operative, one of the member co-ops of OCFCU.

 (photo courtesy of Bill Barrett, Planet Bean Coffee, 2010)

Fair trade certification also has a focus on environmentally sustainable development. Interestingly, there appears to be an ecologically appropriate sensibility inherent to democratic co-op organizations. This notion is revealed by the work of Nobel Prize winning economist Elinor Ostom. Her years of study highlight how commonly held resources like fisheries, water and forests, are most sustainably managed by non-state, voluntary democratic organizations made up of individuals whose lives are most dependent on the management of those resources. These organizations are most often co-operatives.

The conclusion of her work, explained in her book, “Governing The Commons”, is that if you are looking for an ecologically sound organizational structure that can successfully navigate both the economic and environmental challenges we now face, co-operatives are a pretty good bet.

Furthermore, if you are looking to promote “the good life”, that is lives characterized as being long, healthy, free of violence and depression, with key needs met like clean water and adequate food, then it seems co-operative structures are also a means to that end. In their exceptionally well researched book “The Spirit Level”, Richard Wilkinson and Kate Pickett document why equality is better for everyone. A major conclusion of their work revolves around the importance of co-ops. (If you are reading this I suspect you would find their book compelling - so check it out)

They write,

“the truth is that modern inequality exists because democracy is excluded from the economic sphere. It needs therefore to be dealt with by an extension of democracy into the workplace. We need to experiment with every form of economic democracy – employee ownership, producer and consumer co-operatives, employee representatives on company boards and so on.”

By including co-operative organizations in the standards, those fair trade certification pioneers were really onto something.

So if co-operatives are key components of the success of fair trade in the global south, why do they not play an important role in the promotion of the co-operative fair trade system in the north? Why is the connection not automatically made? It's time to make the connection.

Co-operatives have a long and important history in Canada. In fact my own home town Guelph gave birth to the most successful Canadian consumer co-op of the early 1900's. It was originally a co-op bakery set-up to deal with the private bakeries in town that colluded to charge inflated prices. The Guelph Co-op grew into a multi-faceted community owned enterprise led by a local co-op all-star Samuel Carter. The motivation for those early Guelph co-operators is consistent with the fair trade co-operators of today – dealing with being marginalized by powerful economic forces.

The first major promoter of fair trade coffee in the USA was Equal Exchange a worker co-operative that continues to be a fair trade leader in north America. In Canada three worker co-operatives are allied in growing the fair trade market nationally: Planet Bean, Just Us!, and La Siembra (Camino).

These worker co-op organizations present a model that is ethically consistent from south to north. Their existence brings forward the question: if democratic organizations are mandatory for fair trade in the global south – why are they not critical for fair trade movements in the north? Furthermore, what role does the multi-billion dollar Canadian co-operative sector have in developing fair trade.

In a effort to define this role a resolution sponsored by the Ontario Natural Food Co-operative was brought forward and passed at the Canadian Co-operative Association annual meeting this summer.

The resolution in part reads: Be it resolved that the Canadian Co-operative Association and its members recognize the natural affinity between the fair trade and co-operative movements and that the CCA and its members strive to promote and support the advancement of fair trade in Canada through education, fair trade procurement policies, investment, overseas support of fair trade co-operatives and support for Canadian co-operatives involved in fair trade.

The fair trade system is an excellent way for co-operatives in Canada to teach consumers about the democratic nature of their own organizations. Highlighting the two movement's affinities is mutually beneficial.

On my last day with Tadesse this summer I asked him about the relative importance of fair trade versus the co-operative structure for improving the lives of coffee farmers. “It is equal”, he said, “both need to be there, fair trade certainly can't work without the co-ops, you need the transparency, the clarity and the democracy is key.”

An ethical global economic model is right under our noses – we just have to connect the dots.

Imagine for a moment a product grown by a farmer who is a member of a fair trade co-op, let's say coffee, which is then processed by a co-op facility owned by a union of farmer co-operatives, then the product is transformed by a co-op, perhaps a co-op coffee roastery, the coffee is then distributed through a co-op or sold directly to a co-op store. Ethical economic symmetry, a very real way to organize a different kind of economy. The certified fair trade mark could become a symbol for this different economy.

Bill Barrett has been promoting fair trade and co-operatives for over two decades. He is currently the President of the Sumac Community Worker Co-operative in Guelph, which owns and operates Planet Bean Coffee Roastery and Wearfair Cotton, both enterprises focused on organic and fair trade certified products.