“More and more UK shoppers see Fairtrade as a simple, highly effective way to enable producers in the developing world to work their way out of poverty with dignity, receiving a decent return for their great produce and hard work.” (Harriet Lamb, Executive Director of Fairtrade Foundation)[4]
‘Simple’, indeed, as all we need to do is just shopping. But can it really lead people out of poverty? What is a “decent” return? What is “hard work”? How effective Fairtrade is? My study shows a picture much different from the cheerful anecdotes we usually hear or read about.
[F]air trade… isn’t particularly fair… We’re so concerned with marketing and brands that we almost overlook the human reality… we are increasingly not willing to tell the truth… We’re nothing if we’re not telling the truth.
Cost of the Producers
One factor that seems often missing or if mentioned, rather briefly, in the Fairtrade materials that are targeting the consumers is the extra cost a producer has to bear. Entering the Fairtrade market is not for free. Since 2004 the Fairtrade Labelling Organizations (FLO)[5] started to charge its producers: application fee, initial certification/audit fee, annual certification/audit fee, etc. Fees are per product, each additional product will incur extra charge. If there is any additional expense needed for the auditors, this will be levied on the producers as well. The imposition of such fees clearly has adverse effect on the poor producers. A Bolivian small farmer association actually fired a letter of complaint to the FLO.
“The small producer groups… cannot easily access the funds necessary to pay such considerable fees as you are now imposing. We had a lot of faith and hope; we thought we were members of an institution worthy of the name ‘fair trade,’ but it seems it has become a business with the goal of profiting from the fair trade seal… [I]t appears that the goal is to eliminate a large number of the producers from the FLO register.” (2004 cited Jaffee 2007, p.227)
It looks like in reality, Fairtrade is more a market that producers in poor countries can sell to. This market pays slightly higher price but also incurs numerous charges plus a set of standards. Fairtrade also provides advance credit, technical support and market information. However, when you take the fees into account, these can be considered as the extra “services” that producers “purchased” together with their Fairtrade entry tickets. For the producers, it is a calculation between gain and loss. Some could afford such tickets, some could not. Now one may ask the question if this scheme is really meant to help the poorest. Or is it more a deal between the organisations and those who can afford to co-operate with them?
Guaranteeing them a “fair and stable” price?
Another often overlooked problem is that the Fairtrade floor price is not guaranteed to individual farmers but farmer associations/cooperatives. Before the money trickles down to a farmer, all types of costs such as administration and transportation still need to be deducted. It may not be an issue if producers do have a right to adjust the selling price to compensate all costs, which is what they cannot do within the conventional market. In the nowadays highly complicated economy, commodity prices are not determined by their producing countries anymore but by the exchange markets based in New York or London. Livelihood of millions of farmers/producers has become just screens and screens of blinking digits – the virtual betting table for the rich and powerful. This is one of the reasons why Fairtrade was introduced. However, within Fairtrade, how much bargaining power do producers really have regarding the prices of their crops?
The Cafe of equivalent$ Project by kennardphillipps, Design Museum, London, 2010
Instead of facing the fluctuating and very often notoriously low commodity market price, brands certified by Fairtrade are required to pay their producers a guaranteed unit price which will rise as the market price rises but will never fall below the minimum set out by the FLO. Thus, as Fairtrade and its proponents claim, the guaranteed price should serve as a safety net for the producers. On top of the minimum prices, registered brands also need to pay the producers a social premium. The producers can then spend the premium on community projects such as clean water and education for children.
Unfortunately this guaranteed, minimum price is often complained as stagnant. As illustrated in the charts below, at a glance it may look fine as the Fairtrade guarantee price is always above the fluctuating market price. However, if one ignores the occasional spikes which are caused by the market but not Fairtrade and which give sudden rises to the commodity prices, it is clear that the Fairtrade minimum price has remained virtually static for two decades. In case of coffee, since its inception in 1989, for Arabica it has only been raised once by US 4 cents/lb (2008), and not at all for Robusta. The social premium for both have also been raised once only by US 5 cents/lb. Recently the FLO has announced the first rise in the cocoa price and premium in 15 years. But since the market price is much higher, it is not such a big change. As some online discussions already pointed out, that Cadbury has chosen a good time to join Fairtrade since they are paying just a bit more than what they always have to pay anyway, but the giant corporate surely gets a good endorsement over their brand by claiming that they care about their producers now.
Original charts from the UK Fairtrade Foundation
Two decades is long time, especially in terms of inflation. We in the industrialised world can hardly imagine supporting our daily lives now with a salary from the late 1980s. And inflation does not only occur in the well-off nations. Studies reveal that living and production costs have been rising and Fairtrade producers find it hard to break even. Yet contradictory to their needs for a higher price, the FLO proposed to reduce or even eliminate it entirely. When asked about the financial difficulties the producers were facing, Paola Ghillani, President and Chairwoman of the FLO Board (2001 – 2004), said, “…(If they can’t break even) then they have a problem with the administration…”, regarding the proposal to lower or eliminate the floor price, “(it is) no more on the table… But… if they want to increase this base price, I think it’s not very reasonable…” (Jaffee 2007, p.240)
Stable? Indeed. Fair? Can we still call it fair when producers find it so hard even to ask for a better price within Fairtrade? Can we still call it fair when Fairtrade producers are required to open their books for scrutiny and retailers/roasters using the FAIRTRADE Mark (e.g. Proctor & Gamble) can keep theirs closed because of trade secret? “A blatant double standard” as Jaffee described (2007, p.154).
