The Processes and Practices of Fair Trade

Trust, Ethics and Governance

Brigitte Granville, Janet Dine

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780415575669
• eBook ISBN: 9781136231803
• Topic: Business
• Subtopic: Business General
• Index: Business

This book analyzes the factors behind the recent expansion of Fairtrade and questions whether the trust given to the scheme by "ethical" shoppers is warranted. It goes about this assessment by analyzing the claim of ethical shopping and by scrutinizing the specific contribution of the Fairtrade Certification Mark to producer's welfare. This assessment is based on information gathered in a mixture of desk-based research and fieldwork carried out in Argentina, Bolivia, Chile, Peru, Tanzania and South Africa. This book comprises separate chapters written by academics of various backgrounds, who have worked together on Fairtrade, it should however be noted that the authors do not necessarily hold a common set of views in respect to Fairtrade.

Part I
Overview and introduction

Janet Dine, Brigitte Granville, and Steven Telford

The primary subject matter of this book is fairness in trade and in particular what Western consumers have come to recognise as being the ‘Fairtrade’ movement. Strictly speaking, one should reserve ‘Fairtrade’ (as a single term) for discussions that relate to ‘Fairtrade International’ – previously known as Fairtrade Labelling Organizations International (FLO). Fairtrade International is a non-profit, multi-stakeholder association involving 23 Labelling Initiatives (including the Fairtrade Foundation). Set up in 1997, FLO develops and reviews Fairtrade standards and provides support to Fairtrade-certified producers. FLO-CERT GmbH is responsible for the inspection and certification of producer organisations.¹

As far as the eye of the consumer is concerned, sporting its famous blue green and black empowerment badge, FLO umbrella certification likely constitutes nine tenths of the concept, and indeed the chapters of this book are predominantly concerned with FLO and its standards of practice. It is true that there are in existence various other uncertified initiatives that are capable of posing a similar moral boast, and as well as that there are similar moral practices which at times are present in commodities which are not certified (see Berlan 2006, and Mohan 2010). Nevertheless, as the predominant concern of our book is Fairtrade International, we will stick with ‘Fairtrade’ (as a single term).

Though the contexts of economics, history, law, and philosophy, this book aims to deliver a multidisciplinary analysis of Fairtrade. From the onset it must be mentioned that the authors do not share a unified view of what Fairtrade is, what it represents, or what it should be. To the contrary, there is considerable disharmony in frameworks, opinions, and general perceptions of the role of markets. To be clear, when something is said as ‘I’ or ‘we’, it relates to the owner(s) of individual chapters; ‘we’ is not a universal statement. We think (hope) that the reader will enjoy any touches of disharmony that they may occasionally encounter, for in a setting such as this, it is contention not accord that gives birth to progress and wider understanding.

Let us first outline the sequence and structure of our book. Thereafter, we will deliver a practical outline of what Fairtrade is, the logistics and growth of the movement, and the generalised standards under which it operates. The third entry elaborates on the issue of definition. It looks at how Fairtrade chooses to define itself and plays the devil’s advocate in seeing how one may assault that definition in order to generate a healthy debate.

Part II is entitled ‘Governance and Institutions’. In tune with the title, the opening chapter written by Martha Prevezer examines the role which governance plays in delivering developmental goals (Chapter 1). The subsequent chapter by Elizabeth Bennett reviews the history of Fairtrade International and its governance structures (Chapter 2). In the third chapter, Matthew Anderson asks whether Fairtrade is worthy of being perceived as having forged a genuine partnership with development. In the final two chapters of Part II written by Marise Cremona and Gracia Marín Durán, we depart from Fairtrade’s histor ical context and set the scene for Part III by moving the discussion towards a regulatory evaluation of Fairtrade (Chapters 4 and 5). Part III furthers applies the context of scholarly law, but at the same time adds a philosophical twist through a consideration of trust and ethics. The opening chapter, Chapter 6, sees Janet Dine look at Fairtrade from the perspective of trust, risk, and the company concession model. Kirsteen Shields in Chapter 7 takes into consideration the extent to which Fairtrade offers solutions to the problem of compliance with labour standards in foreign contexts. By pondering the relationship between ethical consumption and trusting morality, Andrew Fagan in Chapter 8 holds the context of ‘trust’ but engages with it through a more philosophical lens than seen in the preceding chapters. Entitled ‘Fairtrade in Action’, Part IV is distinct from its predecessors in that it looks more at the operational level practicalities of Fair-trade. Shannon Sutton in the opening chapter poses the argument that the income component of Fairtrade plays second fiddle to capacity building (Chapter 9). Written jointly by Brigitte Granville and Steven Telford, Chapter 10 is empirical in that it takes data on Fairtrade wine (grape pickers) in South Africa, and contrasts welfare performances with those of regional counterfactuals. Rohan Kariyawasam in Chapter 11 also makes use of primary data in his attempt to ascertain the potential role that technology has to play in bolstering trust.

