in the market but not if

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In the Market But Not of It: Fair Trade Coffee

and Forest Stewardship Council Certification

as Market-Based Social Change

PETER LEIGH TAYLOR *

Colorado State University, Fort Collins, CO, USA

Summary. This paper discusses two well-known market-based social change initiatives, FairTrade coffee and Forest Stewardship Council certification, which harness market forces to pursue

social and environmental objectives. A serious challenge for both is to operate in the conventionalmarket without undermining their original objectives. A global commodity chain analysis approachis combined with insights from economic sociology embeddedness theory to explore the social, cul-tural and organizational factors shaping the initiatives governance structures. Both initiatives areseen to move along opposite organizational trajectories, but face similar pressures from conven-tional market logics, practices and dominant actors. A preliminary framework is proposed for com-parative assessment, focusing on distribution of benefits, how conventional market institutions maybe questioned, and how internal governance manages diverse stakeholder interests and influence. 2004 Elsevier Ltd. All rights reserved.

Key words Latin America, Mexico, Fair Trade, FSC, coffee, community forestry

1. INTRODUCTION

Certification and labeling initiatives world-wide gain growing attention as promisingmarket-based instruments which harness glob-alizations own mechanisms to address the verysocial injustice and environmental degradationglobalization fosters. Initiatives such as FairTrade and Forest Stewardship Council (FSC)certification are being hailed as innovativewinwin responses to seemingly intractable

economic and environmental struggles (WWF,2001b). Certification and labeling today areparticularly interesting because, to paraphraseBass, Markopoulos, and Grah, they operateat the boundary between globalization pro-cesses which put market interests first, andlocalization commitments which prioritize peo-ple and development. They lie, therefore, atthe heart of many of todays greatest economic,social, environmental and political challenges,which involve getting the tradeoffs right for sus-tainable development (Bass, Markopoulos, &

Grah, 2001, p. xi).This paper looks at two highly successful 1

initiatives, Fair Trade coffee and FSC certifica-

tion and labeling. It proposes a preliminaryframework for assessing market-based instru-ments capacity to ameliorate the marketsown negative social and environmental im-pacts. The papers comparative focus emergedfrom my participation in collaborative researchon the Fair Trade coffee initiative (Murray,Raynolds, & Taylor, 2003) and my involvementin the FSC scheme as a member of interdisci-plinary certification teams evaluating the man-agement of community-owned Mexican

forests. Several authors have observed that Fair

*I am indebted to Bridget Julian, Dawn Robinson,

Doug Murray, Dan Klooster, Ross Mitchell and three

anonymous reviewers for insightful and helpful com-

ments on previous versions of this paper, and to the

Ford Foundation-supported CSU and North/South Fair

Trade Research Groups for stimulating discussions. I

also must thank the many Mexican coffee and timber

producers and their leaders who were willing to share

with me both their successes and their challenges with

certification and labeling. All remaining errors of factand interpretation are my responsibility. Final revision

accepted: 16 July 2004.

World Development Vol. 33, No. 1, pp. 129147, 2005 2004 Elsevier Ltd. All rights reserved

Printed in Great Britain0305-750X/$ - see front matter

doi:10.1016/j.worlddev.2004.07.007www.elsevier.com/locate/worlddev

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Trades roots lie in an Alternative Trade move-ment committed to operating both in andagainst the market, aiming to use the marketto transform the market (Brown, 1993; Ray-nolds, 2000; Renard, 2003; Shreck, in press).

Yet one of the most serious challenges of certi-fication and labeling initiatives today is actuallyto be in the market but not of it, that is, to beable to pursue alternative values and objectivessuch as social justice and environmental sus-tainability without being captured by the mar-kets conventional logic, practices anddominant actors. For Fair Trade coffee andFSC certification, this dilemma stems not somuch from an oppositional strategy as fromtheir significant success in the market.

A comparative analysis of Fair Trade coffee

and FSC certification can generate fruitful in-sights into certification and labelings capacityto effect change in the market. 2 Both schemeshave discovered that they must operate in themainstream market to effectively pursue theirobjectives. Yet the two initiatives may be saidto be moving in opposite directions. Primarilya socially oriented scheme, Fair Trade coffeeexplicitly aims to modify existing trade rela-tions in the global agro-food sector. Yet to in-crease its impact, the Fair Trade coffeeinitiative has begun moving away from alterna-

tive trade niche markets to place certified coffeein mainstream retail outlets. By contrast, FSCis primarily an environmentally orientedscheme which has self-consciously workedwithin the mainstream wood products sector.With the vast majority of its certified forestsnow located in the global North and understate or corporate control, FSC currently seeksto improve access to certification by small-scale, low-intensity and community-operatedforests in the global South. These two initia-tives diverse trajectories highlight the often

subtle process by which operation in the globalmarket can lead a movement away from origi-nal objectives.

2. GLOBAL COMMODITY CHAINANALYSIS AND THE SOCIAL

EMBEDDEDNESS OF GOVERNANCE

This papers comparison of the coffee andwood products sectors draws on global com-modity chain (GCC) approaches (Gellert,

2003; Kaplinsky & Morris, 2002; Ponte, 2002;Raynolds, 2002; Talbot, 1997). Originallyintroduced by world systems theoristsHopkins

and Wallerstein (1986), a commodity chain re-fers to sets of interorganizational networksclustered around one commodity or product,linking households, enterprises, and states toone another within the world-economy (Ger-

ffi, Korzeniewicz, & Korzeniewicz, 1994, p. 2).A key contribution of the GCC frameworkhas been to point out that surplus or profits ac-crue at the pivotal points or nodes of the laborand production process rather than at the levelof national economies (Applebaum, Smith, &Christerson, 1994, p. 188).

To explain the allocation and flow of finan-cial, material and human resources along acommodity chain, Gary Gereffi has focusedattention on chain governance (1994, p. 96).Governance refers to patterns of authority and

power relations which structure the parametersunder which actors operate, including what isproduced, how and when it is produced, howmuch is produced and at what price (Humphrey& Schmitz, 2001, p. 4). Gereffi distinguishedbetween governance in producer-driven versusbuyer-driven chains. Producer-driven chainsare exemplified by automobile, aircraft andother capital and technology intensive indus-tries in which transnational corporations(TNCs) and other large integrated enterprisesplay a central role in controlling the production

system. In buyer-driven commodity chains,large retailers, brand-name merchandisers andother trading companies organize decentralizedproduction networks in exporting countries,typically in the global South (Gereffi, 1994).Agrarian commodities such as coffee and woodproducts in many ways represent buyer-drivencommodity chains (see Ponte, 2002, p. 1101).The governance structures of these two sec-tors locate the lions share of power overcommodity chain organization, including thedistribution of benefits, in the hands of actors

based in consuming countries in the industrial-ized North.

Gereffis seminal work on GCCs has influ-enced related theories of the globalization ofproduction and trade, most prominently theglobal value chain (GVC) framework originallydeveloped by Michael Porter (1990). Thoughthe GCC and GVC frameworks are sometimestreated as identical (see Ponte, 2002, p. 1099),GVC analysis focuses on social networks whichemerge to coordinate highly diversified andinternationally dispersed industrial manufac-

turing. Governance patterns can be largely ac-counted for by the way firms manage threevariables: the complexity of information and

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knowledge transfer; the potential for codifica-tion, and capabilities of suppliers (Gereffi,Humphrey, & Sturgeon, in press, pp. 3, 15).

