Cover image courtesy of Fairtrade International
–by Aaron Wilson–
Abstract
As stated on their website, the mission of Fairtrade International is “to connect disadvantaged producers and consumers, promote fairer trading conditions and empower producers to combat poverty, strengthen their position and take more control over their lives.” Fairtrade International formed in 1977, with Fairtrade Africa joining as an independent branch in 2005. Fairtrade works by certifying commodities such as coffee, foods, and other products when the producers and traders meet their long list of standards. These standards, among many other things, include requirements on the safety, legality and pay of the workers. Farmers and artisans in developing countries can pay a premium and go through an auditing process to receive the Fairtrade label. Once verified, Fairtrade claims to help the producers by providing them stable prices, via a minimum price to cover production in case of a market crash. Fairtrade also provides a premium on top of the Fairtrade price, which the producers decide democratically how to use, purportedly to improve their community. Fairtrade can provide these benefits because of the higher prices consumers are willing to pay for what they understand to be ethically produced and traded Fairtrade goods.
While the intent seems noble, there have been many criticisms of the Fairtrade International model. One question is whether producers actually reap any long-term economic benefit from the Fairtrade system. Another issue is the added administrative difficulty for small producers to maintain compliance with the Fairtrade standards. Other criticisms include the lack of benefits apparent in poorer countries, such as those in Africa. Finally, even if the model works in general, is it worth the increased price well-wishing consumers pay, or should they save their money for other charitable causes? This article will investigate the merit of the Fairtrade Africa system along with its shortcomings.
From coffee to chocolate to cell phones, manufacturers everywhere seem to be slapping on the Fairtrade label, appealing to the consumer’s desire to make ethical purchases. Fairtrade calls itself “an alternative approach to conventional trade” (FLO), and their mission is to help impoverished producers succeed. They seek to do this by joining producers into cooperatives, vetting their processes, and labelling and marketing the product in other markets as “Fair Trade”. The idea is to rely on the desire of consumers to support products made ethically in poorer countries. This is a complicated task, and Fairtrade has been met with several challenges, especially in Africa. In this article I will investigate the merit of the Fairtrade Africa system along with its shortcomings.
On their website, Fairtrade international posts a clear vision statement: “Fairtrade’s vision is a world in which all producers can enjoy secure and sustainable livelihoods, fulfill their potential, and decide on their future” (FLO). It arose as an approach to solve a perceived failure in the free market system, where producers in poorer countries could not match the production in other areas, resulting in social and economic problems. It isn’t, however, really a new economic model. Fair Trade attempts to mend the market through the promotion of market-driven social justice rather than by creating a new model” (Montgomery 260).
Fairtrade works by auditing producers to ensure that they meet their long list of requirements. These standards, among many other things, include requirements on the safety, legality and pay of the workers. One goal of these standards is to “set clear core and development criteria to ensure that the conditions of production and trade of all Fairtrade certified products are socially, economically fair and environmentally responsible” (FT). An additional regulation for Fairtrade verification is membership in a cooperative (Haight 3). Once a producer has been verified, purchasers pay a premium for Fairtrade-labeled commodities which goes directly to the coop, and the producers then vote on how to collectively use the funds. Fairtrade also claims to help the producers by providing them with stable prices, via a minimum price to cover production in case of a market crash. Fairtrade can provide these benefits because of the higher prices consumers are willing to pay for what they understand to be ethically produced and traded Fairtrade goods.
Fairtrade has seen a measure of success in some areas. In Costa Rica, researchers found benefits to income as well as increased high school enrollment in Fairtrade regions (Dragusanu 3). In Rwanda, researches found that Fair Trade certification did encourage more involvement from women in producer cooperatives (Elder 2366). Fairtrade International has also done their own research, with impact reports available on their website. Unsurprisingly, those reports contain local case studies where they found success.
With such a wide area of effect and such lofty goals, it’s almost inevitable for criticisms of Fairtrade to arise. Dr. Ndongo Sylla is a development economist from Senegal who has previously worked as a consultant for Fairtrade International. In his book, The Fair Trade Scandal: Marketing Poverty to Benefit the Rich, he criticizes the Fairtrade movement, pointing out several of its flaws. “The fact that Fair Trade has achieved a significant impact in some regions of the world is undeniable,” Sylla says, “but isolated and limited successful experiences are insufficient to argue that this tool has been effective in reforming capitalism” (Sylla 1). Sylla questions the method of essentially labelling and selling poverty and asks they key question: “has Fair Trade kept its promise?” (Sylla 2).
Some of the standards required by Fairtrade limit the potential profitability of the producers and can actually produce negative effects. As pointed out by Barham and Weber in their study of certified coffee, Fairtrade requires growers of crops to use only organic fertilizer. This can directly impact yields, and therefore revenue for the growers. The blanket ban on inorganic fertilizer, regardless of its actual effect on the environment, could pressure growers to expand their area, increasing deforestation and accomplishing the opposite of Fairtrade’s noble goal of helping the environment (Barham 1276).