In fact one can even ask why these producers (or producing countries), who should have the ownership and naturally the pricing right for their own crops, have to “apply” to a higher board (in this case, the FLO) for a more reasonable price. Is it possible that with conventional market pricing or Fairtrade pricing, the position of the producers are just the same – at the mercy of some higher, foreign entities? Before we declare if a form of “trade” is “fair”, perhaps we should also consider if both parties participating in the trade enjoy equal negotiating power. Only with bargaining position at least equal to the trade counterparts can there be a fair price, which should be achieved through negotiation and mutual agreement, not application. Placing the livelihood of a certain group of people at the shopping choice of consumers from rich countries does not contribute to this. Instead, it places the poor forever in a lower position, which we will return.
I remember…(the) Europeans getting up and saying… “…this fair trade is your program, we’re here for you”. Then a producer gets up and says, “OK, then how come we only have voice and not vote? If it’s ours, let us run it.”……There was just this dead silence…… the hypocrisy of the colonial moment was exposed…… [A]n unspoken reality…… We say we’re here to serve producers, but we want to tell them what to do.
Development? Entrapment?
Galeano, tracing back to the colonial era, has given us a very clear picture of how economies of Latin American countries were shaped to work for the colonists’ and later US’ interests – an “agro-export system” [6], with each region concentrated on producing one to two products (monoculture) for export. Since no local industry could be developed, locals had to rely on manufactured goods imported back from the industrialised world. Thus the industrialised world benefits both from the import of cheap raw materials and export of their finished products.
When considering if Fairtrade is helping people to find their way out of poverty, one needs to ask if Fairtrade is seeking to change such agro-export status of these countries.
The Ghanaians interviewed in WORLDwrite’s series of documentary Pricking the Missionary Position (2007) state that they want to decide for their own resources, take them to the value-adding level. They want mechanised, large-scale farms. They want industries that generate a lot of jobs and real income.
But is this what the Fairtrade organisations are now campaigning for?
Instead, Fairtrade is being criticised to have lowered people’s incentive to move away from cash crop. The organisations are also said to have been actively promoting an organic and labour-intensive way of farming which, instead of freeing people from the toil, it actually locks people to the land. As Jaffee’s study reveals, Fairtrade farmers in Oaxaca, Mexico do have a tendency to plant more coffee than non-Fairtrade farmers. And since it is virtually a must to be organic-certified if you want to supply Fairtrade coffee, the participating growers end up finding their costs (for instance, the certifying fees for both the organic and the Fairtrade seals) and workload (physical work on the fields plus a large amount of paper work required by both certifying parties) increase dramatically. Some complain that they do not have time for anything else, not even diversifying into food crop, let alone diversifying into other industries which may bring true economic progress. Instead of moving away from the agro-export dead end, Fairtrade requires “a far more intense focus on coffee (cash crop)” (2007 p.127).
We as consumers from the richer parts of the world are now tired of food from chains and chains of cold, metallic, inhuman production lines. So now we have a taste for organic food, even better if they are home-grown, hand-picked with lots of love and care. While turning organic is not an issue as long as the producers have a choice to decide if they would like to do so, as long as they can maintain a decent living and working standard just as we in the developed world are having, but is it the case for Fairtrade farmers?
The documentary The Bitter Aftertaste (2005) reveals that the Ghanaian Fairtrade cocoa farmers are, instead of using a mechanised tool, breaking their backs and weeding their land manually. Fairtrade prefers small-scale farms, organic, primitive ways of agriculture. Traditional, labour-intensive tools even find their way to the design of Fairtrade product packaging. Mexican coffee grower Cristobal uses “Cava-hoyos” (see package on the right below) to make holes to plant coffee and “watch it grow little by little”, as if he was nurturing a child. But perhaps we need not worry about them performing such hard work, since “[t]urning this husking machine (see package on the left below) is heavy work but I am used to it”, Tanzanian coffee grower Emiliana assures us. “They like living in the villages”, said Sophi Tranchell, Managing Director of the much celebrated Fairtrade-certified Divine Chocolate Limited. She was also very impressed how skilful the Ghanaian cocoa farmers are in using knives (machetes) to open up cocoa pods, something we (in the developed world) must find it very difficult to do. [7]
Cafédirect packaging: (left) husking machine for Emiliana; (right) Cava-hoyos for Cristobal
Photo of producers threshing (UK Fairtrade Foundation offce decoration)
They are good at it. They are used to it. This is how we prefer to tell ourselves. In reality, does the poor really embrace such hard labour like a grace from the nature? Is hard labour really as serene as how the package of Alter Eco Fair Trade Organic Green Dew Tea describes it: “In perfect harmony with nature… [they] work their land to the rhythm of the seasons”? According to Mr De Roy, who used to work as a cocoa farmer and now moved on to take up teaching in the city, it only brings “untold hardship, sweat, drudgery and toil”. Such hardship is not a preference but a consequence of “no choice”. Given the chance, it is natural for people to seek more comfortable, modern lifestyle and to explore one’s talents elsewhere.