The GVC approach is a powerful instrumentfor exploring the organizational imperatives

giving rise to international industries diverse

network forms. Yet Ponte argues that com-pared to GCC theory, the GVC approachscapacity to explain overall forms of governanceis limited. GVC analysis approaches gover-nance mainly in terms of how firms at differentfunctional positions achieve immediate coor-dination and integration of activities. Pontesuggests, however, that coordination shouldbe distinguished from with levels of driven-ness, the degree of power lead chain actorsexercise (2002, p. 1115; 2003a, pp. 5, 26). More-

over, coordination is often approached analyt-ically with the assumption that efficiency isan objective, nonpolitical benchmark of organi-zational performance. 3 This approach doesnot facilitate analysis of the political dimensionof firms pursuit of efficiency, which in practiceis linked implicitly to organizational objec-tives. 4

GCC analysisfocus on relatively undifferen-tiated commodities (Kaplinsky, 2000, p. 144)makes it apt for analyzing chains originating inthe global South and involving products with

less value added. Its explicit internationaldimension and emphasis on the shifting distri-bution of power among competing chain actors(Gereffi, 2001, pp. 16211622; Ponte, 2002, p.1101) also make it particularly suitable forstudying the unequal market entry and valueappropriation opportunities facing Northernand Southern based actors in sectors such ascoffee and wood products. Its attention tobroader political dimensions of governance al-lows more systematic consideration of externalfactors such as state regulation, and nongov-

ernmental organization (NGO) and publicpressure.

Nevertheless, GCC and GVC literatures bothtend to view governance as direct and purpose-ful control exercised by some chain actors overother actors operational parameters. Gover-nance, for many researchers, represents a non-market phenomenon. Humphrey and Schmitz,for example, argue that governance is not aninherent part of market systems but involvesinter-firm relationships and institutionalmechanisms through which nonmarket co-ordi-

nation of activities in the chain is achieved(2001, pp. 2, 4). Governance is often contrastedwith arms-length market relationships, in

which the parameters of operation are definedautonomously by each firm at its point in thechain (Humphrey & Schmitz, 2000, p. 10;alsosee Dolan & Humphrey, 2000, p. 150; Fitter& Kaplinsky, 2001, p. 14).

This paper by contrast argues that all marketactivity, conventional or alternative, is struc-tured by forms of governance regulating mar-ket entry, links among participating actors,and the distribution of benefits. Economic soci-ologys concept of embeddedness (Granovetter,1985; Polanyi, 1944, 1957) suggests that mar-kets do not operate in social or political isola-tion but are instituted processes. Theapparently objective organizational imperativesof production and trade in todays globalizingmarkets are shaped by particular constellations

of social and political relations (see Boyer,1997; Randles, 2003). Economic sociologysbroader conception of governance can betterilluminate the difficulties Fair Trade and FSCsalternative governance forms confront whenthey operate in conventional markets struc-tured by quite different, even hostile forms ofgovernance. As will be discussed below, forexample, Fair Trades alliance with small roast-ers, the strength of its public political base, andits focus on supporting smallholders access tonew markets have facilitated a wider distribu-

tion of benefits to small producers. FSCs com-mitment to operation in the conventional woodproducts market, by contrast, has not yetyielded significant new markets or a significantshare of the value added of certification for par-ticipating smallholders and communities.

A key dimension of economic activitysembeddedness, Polanyi argued, involves pre-dominant cultural patterns such as the reciproc-ity and redistribution principles of pre-industrialsocieties (1944). Contemporary economic soci-ologists have pursued the link between culture

and economic activity in market societies,examining, for example, historical variationsin cultural definitions of rational and appropri-ate economic behavior in industrial socie-ties (Block, 1990; Zelizer, 1992). Sociologistsemploying institutional approaches (DiMaggio,1990; Powell & DiMaggio, 1991) have studiedhow internalized cultural rules create orderand shape action within organizations. Biggartand Beamish explore the importance in themaintenance of economic order of cultural con-ventions: collective understandings and guides

for economic interpretation and action whichprovide a basis for judging the appropriate-ness of acts by self and others (2003, p. 444).

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Raynolds focuses on how individual and col-lective social actors ideologically and materiallyconstruct, maintain, and transform commoditynetworks (2002, p. 389).

Although the organizational ends of alterna-

tive initiatives such as Fair Trade and FSC maydiffer, operation in conventional markets in-volves utilizing means shaped by those marketspredominant cultural assumptions, rules,norms and behavioral expectations. This studyexamines how the widely taken-for-grantedneoliberal logics and rules of the game whichgovern globalizing coffee and wood productmarkets shape the experience of Fair Tradeand FSC certification. 5 As will be describedbelow, Fair Trade directly challenges theassumptions of conventional markets, but has

embarked on a mainstreaming strategywhich critics fear may introduce organizationalimperatives inimical to Fair Trades alternativevalue system. Despite its roots in environmen-tal campaigns and boycotts against the forestindustry, many of the major assumptionsunderlying FSC certification are compatiblewith rather than challenging neoliberal under-standings of the conventional wood productsmarket.

Below, I explore the experience of Fair Tradecoffee and FSC forest certification with special

reference to Mexico. I then propose a prelimin-ary framework for assessing the problems ofoperating in mainstream markets while retain-ing alternative orientations, focusing on the dis-tribution of benefits of participation, the extentto which conventional market logics and prac-tices are questioned, and how internal gover-nance manages diverse stakeholder interestsand influence. I suggest that both schemes havemuch to learn from each other about how tomanage contradictory practices, objectivesand stakeholder interests. More generally, these

two cases show that the performance of suchvoluntary market reform mechanisms in a glob-alizing system depends much on how gover-nance is organized to manage internal andexternal pressures to conform to conventionalassumptions and practices.

3. FAIR TRADE COFFEE AND FORESTSTEWARDSHIP COUNCIL

CERTIFICATION AND LABELING

According to Bass et al., certification is aprocedure by which a third party provides writ-ten assurance that a product, process or service

conforms to specified standards, on the basis ofan audit conducted to agreed procedures(2001, p. 2). Market-based certification instru-ments presume that consumers are willing to re-ward producers superior practices with price

premiums or improved market access (Basset al., 2001, p. 21; Hock, 2001, p. 348). The sig-nificant degree of success of Fair Trade andFSC certification illustrates that market-basedinstruments can be used to make progress to-ward environmental and social goals. Theirvery success however subjects both schemes toincreasing pressures from conventional marketlogics and practices. Within Fair Trade a ten-sion has emerged between what Raynolds(2000) describes as a more radical conceptionof Fair Trade as a tool for modifying the dom-

inant economic model, and a more pragmaticvision emphasizing insertion of Southern prod-ucts under fair conditions in Northern markets.An analogous tension exists within the FSC ini-tiative between the advocating of FSC princi-pally as a tool for protecting the worlds mostthreatened forests, and a buyer-driven focuson delivering large quantities of certified woodproducts to northern-based buyers (Basset al.,2001, p. 86).

(a) Fair Trade coffee

According to the International Federationfor Alternative Trade, Fair Trade is a tradingpartnership which aims at sustainable develop-ment for excluded and disadvantaged produc-ers (Robinson, 2000, p. 21). Coffee is the FairTrade commodity with the longest history andthe highest sales (James, 2000, p. 23). It is oneof the five most important commodities in theworld market and is principally produced bypoor, small-scale farmers in the global South.Since the 1989 collapse of the International

Coffee Agreement (Ponte, 2002, p. 1105), priceshave fallen to their lowest level in a hundredyears, and millions of small farm families havesuffered the loss of their livelihoods (FLO,2003; Murray et al., 2003, p. 3; Oxfam, 2002).Fitter and Kaplinsky report that Fair Tradeproducts in 2001 accounted for about 1% of to-tal global coffee sales (2001, p. 12). In 2003,over 300 Fair Trade coffee grower associationsexisted, representing some 500,000 small-scalegrowers in Latin America, Africa and Asia.Fair Trade coffee imports in Europe in 2002 to-

taled 27 million pounds valued at over $300million dollars. Transfair registered sales of4.7 million pounds of Fair Trade coffee in



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2000 in the United States and Canada, with aretail value of $64.4 million (Giovannucci,2001; OBrien, 2002).

