World Fair Trade Day: Should we keep supporting fairtrade?

This Saturday, May 10th marks the World Fair Trade Day.

What it essentially means is this will be a day to celebrate fair trade, pay attention to the plight of farmers and artisans in the developing world and recognise their efforts. Not that we shouldn’t be doing this every day – but World Fair Trade Day provides an opportunity to raise greater awareness.

The first attempts at initiating fair trade were made as far back as the 1950s

While the 1960s saw wider and more organised ways to help the developing world by encouraging fair trade, it wasn’t until the 1990s that Fairtrade became more mainstream.

Something that we saw potentially belonging on the shelves in our supermarkets not just specialist health and charity shops.

By 2012 over £1.3 billion was spent on Fairtrade goods in the UK making it the world’s biggest fair-trade market. The growth has been steady and continuous.

However, as it became more popular, it also brought with itself a whole new set of questions: How fair is fair trade?

Is it really helping the farmers? Can we trust it?

As we take pride in being the country with the biggest input to the mission of “fair prices for the work they do and the produce they grow”, do we sleep more soundly at night, knowing that we have in our little way contributed towards better living and working conditions of some people?

Let’s take a look at some arguments for and against fair trade, based on the debate that’s been going on in the British media for over a decade.

Why is Fairtrade good?

First, the advocates of fair trade have always maintained that it’s a successful way of combating poverty in the world.

Instead of endless charity fundraising, fair trade would provide people with work and a sustainable way of living, enabling them to ask fair prices for the work they do.

In 2012 The Independent interviewed some fair trade farmers, agricultural workers and miners for their piece on the fairness of fair trade.

Their interviews concluded that fair trade is indeed seen as essential way of earning a living for some workers in different areas of the world, working in different industries.

A Colombian gold miner Harbi Guerrero Morillo said to the Independent:

“Here, the whole town depends on mining – we need support. This certification could work as a road map for mining and it could open us up to how we could improve our communities and network with other miners. It is about legitimising my work – that is very important.”

It’s not just about earning a fair wage and getting a fair price for the produce – it’s also about stability.

The prices tend to go up and down all the time in the markets. Fair trade guarantees the sure and stable price all the time, thus making it easier for the people involved to rely upon their income and make plans for the future.

Tomy Mathew, an Indian farmer pointed out in his interview to the Independent: “It’s not the difference between the market and fair-trade prices that makes the most difference; it is the fact that the fair-trade price does not change throughout the season.”

How do they do that – how do they guarantee stable prices if there are fluctuations in the free market and prices drop with a reason – be it a natural reason (draught, flood, etc.) or an economical reason?

Well, it costs the farmers a considerable sum to get fair trade certification but that is also what guarantees them the stability.

Fairtrade & Sustainability

Sustainability is just as important as stability.

Farmers need to know there’s a future for their production and that it won’t just be priced out by cheaper mass products.

Fair trade can guarantee that too. For example, let’s take bananas – around 40% of the bananas sold today in the UK are fair trade.

Sainsbury’s decided way back in 2002 to switch to fairtrade certified bananas only, so have Waitrose and Co-op, and this has made a big difference to some banana growers in the Caribbean.

“My local group of 80 members signed up to Fairtrade at an important time. It was at the point when farmers here were thinking of stopping producing bananas; we just couldn’t compete,” told Moses Rene, a banana farmer from a Caribbean island of St Lucia to the Independent. “Farmers here get almost double the rate for a box of bananas under Fairtrade. Fairtrade is the way forward – it is a way of keeping poor producers like myself earning a living.”

The sugar story

Or let’s take sugar, the biggest single Fairtrade product in the UK with around 45% of the UK retail bagged sugar market now Fairtrade.

This has a major impact on some farmers and some countries – according to the Fairtrade Foundation director Harriet Lamb, around 40 per cent of the sugar export from Belize in 2012 was Fairtrade, having a significant impact on the economy of that small country.

When Tate & Lyle converted to Fairtrade in 2008, they were the first major sugar brand to do that – and not without risk, as Fairtrade tends to be more expensive.

They continue to sell sugar at the same prices as their major competitors, but they also said (in the Guardian in 2012) that they made that a conscious decision, seeing it both as a marketing opportunity as well as a business imperative.