Just before we move to address issues of definition, let us first consider the geography, commodities, size, and growth of the movement. Appendices 0.1, 0.2, and 0.3 offer a picturesque outline of the countries and commodities with which FLO-certified Fairtrade is predominantly associated. In terms of volume and visibility, coffee has traditionally been the poster child of Fairtrade certification, but in regards of retail value bananas have now in some markets knocked it from its top spot, and other commodities continue to rise. As a whole, Fairtrade certification is estimated to account for only 0.01 per cent of global agricultural trade (Riedel et al. 2005). Needless to say the markets for final consumption are those with affluent enough incomes to be able to support it. The Fair Trade Federation (2010) estimates that total global sales of FT products in 2009 amounted to €3.4 billion, a 15 per cent overall increase on the previous year. In 2009 North American sales amounted to €1.053 billion, a 20 per cent increase on the year before. Sales in 2009 to Pacific Rim countries amounted to €29 million, a 55 per cent increase compared to 2008. Europe stands out as being particularly receptive to the message of the movement. Appendix 0.4 depicts the market share of coffee across selected countries, and Appendix 0.5 displays more recent retail volumes and year on year growth in global sales. While there is always a lag, the length of which we do not yet know, it is interesting to observe that the financial crisis did not appear to coincide with a dent in the value of the Fairtrade market. 2008–2009 did however reside over a fall in the rate of growth, albeit still impressive, down from 43 per cent in the previous period to 15 per cent. Appendices 0.6 and 0.7 trace the growth of Fairtrade in the UK market, in which total sales in 2009 are estimated to have been between £799 million and £836 million, and to have thereafter breached the billion pound mark in 2010. As estimates sometimes have to be revised, the researcher may find slight discrepancies between various FLO annual reports, which are the sources of the numbers reported here.

It is appropriate to proceed with an ‘in-house’² definition of Fairtrade:

Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers – especially in the South. Fair Trade Organisations (backed by consumers) are actively engaged in supporting producers, in awareness raising and in campaigning for changes in the rules and practices of conventional international trade.

(Fairtrade Advocacy Office, 2011)

While the above text is touted as a definition, it may be argued that the statement amounts to more of a guiding principle, a constitution of sorts; as in regard to the realities on the ground it undeniably leaves much to the reader’s imagination. The specifics of various Fairtrade agreements are often generalised to be inclusive of such definitional conditions as: a minimum price that is guaranteed to be above the market price; a social and business development premium; partial payment in advance if requested; and the signing of contracts sufficient in length to afford the producers a predictable horizon of income. The premium is based on volumes sold and is intended to be used for investments from which all members may benefit, e.g. a health clinic or occupational training.

There is nothing overly misleading about the above definitional inventory; it states the rules of the game in what may be described as an ‘accurate enough’ package. However, it is necessary to be aware that there are occasional pragmatic departures from what one may typically regard as the usual suspects of Fairtrade, for example: “Where minimum prices are not defined these must be based on covering production costs as defined by the producer” (OPM, 2000: 6). The fact that some products lack minimum prices provides an illustration of one such twist of convention. Hence emerges the reasoning as to why Fairtrade is forced to employ so broad a definition as its principal charter.

In response to ambiguities that manifest themselves at the operational level, we would personally be inclined to prefer a more plain and practical definition that may be stated as so:

Fairtrade is a privileged contractual trade agreement whereby producers and or labourers receive a degree of insulation from market forces and alleged market failures and which seeks greater equity in international trade.

In a further engagement of the FINE definition, one could assert that it is a touch myopic to view this problem of fairness in trade as being a North–South issue as opposed to it being a more deeply entrenched rural–urban phenomenon. Indeed, development economics is well equipped to argue that relative agricultural ache is more a sign of progress than illness. Admittedly, that is a historical and technical argument, and not a moral one. On moral grounds, one must concede that some technical and historical arguments must surely be of little comfort to those who are forced to bear the burden of structural disruption and/or structural entrenchment. The inter-temporal, or to be more precise, the intergenerational trade-offs that Fairtrade may potentially give rise to makes for an absorbing avenue of discussion. While one must maintain respect for paths well worn and lessons that seem largely inevitable, at the same time one must not be too eager to be taken hostage by the view that not even the edges can be smoothed to assist those whom development might otherwise devour. The question is not ‘why’ – it is ‘how’.

Continuing to take issue with the FINE definition, one may raise an eyebrow with respect to the claims of transparency and sustainable development. From the view of the consumer who is likely to have only the packaging in front of them, there is no explicit reason to consider Fairtrade any more or less transparent than a conventionally traded good. What is made public outside of the packaging may well surpass that of many conventional equivalents; however, given the search costs involved, transparency in itself can be a trait that is difficult to qualify. In one sense something can be declared to be transparent if everything that relates to it is freely available. But in another sense, if that which constitutes ‘everything’ amounts to an unassailable amount of testament, then the claim to transparency shrinks in practical meaning. The ‘Fair Tracing project’,³ a program being developed by which a consumer will be able to input a barcode and trace the origins of their purchases by way of website and mobile phone, potentially offers an impressive and innovative solution to this part of this quandary. Indeed, Fairtrade organisations, such as Canada’s Ethical Bean, are now using QR (Quick Response) codes to allow consumers to trace the origins of their purchases. Impressive as this technology is, what it does not completely solve is the wider issue of consumer faith in the enforcement of standards. Given that the number of FLO-CERT inspectors is, as of 2010, listed to be 120, one may be forgiven for harbouring a touch of scepticism regarding the ability of Labelling Initiatives t...

Table of contents

• Cover Page
• Half Title page
• Series page
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Acknowledgements
• Abbreviations
• Part I Overview and introduction
• Part II Governance and institutions
• Part III Trust and ethics
• Part IV Fairtrade in action
• Index