Mexico is the fourth most important coffeeproducer in the world. Ninety-two percent of

Mexicos coffee producers have less than five

hectares of land (Robinson, 2000, p. 24). Mex-ico is the single largest Fair Trade coffee sup-plier, representing 23% of global Fair Tradeexports (Murray et al., 2003, p. 6). In 2003,there were 36 Mexican certified Fair Trade cof-fee producer associations (FLO, 2003).

(i) The coffee commodity chain and alternativetrade arrangements

Since 1989, power has shifted to roasters rel-ative to producers and other actors in the coffee

chain. A buyer-driven commodity chain (Ponte,2002, p. 1107), todays international coffee mar-ket is dominated by large roasters, includingsome of the worlds largest corporations.Roasters are increasingly concentrated, withfive giant agro-food corporations shaping theworld retail coffee market: Kraft, Nestle, Proc-tor & Gable, Sara Lee and Tchibo (Waridel,2002, p. 53). Despite coffee prices which arewell-below production costs, the TNCs buyingand roasting most of the worlds coffee are

making unprecedented profits (FLO, 2003; Ox-fam, 2002, p. 21). Producersshare of coffee in-come dropped from 20% in 1989 to 13% in 1995(Ponte, 2002, p. 1106).

Though the coffee commodity chain varies

from country to country, Waridel observes thatthe Mexican coffee chain best represents the ba-sic coffee route (Figure 1). It has historicallybeen difficult for small producers to supply thesectors giant corporations, who generally haveused in-house purchasing organizations or mul-tinational dealers to supply needed volume andvarieties (Renard, 1999, p. 494).

Nevertheless, the international coffee chainpresents unique opportunities to organize coffeeproduction, trading and consumption outsidelarge corporate channels. Despite the concen-

tration among roasters, Renard points towarda growing number of small roasters. These rep-resent interstices in the globalized marketwhere small-scale producers can enter undermore favorable conditions 60 (1999, 2003; alsoseePonte, 2002, p. 1111). The growth of smallroasters has been spurred by the rapid growthof the specialty coffee sector, which now mayaccount for as much as 40% of US sales (Ox-fam, 2002, pp. 25, 26). 6 With their direct buy-ing relations with producers and more direct

Small producers

Local middlemen

Consumers

Retailers

Roaster-distributors

Importers

Multiple brokers

Exporters

Processors

Plantation workers

Large landowners

Figure 1. The coffee commodity chain. Source:Waridel (2002, p. 43).



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access to consumers, specialty coffee roastershave been most open to providing niches forsustainable coffees such as Fair Trade, or-ganic and shade grown products (Fitter & Kap-linsky, 2001, p. 12; Giovannucci, 2001).

Unlike FSC certification, Fair Trade aimsexplicitly to alter trade relations along themainstream coffee commodity chain. Coffeeproducers operations must be small-scale andfamily-based, be organized into politically inde-pendent democratic associations, and pursueecological goals (Murray et al., 2003, p. 20).Coffee buyers must purchase directly fromgrower organizations with contracts extendingbeyond one harvest cycle, guaranteeing theFLO minimum price of $US1.21 per pound(Arabica coffee), and paying a social premium

of $US0.05 per pound (Murrayet al., 2003, p.6).

Fair Trade is unique among certificationschemes worldwide because the buyer, ratherthan the producer, pays the cost of certificationand monitoring by FLO. As these costs arepassed up the commodity chain, Fair Trade ismostly financed by the consumers willingnessto pay more for fair coffee (FLO, 2003). Thiswillingness to pay is supported by the buildingof direct personal ties between Northern con-sumers and Southern producers. With special

niche commodities such as Fair Trade coffee,Renard writes, moral and ideological consider-ations are added to the value of the product it-self. Consumers are conscious of theirparticipation in humanitarian or charitable ac-tions when they buy a certain product over an-other 60 (1999, p. 490; also seePonte, 2002, p.1110).

(ii) Fair Trade coffees mainstreaming strategyThough its roots lie in the Alternative Trade

(ATO) movement, Fair Trade began offering

products in large, non-ATO channels in theearly 1980s and in 1997 a labeling scheme wasintroduced under the Fair Trade LabellingOrganization (FLO) (Raynolds, 2000, p. 301;Renard, 2003, p. 90; Tallontire, 2000). Today,Fair Trade pursues a mainstreaming strategywhich aims to achieve rapid growth in marketshare by encouraging corporations, govern-ments, major retailers and other large economicactors to support Fair Trade (Zonneveld,2003). Led in the United States by TransFairInternational (James, 2000, p. 13) mainstream-

ing has fueled rapid growth in Fair Tradesmarket share (Raynolds, 2002, p. 410). Thestrategys most visible recent success has been

the enlistment of Starbucks, now the largestUS buyer of Fair Trade coffee (Renard, 2003,p. 93). Yet Fair Trades shift to the FLO-spon-sored labeling model has sparked some concernamong participants. Producers and their repre-

sentatives, for example, have observed that reg-ular visits of Northern consumer groups toSouthern cooperatives have declined as the pre-vious ATO social movement strategy is re-placed by a depersonalized niche marketplan (Murrayet al., 2003, p. 20).

Mainstreaming is also now pursued by certi-fied coffee producer organizations, some ofwhich have begun negotiating direct marketingrelationships with large corporate actors,including supermarkets, specialty roasters andcoffee retailers (Murrayet al., 2003, p. 23, 24).

Mexican cooperatives, for example, recentlynegotiated a 10 year contract with Carrefour,the second largest distributor group in theworld, to sell their organic coffee outside FairTrade channels under the trademark Bio Mex-ique (Renard, 2003, p. 92). Aranda and Mor-ales argue that these new arrangements are aproduct of Fair Trades own success. They alsoreflect the fact that producers must pursuediversified marketing because few can sell alltheir certified coffee in Fair Trade markets(2003, p. 20). VanderHoff Boersma, however,

fears that these new arrangements could alsoundermine the viability of Fair Trade (2003,p. 11).

(b) FSC forest certification

The Forest Stewardship Council is an inde-pendent, nonprofit organization of representa-tives from environmental, social, forestindustry, indigenous peoples, community for-estry and forest certification organizations.FSC sets guidelines for sustainable forest man-

agement, accredits and audits third party certi-fication agencies (FSC, 2003; Gerez Fernandez& Alatorre Guzman, 2003, p. 5). Established in1993 in the wake of mass consumer movementsagainst tropical deforestation (Counsell & Lor-aas, 2002, p. 12), FSC represented an unprece-dented alliance between environmentalorganizations, the wood industry and forestproduct users (Fern Foundation, 2001, p. 15).Since FSCs founding, numerous other forestcertification programs have been developed(seeBass et al., 2001, p. 7), but FSC is widely

considered the most rigorous.FSCs performance based system requires

third party verification of forest management



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in the field (Mater, Sample, Grace, & Rose,1999, p. 6). FSCs global standards provide aframework for more specific standards for dis-tinct regions, countries or ecosystems (Counsell& Loraas, 2002, p. 31; Freris & Laschefeski,

2001, p. 9). Though it is widely viewed as anenvironmental conservation instrument, FSCcertification emphasizes the social and eco-nomic foundations of sustainable forest man-agement (Bass et al., 2001; Molnar, 2003, p.1; Rametsteiner & Simula, 2002, p. 97). Forexample, of FSCs 10 global principals, Princi-ple Two safeguards the resource rights of localcommunities with legal or customary tenure oruse rights. Principle Four ensures that localcommunities benefit from forestry throughemployment, services and training and requires

adequate conflict resolution when tenure dis-putes arise (Kruedener, 2000, p. 16).