Not to mention with such small scale, primitive way of farming one cannot expect a true economic breakthrough for any poverty-striken country.
But our region still works as a menial. It continues to exist at the services of others’ needs, as a source and reserve of oil and iron, of copper and meat, of fruit and coffee, the raw materials and foods destined for rich countries which profit more from consuming them than Latin America does from producing them…
To truly exit poverty and to achieve genuine economic growth, one needs to find the way out of such agro-export dead end. Instead of handing them raw to foreign buyers or multinationals, a country needs to develop their own resources beyond the agricultural level since the most lucrative parts of business lie in the value-adding phases afterward, such as manufacturing, packaging, shipping, retailing and marketing. Sadly, Fairtrade or not, these processes are still within the tight grip of the rich countries. In case of coffee, without Fairtrade, producing nations rips approximately less than 10% from the full purchase price; with Fairtrade, they receive 15%. That means, 85% is still in the hands of the rich. In case of chocolate, “98% of Fairtrade chocolate is manufactured and packaged in Europe’ (Neil Kelsall, Marketing Director, Malagasy). In response to this, Harriet Lamb said,
“[T]here are good reasons why chocolate is not manufactured in, say, Ghana – among them lack of milk supply, poor refrigeration and water shortages.” (Purvis, A, Guardian, 2006). Then why the organisation does not focus on helping the country to improve on such manufacturing equipment but still on the commodities the West wants? According to David Ransom, Ghanaian’s own chocolate is excellent but is carefully kept out of the developed countries’ market through high tariffs and bad economies of scale [8]. This is not new, as early as in 1967 Brazil already tried to export its own soluble coffee but was eventually put out of international market under pressure from rich nations (Galeano 1971, p.240).
One interesting thing I noticed is that, the Fairtrade organisations address commodity suppliers as “producers” and the companies certified to use the Mark as “commercial partners” [9]. On the other hand, WORLDwrite, the charity body I had an interview with, addresses the people they work with in Ghana as “peers”. Does it not reveal how we look at a someone by the way we address them? If the movement is truly about the Global South and Global North working together to fight unjust trades, shouldn’t the “producers” be the real “partners” and the businesses who wants to use the Mark on their products “applicants” or “licensees”?
In fact, the FLO’s proposal to lower or eliminate the floor price for poor producers is said to have been put forward under the pressure of some of the profit-driven “commercial partners”. Transfair USA [10] is also reported to have provided more favourable deals with big corporations such as Starbucks and Proctor & Gamble than smaller but 100% Fairtrade licensees. “[T]he definition of fairness came to depend on whom Transfair was negotiating with”, expressed Jaffee (2007 p.208). Meanwhile, the producers lament on how very little extra they get: it is a bit better, but not much…; it makes ends meet…; there are all sorts of fees…; there is so much work I end up spending the extra money in hiring labours… (Jaffee, 2007)
Ghanaian supermarket full of foreign brands, Ghanian’s own rice cannot make it to their local shops (WORLDwrite’s documentary)
Here we come to face a more nuanced picture: some producers do get benefits, minuscule though. Enough for them to survive on the land but not enough for real economic progress. Last year the journalist Zoe Wood wrote an article about Cadbury going Fairtrade, “[i]t is therefore seen as also in the interest of chocolate manufacturers such as Cadbury to increase farm incomes, securing sustainable supplies around the world.” (Guardian, 2009)
Building a longterm relationship – a phrase many fair traders or fair-trade businesses love to use. At first we often take it as a guarantee to the poor growers, who can be sure that he or she always has a market to sell to. But is it not a guarantee to our businesses as well? A guarantee of supply of raw materials, which surely will be seriously affected in the following (but not limited to) two cases: 1) price falls to hungry rate driving growers to give up cultivation, or 2) producing countries embark on real development and become strong and wealthy enough so that people can now choose not to produce as much cash crop/producing countries can start to regulate pricing and output for their resources. Both scenarios will be much harmful to industries in the developed countries. Lord Meghnad Desai from India commented Fairtrade as “short-term palliative” [11]. To the current world order, maintaining a status quo is a must.
While this may not be the intention of many genuine fair traders, it is also undeniable that no one wants to see his suppliers turn into competitors one day. Writing such as the one from Zoe Wood just happens to reveal why the current Fairtrade scheme is so embraced by governments and businessmen in the industrialised countries. And how ineffective it is in terms of bringing fairness and justice in trade.