Plus, they were concerned that the smallholders providing around 20% of the sugar in their supply line, were in danger of being pushed out of farming by other mass producers with cheaper prices. “We were worried that our smallholder suppliers would no longer be economically sustainable, and we can’t refine cane sugar if the cane growers can’t afford to grow it,” the company’s FT manager Julia Clark explained to the Guardian.

Is Fairtrade a badge of reliability and trust?

The Colombian gold miner Mr Morillo pointed out in the interview to the Independent another important part of fair trade certification – not only does it help the community and the workers providing them with a steady and fair income, it also legitimises the product, showing to customers that it comes from a reliable source.

Perhaps not such a problem with bananas or cocoa but much more important with luxury commodities like gold or diamonds.

Even with foodstuff or clothing the Fair Trade label ensures the buyer that their money is going back to the farmers or workers and that whatever produce they’re buying, it has been produced in the humane working conditions.

What do the critics say?

Now, let’s also look at the criticism of fair trade that has ranged from distorting the market, pushing out the poorest farmers, condoning production that might be inefficient and exaggerating its value.

According to Philip Booth from the Institute of Economic Affairs, Fairtrade is not an exclusive way for farmers and workers to get fair prices and wages.

He argues in the Independent that there are speciality brands and traditional channels that work much better for Fairtrade has not proven that farmers get better prices under them.

Also, Mr Booth argues, Fairtrade cannot help all farmers as not everybody can afford to pay the fee for joining up. Especially the poorer people from more remote villages are excluded as are those working in other product lines that Fairtrade doesn’t include.

While he argues that there is clear evidence of Fairtrade doing a lot of good, it can’t claim such a unique and absolute status.

The coffee conundrum

His sentiments and arguments are echoed by Steven Macatonia, the co-founder of Union Hand-Roasted Coffee who writes in the Guardian that while the whole idea behind Fairtrade certification is to promote socially sustainable coffee production with price stability for coffee producers, it won’t really make a significant change in the farmers’ lives.

He also argues the volatile world market sets its own limitation to the prices, as for example in 2012 only 30 per cent of the Fairtrade certified coffee was sold under Fairtrade conditions and for the rest of the 70% the farmers received the commodity prices.

Mr Macatonia says in the Guardian: “A more sustainable approach would reward excellence. It would be based on quality, innovation, growth and economic progress. It would be accessible to all farmers, not restricted to just co-operatives. /…/ An alternative trading model focuses on the prices that customers are willing to pay, rather than the market basic or even average price; if it tastes delicious, we want that coffee. For some coffees, this approach can achieve 10 times above the Fairtrade price.”

Where does the money actually go?

Another criticism of fair trade focuses on the ethical side, claiming that the producers often don’t benefit from the scheme at all and that the money simply doesn’t reach them.

Indeed, the Fairtrade Foundation doesn’t monitor how much extra money the retailers charge for Fairtrade goods or how much of the money paid to the exporters actually reaches the farmers or the producers.

Estimates are that only 40% of the money that reaches back to the developing countries is passed on to the farmers and the rest is apparently spent on social projects.

The criticism also states that fair trade impact studies haven’t really been carried out so there is little evidence of actual positive impact on the societies involved in the scheme.

However, at the same time it has been argued that while it might help some farmers, it can also create greater injustice.

Many economists have pointed out that as the prices in world markets depend on yields and quality, an increase in supply often means a fall in the market price, thus meaning that while some of the farmers get a better price for their crops, others get substantially lower prices.

Fairtrade – The conclusion

As we can see there are strong arguments both for and against fair trade.

It’s hard to conclude whether fair trade is completely fair after all but in a way we’d have to agree with Harriet Lamb from the Fairtrade Foundation – it certainly seems like a step in the right direction.

With Fairtrade farmers asking higher prices for their produce, it might help others who are not organised under the fair trade umbrella to negotiate better prices as well.

The stable prices don’t necessarily have to mean that the Fairtrade farmers cannot go with the market fluctuations – especially if they fluctuate towards the higher scale.

It simply sets a floor price to ensure them a price that covers the cost of production, should the market prices drop.

While fair trade indeed doesn’t seem to be all cut and dried, it still gives us hope that there will be future investments to the scheme and that the farmers and workers around the world will continue their production in fairer markets.

And that in itself is already a pretty big reason to keep supporting it.