Contrary to Fair Trades modification oftrade relations, FSC certification focuses princi-pally on the conditions and impact of forestproduction. Also unlike Fair Trade, forest pro-ducers are responsible for the direct and indi-rect costs of FSC certification. With fewexceptions and contrary to initial expectations,no consistent price premium has emerged forcertified wood products. Most participants,particularly those in the global South, have

yet to find that certification opens doors to sig-nificant new markets. 7

(i) The wood products commodity chain andalternative trade arrangements

Though trade in certified wood products isnot explicitly tracked in official statistics,researchers estimate the certified wood supplyat 243 million m3 per year. Certified wood rep-resents as much as 5% of some European mar-kets and 1% in the United States (Atyi &Simula, 2002, p. 19; Bass et al., 2001, p. 42).

Unlike the coffee sector, both wood productproduction and trade are dominated by North-ern countries.

Like that of coffee, the international woodproducts market is undergoing concentration(Rice, Ozinga, Marijnissen, & Gregory, 2000,p. 30). Almost half the annual global wood har-vest is now processed by 50 forest productscompanies. The top 50 users of the wood con-sume 10% of the total (WWF, 2001a). At thesame time, the rest of the wood products mar-ket is quite fragmented, with the wood products

chain varying greatly by country and type ofproduct (Peck, 2001, p. 157; WWF, 2001a).Contrary to the relative simplicity of the coffee

commodity chain (Talbot, 1997, p. 61), com-plete wood product chains can involve hun-dreds of individual companies, many stages ofprocessing and transportation and multiplechanges in product ownership (Lawrence,

2002, p. 101; Peck, 2001, pp. 126, 154).Figure 2 illustrates a simplified diagram of

the basic wood products commodity chain.Does an interstice analogous that of FairTrade coffees small roasters exist in the woodproducts commodity chain which would favoran alternative model of production and trade?The most important successes in placing certi-fied wood have occurred in the DIY (Do-It-Yourself) retail sector, where supply chainsare simple and there is aggressive buyer pres-sure (Bass et al., 2001, p. 72). The certified

wood products market increasingly resemblesa buyer-driven commodity chain, with largeglobal retailers like B&Q, IKEA, HomeDepotand Lowes the key actors. Yet, as will be dis-cussed below, unlike in Fair Trade coffee theseretailers control markets that are not readilyaccessible to small-scale or community-basedforest producers in the South. They have alsodemonstrated relatively little interest in increas-ing end-consumer demand for certified wood.

Consumers

Retailers

Wholesale brokers

importing/exporting

Secondary manufacturers-

producing more complex products

Primary manufacturers-

producing sawnwood

Forest producers-producing logs

Figure 2. The wood product commodity chain. Adapted

fromBass et al. (2001, p. 45) and Lawrence (2002,

p. 101).



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(ii) Supply, demand and premiums in certifiedwood markets

Given the lack of a price premium or newmarkets for most certified producers, it mayseem paradoxical that both supply of and de-

mand for certified timber have grown dramati-cally in the 10 years since FSCs founding. Bymid-2002, over 109 million hectors of foresthad been certified under all schemes, represent-ing some 18% of the 600 million hectares ex-pected to produce wood in the next threedecades (Atyi & Simula, 2002, p. 10; VanDam, 2003, p. 3). As of July 2004, 43.93 millionhectares of forest had been certified by FSC,with 629 certificates held in 62 countries(FSC, 2004). Over 10,000 certified wood prod-ucts existed in the forest product market and

over 600 companies had joined certified woodbuyers groups promoted by the WorldwideFund for Nature (Molnar, 2003, p. 1).

Most of the impressive growth in certificationhas occurred in the North rather than thethreatened Southern tropical and natural for-ests that certification was originally establishedto protect. 8 Three years after FSCs founding,70% of all certified forests were still found indeveloping countries. Today most forest certifi-cation occurs in the temperate and boreal for-ests of the North and in large-scale industrial

forestry rather than in the South and in enter-prises operated by communities and indigenouspeoples. With respect to FSC specifically, tem-perate and boreal forests in the United Statesand Europe in 2002 represented the vast major-ity of the schemes certified areas (Atyi & Sim-ula, 2002, pp. 8, 10); tropical forestsrepresented only 12% (Simula & Ebaa Atyi,2002). According to FSC, 36% of its certifiedarea is held privately, 59% is publicly owned,and 5% is communally owned or administered(2004). The communal share of certification

raises concern given that communities in 2002owned or administered 11% of the global forest(or 25% if state-owned Northern forests are ex-cluded; Molnar, 2003, pp. ii, 30).

Interestingly, a significant demand for certifi-cation has developed without the appearance ofa systematic price premium or new markets formost producers. Members of WWFs GlobalForest and Trade Network generate over halfthe demand for certified wood products; suchbuyers groups account for two-third of the de-mand for FSC labeled products (Atyi & Sim-

ula, 2002, pp. 11, 17). Some critics fear thatlarge retailers demand and competition withother certification schemes 9 encourage FSC

to adopt a fast growth strategy. An FSC-commissioned Change Management Team re-marked in 2001 on:

the need to rapidly increase the supply of certified

timber for producers and retailers so there is a majorincrease in the volume of products carrying the FSCbrand name. The ultimate success of FSC will dependupon in large part its ability to put labeled productson the shelf. . . With the growing acceptance of theFSC as the preferred brand by a number of majorretailers (e.g., IKEA, B&Q, and The Home Depot)the pressure is on to FSC to deliver. Should FSC failto respond to the market demand for labeled prod-ucts, an ever increasing number of competing certifi-cation schemes stand ready and able to overtake FSC(cited inCounsell & Loraas, 2002, p. 26).

These pressures encourage a focus on large-

scale suppliers and buyers. Of course, its socialstandards notwithstanding, FSC has neveraimed to modify trade relations in the conven-tional market but has been committed princi-pally to promoting sustainable forestmanagement. Bass et al. observe, not surpris-ingly, that as it has grown, FSC has evolvedfrom an NGO concerned with addressing deg-radation and deforestation, particularly inSouthern forests, to a buyer driven preoccupa-tion with delivering large quantities of certifiedwood products, which has naturally led to a fo-cus on those big producers who already havewell managed forests and can readily supplythe produce (2001, p. 86).

This shift has been encouraged by the lack ofa certified wood premium, relatively higher cer-tification costs in the South, and general defi-ciencies in production and commercializationthat undermine Southern producers interna-tional competitiveness. Yet these structural fac-tors aside, FSCs longstanding commitment tomainstreaming has also allowed conven-tional market logics and practices to natu-rally lead to a predominant role for morepowerful, Northern-based actors.

4. IN THE MARKET BUT NOT OF IT?

In order to assess the challenges market-basedmechanisms such as Fair Trade and FSC faceretaining alternative orientations in the main-stream market, I propose a framework which be-gins to explore how the benefits of certified

commodity chains are being distributed; the ex-tent to which conventional market practices andlogics are questioned; and how internal gover-



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nance mechanisms manage the diverse interestsand influence of their participants.

(a) Changing commodity chain beneficiaries

Market-based mechanisms are predicated onthe assumption that social and environmentalobjectives can be achieved via individuals pur-suing their interests in the market. Therefore,how participants benefit from their involve-ment in Fair Trade and FSC certification iskey to understanding the capacity of these mar-ket-based initiatives to effect social change.

(i) The benefits and beneficiaries of Fair TradeFair Trade coffee significantly modifies the

conventional coffee markets distribution of

benefits. Although measuring monetary bene-fits is difficult, Fair Trade does contribute directand indirect benefits to small-scale farmers,their families, organizations, and communities(Murrayet al., 2003, p. 6). 10 The clearest directbenefit for producers is the guaranteed price,which in 2002 represented as much as doublethe conventional market price. Participantsac-cess to credit has improved, largely due toFLOs prefinancing requirements but also be-cause certification lends a certain prestigesince it is assumed that the organization is sub-

ject to external monitoring and also demon-strates initiative and a capacity to enter newmarket niches (Aranda & Morales, 2003). FairTrade has also provided farmers communitieswith alternatives to migration (Murray et al.,2003, pp. 7, 10). The Fair Trade social premiumhas been used to strengthen cooperatives tech-nical support of producers activities and hasbeen invested in a wide array of communityprojects (i.e., seeVanderHoff Boersma, 2003).

