The Fairtrade System
In this section we will take a closer look at the structures and actors in the fairtrade chain in order to eventually be able to discuss which form of governance exists in the chain.
Fair Trade
As described earlier the fairtrade system functions as an alternative for small and exposed coffee farmers in the unstable conventional coffee market.
Fair trade organizations are not trading organizations but administrators of labelling licenses to fair trade producers. An important principle of the organization is the direct trade between producer organizations and roasters in order to avoid that value is absorbed in mellemhandel – the local buyers in the conventional market.
The trade must go through the roasters’ existing sales and distribution channels and the roasters are responsible for the logistics and financing. In this way the products can be sold in the same manner as the commercial products and the consumer can find them next to each other in the shops.
The national initiatives, like Max Havelaar in Denmark and Transfair in the USA, joined forces in 1997 and established a common labelling. This umbrella organization was named Fairtrade Labelling Organizations International (FLO).
FLO has 5 overarching criteria for the fair trade system:
1. Organizations consisting of small farmers
2. Fair price
3. Minimum level prices
4. Credit
5. Long term contracts
The international coffee register, ICR, where roasters and producers are accepted if they meet certain requirements, works in close cooperation with this system. In addition it should be emphasized that producers are not admitted in ...