Another drawback to the Fairtrade system is the administrative overhead imposed on the producers. These additional requirements force producers to spend any extra money they make through Fairtrade on simply remaining certified. Haight points out how this defeats the purpose of the Fairtrade premium. “Records kept by cooperatives have shown that premiums paid for Fair Trade coffee are often used not for schools or organic farming but to build nicer facilities for cooperatives or to pay for extra office staff” (Haight 5). Rather than being spent on social benefits, some of these premiums are being spent to help manage the increased requirements to keep up with Fairtrade regulations. Haight also mentions that language and literacy barriers make this record keeping even more difficult for small producers.
Sylla points out another large economic failure of Fairtrade: it does not benefit the poorest. “The reality is that Fair Trade is mostly beneficial to the richest countries” (Sylla 129). In fact, Sylla notes that “effective certification demand is positively correlated to the country income level.” One cause of this is that the cost of compliance with FT standards remains the same, even for poorer countries. Free Trade product markets are also heavily biased toward Latin American exports. This leaves African countries with little benefit from free trade. This is contradictory to Fairtrade International’s claim that they “deal with the case of marginalized producers and wage workers.” Instead, it points more towards a system that boosts its own growth by simply selecting the most capable producers (Sylla 132).
The price floor concept has also brought up a quality issue for Fairtrade coffee. Some farmers exploit this by selling their lower-grade coffee at the Fairtrade minimum price, then selling their higher quality coffee on the open market. A farmer doing this would also have less incentive to improve his lower quality crops (Haight 5). This has become a problem for Fairtrade as some purchasers have noted a lower quality when buying Fairtrade coffee.
Fairtrade has become more widespread in recent years as larger companies have recognized the appeal. “Corporations have seen the benefit of engaging in Fair Trade and gaining certification, often as a public relations benefit to the company” (Montgomery 89). Montgomery, in her dissertation on the trade of wine in South Africa, critiques the motivations of these corporations. She brings up the example of Proctor and Gamble, who used fair trade to “whitewash” their other business practices, so that they could market themselves as ethical. Clearly consumers cannot simply buy products with the Fairtrade label and assume the companies involved are therefore ethical.
An undisputed fact about Fairtrade is that the products with their label do cost more for the consumer. Retailers must pay service fees to sell Fairtrade products, resulting in higher prices (Haight 5). By presenting products as ethical, fair, and helping the poor, companies are using the Fairtrade label to profit off the consumer’s need to help. However, the benefits do not go to the poorest producers and are not necessarily used in ways the consumer would imagine. Fairtrade’s stated motives are reasonable, and its effort has not entirely failed, but its inefficiency and inconsistency hold Fairtrade back from being a truly impactful organization that fulfills its bold promises. Competitors to Fairtrade International have also risen up, such as TechnoServe and Allegro. These businesses intend to give farmers higher percentages of the proceeds, assure better quality of products, and grow more efficiently.
Consumers should carefully weigh the added increase in cost when considering Fairtrade products, and not simply assume the label means they are helping people who need it. The “donation” from the extra price is diluted by organizational costs, regulation costs, and sacrifices the producers make to participate in Free Trade. Perhaps the money from these more expensive products would be better off saved and given to a charity that more directly helps others.
This post may have been edited by admin for clarity and length.
Works Cited
Barham, Bradford L., and Jeremy G. Weber. “The Economic Sustainability of Certified Coffee: Recent Evidence from Mexico and Peru.” World Development, vol. 40, no. 6, 2012, pp. 1269–1279., doi:10.1016/j.worlddev.2011.11.005.
Dragusanu, Raluca, and Nathan Nunn. “The Effects of Fair Trade Certification: Evidence from Coffee Producers in Costa Rica.” 2018, doi:10.3386/w24260.
Elder, Sara D., et al. “Effects of Fair Trade Certification on Social Capital: The Case of Rwandan Coffee Producers.” World Development, vol. 40, no. 11, 2012, pp. 2355–2367., doi:10.1016/j.worlddev.2012.06.010.
Fairtrade International (FLO): Fairtrade International, www.Fairtrade.net/.
Haight, Colleen. “The Problem with Fair Trade Coffee (SSIR).” Stanford Social Innovation Review: Informing and Inspiring Leaders of Social Change, 2011, ssir.org/articles/entry/the_problem_with_fair_trade_coffee.
Montgomery, Alison. “Negotiating the Spaces of Fair Trade in South Africa’s Wine Industry.” University of Florida, 2014.
Sylla, Ndongo Samba. The Fair Trade Scandal Marketing Poverty to Benefit the Rich. Ohio University Press, 2014.