Important indirect benefits have includedstrengthening farmers organizational capacity.

For example, Fair Trade can create a securespace for an apprenticeship in commercializa-tion in which producers can learn in a lowerpressure situation (Gonzalez, 2003). Organiza-tional strengthening is also visible as producergroups collaborate to work within Fair Tradeand influence policy (Murray et al., 2003, p.13). These new political spaces are particularlysignificant given the loss of opportunities fornegotiation as governments have retreated fromcoffee market regulation (Ponte, 2002, p. 1116).

Nevertheless, FLO estimates that Fair Trade

export capacity in Latin America, Africa andAsia is roughly seven times greater than currentdemand. Many producer groups worldwide are

likely capable of meeting Fair Trade standards,but are not on the FLO registry. Already certi-fied producers are usually able to market only aportion of their certified coffee through FairTrade channels (Murray et al., 2003, pp. 15,

16).Interviewees in several well-established Fair

Trade cooperatives expressed concern that theinitiative may be serving the strongest and mostestablished producer organizations rather thanaddressing the most marginalized. Membersof the Mexican cooperatives UCIRI and LaSelva also observed that stagnant Fair Trademarkets may be fomenting competition amongproducer organizations (Taylor, 2003, p. 25).Nevertheless, the regions oldest Fair Tradecooperatives continue to contribute to poverty

alleviation in their communities; removingthem from the registry may not ensure newerparticipants with comparable additional bene-fits (Murrayet al., 2003, p. 19).

The organizational problems arising from theoutpacing of demand for Fair Trade coffee helpexplain why Fair Trades promoters, includingFLO and TransFair, are investing in main-streaming strategies, despite the risks of includ-ing the original targets of Fair Trades critique,powerful global corporations, among FairTrades key participants.

(ii) The benefits and beneficiaries of FSC certi-fication

As a market-based mechanism for improvingforestry management, certification originallypromised incentives such as a price premium,access to new markets and improved marketstability (de Camino & Alforos, 2000, p. 25).For the most part, forest certification has notdelivered on promises of improved direct in-come for producers or access to new markets.Certification has mostly afforded greater mar-

ket stability to producers already enjoying mar-ket access as certification increasingly becomesa requirement for entry (Rametsteiner & Sim-ula, 2002, p. 97).

FSC forest certification has, of course, impor-tant nonmonetary benefits. Certification helpscompanies with their risk management strate-gies, providing them with third party verifica-tion of sustainable practice (Bass et al., 2001,p. 64). Certification, particularly through FSC,provides communities and indigenous groupswith a defense against criticism for their alleged

role in forest degradation and sometimes hasbeen a key resource in communities and indige-nous groupsstruggle for more secure land and



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resource tenure. Finally, FSCs explicit empha-sis on stakeholder involvement in evaluationand standard setting has created new spacesfor community and indigenous group participa-tion in policy debates (Gerez Fernandez & Ala-

torre Guzman, 2003; Madrid & Chapela, 2003;Molnar, 2003; Robinson, 2000).

Yet forest certification overall appears tobenefit most directly the best managed andpowerful participants (Kruedener, 2000, p.12). Despite the role public concern over tropi-cal forest degradation played in establishingcertification, temperate and boreal forests instate and industrial hands now represent thevast majority of FSC-certified forests (Simula& Ebaa Atyi, 2002). Some critics fear that thecertification process exacerbates inequalities

among diverse participants. Others are con-cerned that certification may not be havingthe desired positive impact on the worlds mostthreatened forests (Atyi & Simula, 2002; VanDam, 2003, p. 6).

Unlike Fair Trade, producers are responsiblefor the cost of certification. Under Mexicanconditions, average evaluation and monitoringcosts can total $US36,000 over five years. Ifindirect costs of prescribed corrective actionsare included, that cost can reach $US60,000(Madrid & Chapela, 2003, p. 5). At the same

time most of the value-added generated by cer-tification is appropriated elsewhere in the com-modity chain. Except for occasional temporarysupply shortages (Atyi & Simula, 2002, p. 32;Basset al., 2001, p. 31, 71) or direct trading tiesbetween particular buyers and producer organi-zations (Molnar, 2003), a price premium forcertification has not appeared and is reportedlyunlikely to appear in the near future. Retailershave been consistently reluctant to pay a pre-mium, arguing that end-consumers are unwill-ing to pay more for certified forest products.

Moreover, certification is often becoming partof buyers minimum expectations of accept-able quality 11 and a minimum condition formarket entry.

Although FSC emphasizes the inclusion ofcommunity or indigenous group operations,communal forestry faces significant barriers tocertification (Molnar, 2003). Certified commu-nity forestry operations face the same barriersto international competitiveness as before,including organizational inefficiencies, lack ofcommercialization expertise, and difficulty in

satisfying buyers demands for certain species,specifications and volumes (Gerez Fernandez& Alatorre Guzman, 2003). Thus far, certifica-

tion has not provided niche markets in whichcommunities can compete effectively. Giventhe lack of a secure market or a price premium,communities face difficulty in financing certifi-cation. Community forest certification in Mex-

ico and Guatemala has been financed byinternational donors, forestry industry, andgovernment grants (Molnar, 2003; Taylor, inpress). These subsidies, however, cannot be ex-pected to continue indefinitely.

Unlike Fair Trades FLO and consistent withFSCs production focus, FSC does not providesystematic commercialization assistance. In-deed, forest certification was not designed toproduce economic benefits to forest communi-ties (Madrid & Chapela, 2003, p. 7). Neverthe-less, FSC originally aimed to help protect

threatened Southern forests. If the Southernforests increasing found in community hands(White & Martin, 2002) are to be protectedby certification, ways need to be found to makecommunity forest certification economicallyfeasible over the longer term. Currently, VanDam argues, a central paradox of forest certifi-cation is that an instrument whose principlevalue lies in the markets functioning is actuallydisassociated from the market (2003, p. 6).

(b) Questioning conventional market logics and

practices

Though markets are widely assumed to oper-ate independently of society, their workings areactually shaped by taken-for-granted culturalassumptions, rules, norms and behavioral expec-tations. A second set of questions about the abil-ity of market-based initiatives to maintainalternative orientations concerns, therefore,concerns the extent to which they question con-ventional market practices and logics.

(i) Fair Trade coffee and conventional per-spectives on the market

Fair Trade challenges the organization of so-cial relations in the conventional coffee com-modity chain and with it, the logics andassumptions that underlie the conventionalmarket. Raynolds writes that Fair Tradedestabilizes neo-liberal knowledge claims(2002, p. 389). Fair Trade objects to theabstraction of the market as a depersonalizedmechanism operating outside of social institu-tions and cultural values. It recognizes that eco-

nomic activity is a social activity invested byhumans with social and cultural meaning.Reflecting its origins in the ATO movement,



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Fair Trade has aimed to re-personalize the mar-ket by creating personal ties between Northernconsumers and Southern producers of coffee.

Fair Trade counters neoliberalisms view ofthe economy as a level playing ground by argu-

ing that conventional markets are dominatedby the most powerful actors who shape marketrules in their own interest. Conventional mar-ket organization marginalizes weaker partici-pants unfairly and can produce outcomeswhich are irrational for society. The currentcoffee crisis, for example, is in large part the re-sult of neoliberal market policies which under-mined the sectors international regulatoryframework after 1989 and promoted overpro-duction which now threatens the survival ofthe industry itself (FLO, 2003; Oxfam, 2002).

Fair Trade challenges assumptions that con-ventional ways of setting prices are the onlylegitimate instrument for valuing commoditiesand organizing international exchange (Ray-nolds, 2002, p. 409). It recognizes that pricesare not the automatic product of depersonal-ized demand and supply forces, but reflect thesocial forces shaping the organization of pro-duction and consumption, with all their inter-mediate stages. Fair Trade attempts to modifyconventional trading relations by setting pricesthat can cover producers costs, provide their

families with an adequate standard of livingand support their communities development.

Fair Trades re-personalized trade relationsare animated by an alternative set of moral val-ues or civic norms, including fairness, trust andequality among consumers and producers(Raynolds, 2002, p. 389; Renard, 1999, p.490). Northern consumers and Southern pro-ducers share global citizenship in a world-widecommunity (Renard, 2003, p. 91). ThroughFair Trade, Northern consumers can take per-sonal responsibility for their link to the condi-

tions under which Southern producers live.Yet because Fair Trades alternative values

and practices are also socially embedded, theyare still subject to forces within the conven-tional market in which they operate. FairTrades shift to a mainstreaming strategy re-sponds to the urgent need to expand its market,yet may undermine Fair Trades own alterna-tive logic and practice. Numerous Fair Tradecoffee participants expressed concern, for exam-ple, that many certified producers lack a clearunderstanding of Fair Trade. With the de-

emphasis of direct ties and visits betweenNorthern consumers and Southern producers,an important avenue for enhancing producer

understanding of and commitment to FairTrade has been weakened (Murray et al.,2003, p. 16, 17).

The forces pushing FLO and its affiliates toadopt their mainstreaming strategy are real.

Renard writes: although the fair coffee initia-tive attempts to escape the competition-drivenmarket, because of the context of free marketand globalization, it eventually finds itself obli-gated to negotiate its niche in the market(1999, p. 498). Fair Trades mainstreamingstrategy incorporates some of the global coffeesectors most powerful actors, whose ownactions in the conventional market have beentargets of Fair Trades critique. It will bethe latters challenge to ensure that the schemeretains its commitment to the least powerful

participants in the commodity chain.

(c) FSC certification and conventionalperspectives on the market

Unlike Fair Trade, FSC certification has notdirectly challenged the assumptions underlyingthe conventional wood product market. Forestcertification initiatives generally attribute forestdegradation not to the market itself but to thelack of effective regulation. Voluntary, thirdparty-verified certification is posed as a more

acceptable and effective regulatory instrumentthan state or voluntary industry self-regulation.FSC has been shaped by a winwin convic-tion that conventional market rules and con-ventions can be harnessed to address social,environmental and economic causes of forestdegradation while satisfying diverse stake-holder interests.

Many of the major assumptions underlyingFSC certification are compatible with neolib-eral approaches to market organization. FSCsstandards and principles are designed to be glo-

bal and universal in nature (though within itsframework national and regional standards en-sure appropriate response to local ecologicalconditions). Van Dam reports that the Eco-nomic chamber of FSCs General Assemblyhas strongly defended identical standards forall producers, whether they be large firms, smallproducers, communities or indigenous groups(2003, p. 12). The insistence on uniform rulesof the game dovetails with a laissez-faire pre-sumption that market actors are individualswith equal opportunities to engage in transac-

tions, regardless of social, economic, geo-graphic location or technical, financial andhuman capacity. Nevertheless, the playing field



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of free markets is neither level nor free of un-equal power relations (Block, 1990). ThatFSC certifications diverse participants enterthe scheme as unequals is highlighted after 10years by the strong predominance of certificate

holders in state and industry controlled temper-ate and boreal forests.

FSCs scheme assumes that if consumers va-lue environmental and social objectives, marketmechanisms will translate their preferences intosupply of the relevant services. Observers ofcertification today frequently express disap-pointment that consumers have been unwill-ing to pay a premium for forest certification,despite initial optimistic predictions (Peck,2001, p. 245). Nevertheless, relatively little evi-dence exists that significant resources have been

invested in promoting end-user consumer de-mand for forest certification (Bass et al., 2001,p. 64).

Forest certifications producer-pays prac-tice of covering certification costs dovetailswith neoliberal assumptions that in a competi-tive market, all participants benefit as individu-als and therefore should assume risks asindividuals. The lack of a price premium forcertified products carrying additional informa-tion about their origins would appear to con-tradict conventional market assumptions that

products should be priced to reward value-added. On the other hand, also in conventionalmarket terms, as long as most producers con-tinue to pay for certification themselves andin the absence of more direct end-consumer de-mand, little incentive exists for buyers furtherup the commodity chain to provide a premium.

It is important to note that FSCs own viewof the link between the well-being of forest-dependent communities and forest conserva-tion encourages it to seek to respond moreeffectively to Southern producer needs. FSCs

program to develop new certification proce-dures for SLIMFs (Small and Low-intensityManaged Forests) (FSC, 2003; Robinson &Brown, 2002), and the internal discussions ofgroup and stepwise certification illustrate thatwithin FSC significant counters exist to purelyneoliberal economic perspectives on certifica-tion.

(d) Governance arrangements and theinstitutionalization of alternative practices

The third set of questions I propose forassessing market-based social and environmen-tal change initiatives concerns the extent to

which formal and informal internal governancearrangements facilitate retaining an alternativeset of objectives while operating in the market.Both FLO and FSC promote broad participa-tion by their diverse stakeholders in standards

and policy making. Both NGOs have devel-oped formal structures to channel stakeholdersparticipation. At the same time, nonetheless,their internal governance and organizationaltrajectories are shaped by the social and politi-cal relations of their respective commoditychains.

(i) Fair Trade coffee governanceAn international umbrella organization of

national Fair Trade labeling initiatives, FLOis governed by a Board of Directors and vari-

ous specialized bodies. A FLO Fairtrade For-um is held every two years in which diversestakeholders meet to discuss issues. RegionalProducer Assemblies are held regularly betweenForums to strengthen producer involvement(FLO, 2003). Nevertheless, FLOs formationintroduced into Fair Trade what some partici-pants have characterized as a more impersonalstructure than that of the previous ATO sys-tem. One of the original Fair Trade movementactivists, UCIRI advisor Franz VanderHoffBoersma, remarked that though progress has

been made toward greater democratization,FLO is still characterized by a pyramid deci-sion-making structure, where the top often doesnot communicate with the base (2003, p. 20).Other participants have complained that gover-nance of the Fair Trade coffee movement hasbeen dominated by Northern interests (Murrayet al., 2003, p. 22).

In response to such criticisms, FLO hasrestructured to enhance the participation ofproducer groups, industry and other stakehold-ers. Certification is now managed by an auton-

omous unit within FLO. FLOs Board ofDirectors now has four producer organization,two trader and six national labeling organiza-tion representatives, all democratically elected.Producers, traders, ATOs, experts and otherstakeholders also now serve in a Standardsand Policy Working Group and a CertificationCommittee. A new Producer Support Networkhas been established to address the needs ofsmall-scale farmers and workers. Field liaisonofficers have been appointed in numerous pro-ducer countries and a Product Management

team has been formed to provide producerswith commercialization assistance (FLO,2003; Murray et al., 2003, p. 21). At the same



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time, producers have been encouraged to estab-lish their own collaborative organizations, suchas the Latin American Association of SmallCoffee Farmers, which comprises 17 coopera-tive members in 10 Latin American countries

(Taylor, 2003, p. 8).Outside of these formal governance struc-

tures, small specialty roasters have had less for-mal but crucial influence on Fair Tradesorganizational trajectory. With their relativelydirect ties between producers on one end andconsumers on the other, these small roastershave had a strong interest in helping developFair Trade coffee networks. Yet the shift to amainstreaming strategy introduces new, morepowerful corporate actors like Starbucks andCarrefour into the Fair Trade coffee network,

resulting both in dramatic growth and argu-ably, in greater vulnerability for Fair Trade.With 1% of its coffee supplied certified as FairTrade, Starbucks has reinforced its corporateimage as socially responsible while maintainingits conventional agro-industrial suppliers (Ray-nolds, 2002, p. 414). By virtue of their power inthe market these corporations quickly becomemajor Fair Trade players and stakeholders. Re-nard observes that

if Starbucks were to withdraw from participation theTransFair label, little would remain of Fair Trade inthe United States where, unlike Europe, its introduc-tion was not preceded by a large campaign to explainto consumers the meaning of the label and who cer-tifies, making attempts at deception easier (2003, p.93).

At the same time, certified coffee producergroups in Mexico have begun developing trad-ing arrangements with corporate actors inde-pendently of FLO (Murray et al., 2003, p.23). It is difficult to fault these producersinter-est in corporate contracts as Fair Trade is cur-rently unable to absorb all their certified coffee.However, corporations perception of a com-mercial advantage in Fair Trade does not nec-essarily signal a sharing of Fair Tradesprinciples. Majomuts leaders observed, forexample, that . . .nobody knows [corporate ac-tors] objectives, to support producers in thelong term or launder their public images(Perezgrovas & Cervantes, 2003). VanderHoffBoersma remarks that such arrangements couldundermine Fair Trades viability and are likelyto confuse consumers about Fair Trade stan-dards (2003). Much of Fair Trades past effec-

tiveness has stemmed from the clarity of itsobjectives and values and the direct access it en-

joyed to consumers. The incorporation of large

corporate actors into the network introducesnew, powerful influences over Fair Tradescommercialization strategies, and potentially,over the message it conveys to consumers aboutits products and the movement itself.

(ii) FSC governanceFSCs formal governance system reflects its

origins in FSCs historic alliance of NGOs, hu-man rights groups and industry. FSC has threeequal chambers in its General Assembly:Economic, Environmental and Social. Eachchamber is divided into subchambers with rep-resentatives from North and South, each withhalf of total chamber votes (Bass et al., 2001,p. 5). FSCs Board of Directors, elected fromthe different chambers, includes representatives

from environmental NGOs, rural developmentagencies, human rights and workers organiza-tions, industry and consumers of forest prod-ucts (Gerez Fernandez & Alatorre Guzman,2003, p. 5). FSCs global standards are devel-oped and modified through a participatory pro-cess involving environmental, social andeconomic stakeholders and provide the frame-work for more specific standards for distinct re-gions, countries or ecosystems (Counsell &Loraas, 2002, p. 31; Freris & Laschefeski,2001, p. 9; Van Dam, 2003, p. 3).

FSC has been criticized for the predominanceof the Economic chamber, largely controlled byrepresentatives of large industry (Bass et al.,2001, p. 5). The Social chamber and Southerninterests are said to be poorly represented inkey decision making. Counsell and Loraas ob-serve that though they have equal votes, theEconomic chamber represents 46% of FSCmembership; the Environmental chamber rep-resents 36% and the Social chamber: 18%.These critics argue that FSCs clients areincreasingly becoming large-scale commercial

interests rather than the smaller scale interestsand NGOs that inspired its founding (2002,pp. 7, 8, 32). According to Bass et al., FSChas nevertheless restructured to promote a bet-ter balance of influence and interests, establish-ing nondiscriminatory and flexible standardsfor local conditions, developing new guidelinesfor regional standards, implementing groupcertification, and channeling more support toSocial chamber meetings (2001, p. 94).

Outside of FSCs formal governance arrange-ments, large retailers exercise considerable

informal power as the key actors in the certifiedwood products chain. 12 Unlike specialty coffeeroasters in Fair Trade, wood product retailers



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appear to appropriate most of the benefits ofcertifications value added relative to producers.They may also lack serious interest in generat-ing growth in end-consumer demand for certi-fied wood products. Retailers have opposed a

price premium, arguing that consumers areunwilling to pay more for certified wood prod-ucts. Though the evidence of consumers will-ingness to pay is mixed, several studiessuggest that Northern consumers are indeedprepared to pay a significant premium (Ramet-steiner et al., 1998; Thornber, 1999; Vlosky,Ozanne, & Fontenot, 1999; WWF, 2001b).

Little evidence exists of significant, system-atic investment in developing end-user demandfor certified wood products. This lack of inter-est in end-user demand, along with the fact

that they rarely pay a premium to producers,would make it appear that retailers are seekingto control demand in certified products (Basset al., 2001, p. 64). Large retailers reap the ben-efits they need from certification without a pricepremium or the difficult to control end-user de-mand. Retailers principal interest in certifica-tion lies in risk management and reputationenhancement as it protects them from criticismby environmental groups and government regu-latory agencies. 13 As an executive of UK retai-ler B&Q stated, we werent ever going to have

customers demanding sustainable timber in ourstores. But we knew that if our name, B&Q,was associated with destruction of tropicalforests or even temperate forests, our brandname. . .would be damaged (quoted inCoun-sell & Loraas, 2002, pp. 12, 13). Large retailerspower in the wood products market and byextension, their influence over certificationschemes committed to working in mainstreammarkets, have helped produce what critics likeCounsell and Loraas describe as a subtle shiftfrom the use of FSC principally as a tool for

improved forest management to one of im-proved marketing of forest products (2002,p. 14).

Both FLO and FSC have made serious effortsto encourage greater balance among the diverseinterests represented in their formal governanceschemes. Yet governance of both initiatives isincreasingly subject to the influence of powerfulretail actors in their respective commoditychains. Fair Trade coffee involves a more diver-sified set of actors at the retail end of its chain,particularly in Europe. This reflects its ATO

roots and the continuing importance of smallspecialty roasters. FLO will likely find it easierto retain significant alternative organizational

objectives within the conventional market.Nevertheless, the growing influence of largecorporate actors in Fair Trade is a serious con-cern. Producers may be enticed away from FairTrade with terms more favorable in the short-

term, undermining FLO and Fair Trades

capacity to supply buyers with quality coffee.Consumers may become uncertain about thecontent and reliability of fair labeling. Itmight be advisable to reinvest in the direct tiesand visits that were a mainstay of Fair TradesATO stage as these were significant sources ofinformation for producers and consumers(Murray et al., 2003, pp. 16, 17, 22).

FSC, by contrast, has never relied on grass-roots demand for certified wood but rather de-pends greatly on demand from large-scale

retailers, particularly in the DIY sector. Morewell-established FSC certificate holders, pre-dominately in Northern temperate and borealforests, have more favorable access to theselarge-scale buyers. Certified community andindigenous groups in the South are unlikely toachieve significant access because of their diffi-culties in meeting large retailersvolume, speci-fication and quality demands. Nevertheless,some FSC stakeholders and observers havesuggested that the Fair Trade model might beadapted to make certification work for tropical

forests and small holders and communities.The powerful industrial interests represented

directly in FSCs formal governance schemeare unlikely to enthusiastically support a FairTrade-like critique of their role in the marketor one which undermines the risk and imagemanagement benefits they seek in certification.Nor are they likely to welcome a scheme offer-ing less rigorous standards for Southern pro-ducers (Van Dam, 2003). Nonetheless, a FairTrade forest certification model could conceiv-ably be compatible with FSCs overall scheme.

First, a Fair Trade forest certification processand label could be marketed via education ef-forts about the role communities play as effec-tive stewards of tropical and other threatenedSouthern forests. Second, a special Fair Tradecertification initiative within FSC with its ownspecialized label could be consistent with FSCsexisting practice of making its global standardsappropriately responsive to local ecological andgeographic conditions. The recent SLIMF ini-tiative already represents FSCs realization thatachieving sustainable management in small-

scale and low-intensity operations requires alocally appropriate approach. A Fair Tradeforest certification initiative would highlight



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the connection between healthy forests and so-cial justice for forest dwellers.

5. CONCLUSION

The Fair Trade coffee and FSC initiativesstruggle with contradictions posed by the factthat if they are to make meaningful progress to-ward their goals, they can neither isolate them-selves from mainstream markets nor abandontheir alternative visions of the market. Theorganization of Fair Trade coffees commoditychain and the nature of its product have facili-tated the shortening of the chain, the develop-ment of a more diversified powerbase and thepromotion of more direct, personalized ties

between Northern consumers and Southernproducers. Fair Trade moves toward main-streaming in order to generate benefits for moreimpoverished coffee farm families. Yet it mustwork with powerful corporate actors the FairTrade movement was established to critique.

FSCs wood products chain is more variableand can include many intermediaries, but dis-tribution is increasingly dominated by largeretailers. While more fair forest productchains may be possible, currently, FSCs com-modity chain does not facilitate more direct ties

between end consumers and producers thatmight support a fair approach to commer-cialization. FSCs mainstream strategy has al-lowed it to grow quickly and better competewith other certification schemes. Nevertheless,its impressive growth has occurred mostly inNorthern forests rather than as originally envi-sioned, among the threatened tropical forests,smallholders, and community and indigenousgroups of the South.

This paper has proposed a preliminaryframework for tracking and assessing the chal-

lenges and successes inherent in trying to be inthe market without being absorbed by it. FairTrade is producing significant benefits for manycoffee producers, their families and communi-ties. The slow growth of the Fair Trade coffeemarket poses a challenge to its ability to re-spond to the needs of many farmers still with-out access to fair trading conditions. FSCcertification presently is most accessible for al-ready well-managed operations, mostly in tem-perate and boreal forests of the North. It is nowseeking to develop more effective ways of pro-

tecting the threatened forests and forest peopleof the South. The Fair Trade coffee initiativeposes an authentic challenge to conventional

market discourse. FSC has not yet posed sucha challenge; its assumption of much of the con-ventional markets logic presently hinders itsability to justify a more effective approach toprotecting Southern forests. Both initiatives

are dealing with the internal influence of power-ful corporate actors. Fair Trade enjoys a morediversified powerbase in its commodity chain,with many specialty roasters whose interestsreadily overlap with Fair Trade values. FSCsoperation in the market continues to be princi-pally shaped by powerful industrial andretail interests less easily attuned to those oftropical and community forest operators inthe South.

While more in-depth, comparative research isnecessary, this preliminary framework has sug-

gested that the experiences of these two certifi-cation and labeling schemes have much to offereach other and the broader understanding ofmarket-based change mechanisms. Fair Tradecould learn from FSC how to incorporate pow-erful conventional actors effectively into a for-mal governance scheme and policy makingprocess which represent the interests of quitedisparate actors. Fair Trade could also learnfrom FSC how an NGO-initiated alternativemovement can be naturally moved awayfrom its original objectives by the conventional

operation of the market. Todays Fair Tradecoffee movement still needs the counterweightsto corporate power represented by its legacyof ATO commercialization channels, grassrootsconsumer campaigns and direct personalizedties between Northern consumers and Southernproducers. FSC could learn from Fair Tradehow to create end-user demand and developmarketing channels for a Fair Trade approachto community-produced forest products. Itcould learn from Fair Trade how to establishmore direct, personalized ties between produc-

ers and end consumers. FSC could also learnfrom Fair Trade how to develop a more criticaldiscourse based on fairness, without abandon-ing its commitment to making global standardswork within conventional market channels.

For Gereffi, Garcia-Johnson, and Sasser, cer-tification instruments have arisen as part of are-regulation trend in response to the failureof interventionist states to meet the demandsmade of them in a globalizing system. Volun-tary governance mechanisms are transformingpower relationships in the global arena, creat-

ing new global spaces, with new links among di-verse, often antagonistic actors (Gereffi,Garcia-Johnson, & Sasser, 2001, p. 64). Are



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these emerging market-based change mecha-nisms worthwhile? Neither the Fair Trade cof-fee or FSC initiatives are likely by themselvesto transform their markets into institutionswhich place people and the environment at

the center of production, trade and consump-tion. Nevertheless, they represent innovativeschemes which can demonstrate the viabilityof alternative logics and practices in the econ-omy.

Conventional global markets, just like alter-native market-based change instruments, aresocially embedded and their operations struc-tured by particular governance forms. Success-ful operation within the market withoutsurrendering commitment to an alternative ori-entation requires attention to both the formal

and informal ways in which market governanceis organized. It also requires close attention tohow mainstream logics and practices over time

can subtly shape organizational trajectories.The involvement of large conventional corpo-rate actors in Fair Trade could potentiallyundermine Fair Trades unique logic and prac-tices in favor of disadvantaged Southern pro-

ducers. FSCs efforts to make certification

more accessible to small, low-intensity andcommunity-based forest operators could beweakened without an appreciation of howmainstream market logics and practices system-atically encourage a privileged attention toNorthern forests and actors. In both cases, ten-sions between conventional and alternativemarket logics and practices are inevitablebyproducts of being in the market while notquite of it. But rather than signaling the ulti-mate inviability of the Fair Trade and FSC ini-

tiatives, those tensions may well prove to besources of valuable innovation in a changing,globalizing world.

NOTES

1. The Fair Trade coffee and FSC initiatives have

clearly been successful in terms of the rapid recent

growth in the number of participants, the quantity of

coffee and forests certified, and the seriousness with

which markets are greeting their products, and activists

and researchers their pioneering certification and label-ing models. Nevertheless, any definition of an endeavor s

success will be shaped by the objectives to which

efforts are dedicated. Fair Trade and FSC are complex

and often contradictory projects in which diverse stake-

holders pursue a wide range of objectives. This paper

proposes a preliminary framework for assessing the

initiatives capacity to operate in conventional markets

while retaining agendas of social and environmental

change via those markets.

2. Few studies have systematically compared the oper-

ation of Fair Trade and FSC certification, with Robin-son (2000) as a notable exception.

3. See, for example, Kaplinskys discussion of retailers

pursuit of systemic efficiency (2000, p. 11).

4. See, for example, Pontes argument that increased

corporate financialization of giant roasting companies

leads them to pursue short-term profit maximization to

increase share values even at the expense of increased

inherent instability of the system (2002, p. 1116).

5. Significantly, Ponte has combined GCC and con-

vention theory to argue that quality and other stan-

dardized conventions erect new entry barriers for

smallholders in developing countries. These overall

governance forms are, nevertheless, contested and

susceptible to change, re-definition or re-negotiation

(2002; 2003a, p. 18; also see Du Toit, 2002; Raynolds,

2002).

6. Using a more restrictive definition, Fitter and

Kaplinsky place the specialty coffee market share in

1999 at 17% (2001).

7. See Ponte (2003b) for a related discussion of

contrasts among sustainability certifications and their

relationship to Southern producers interests.

8. This is not to argue that temperate and borealforests are not among the worlds threatened forests,

but to show how FSCs original objective of

protecting Southern tropical forests has been over-

shadowed by its predominately Northern-based oper-

ations.

9. While once all certified forests were FSC, FSCs

current market share among all forest certifica-

tion schemes is about 23% (Atyi & Simula, 2002, pp.

11, 17).

10. Much of the following draws fromMurray et al.

(2003), a report surveying current conditions of Fair



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Trade coffee production in Latin America, based on

seven case studies of Fair Trade coffee cooperatives in

Mexico and Central America.

11. I am grateful to two anonymous reviewers for this

point.

12. See Dolan and Humphrey for a similar discussion

in the fruit and vegetable sector (2000, p. 156).

13. Also see Dolan and Humphreys discussion of

retailer interest in social and environmental standards

(2000).

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in the market but not if

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