Is Fairtrade Fair?

E. Valiente-Riedl

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9780230308152
• eBook ISBN: 9781137284518
• Topic: Business
• Subtopic: Business General
• Index: Business

Evaluates the capacity of Fairtrade® labeling to enhance the livelihoods of marginalized producers in developing countries. It looks critically at the evolution of fair trade values and markets, including its somewhat controversial engagement with conventional businesses, and problematizes the role of the "ethical consumer."

1

Introduction

In recent years we have witnessed an upsurge in the debate over international trading rules and practices, with advocates of ‘fair trade’ both actively critiquing the integrity of a ‘free trade’ system and promoting alternative strategies for global exchange. This has emerged with increasing intensity through awareness of the important relationship between global trade and development. One of the strengths of this debate is that it has questioned the integrity of the dominant economic orthodoxy, in terms of both free trade principles and practices: does ‘free’ trade support a process of development? Yet this is perhaps the one question that fails to be understood or tested with reference to fair trade arguments that advocate alternative trade practices: does ‘fair’ trade support a process of development? While there appears little room for doubt on the first question, can consumers feel certain that their ‘Fair Trade’ purchases will resolve the ills of the global trading system?

With its origins in the activities of non-governmental organisations (NGOs), Fair Trade emerged as the ‘war cry’ of a social movement based in developed countries, championing the plight of marginalised producers in developing countries. Conceived as an ‘alternative trade’ movement, through the activities of dedicated Alternative Trade Organisations (ATOs), it has since reinvented itself as Fair Trade and is setting a clear challenge to the dominant global free trade architecture. However, the authenticity of Fair Trade is also increasingly challenged, and in particular critique is levelled at the introduction of the Fairtrade labelling strategy and its controversial partnership with conventional businesses. ‘Fairtrade’ – one word – is a registered trademark for a product label, which vouches for the conditions of trade associated with any products bearing the label. It does not belong to any one country, producer group or company. It is also not to be confused with ‘Fair Trade’ – two words (capitalised, in contrast to ‘fair trade’ which refers to the concept) – an umbrella term for a myriad of philosophies and practices that promise to bring fairness to global trade. While the latter offers a seemingly open and live debate, within which a singular definition of fairness in trade remains elusive, the former offers a very specific and arguably one-dimensional understanding. Between the two we move from the very broad to the extremely narrow, and yet the narrow product mark is what most modern-day consumers will know as fair trade and which has served to become the most popular and accessible model of fair trade to date. Yet can you put a ‘price’ on fairness – or essentially – can you put a label on it?

Fair Trade has certainly evolved beyond its traditional mantra of ‘alternative trade’, characterised by ethical businesses, ethical supply chains and the small markets they operated in. Today, Fairtrade invites the traditional corporate ‘bad boys’, like McDonald’s, Wal-Mart and Starbucks, to feature ethical brands in their menu of products. For consumers, this begs the question: does the purchase of a Fairtrade coffee at Starbucks balance out the availability of conventionally traded blends on the menu board? Essentially, are our ‘voting’ dollars best spent on Fairtrade or better invested in alternative forms of lobbying to ensure change also takes place in the conventional market? For the marginalised producers in developing countries, which Fairtrade aims to assist, it will be important to establish whether Fairtrade provides opportunities to improve livelihoods beyond those offered in the conventional market. For participating producers, this is likely a relatively simple answer of ‘yes’. Yet the scale of commodity traps in the global market may well eclipse Fairtrade’s capacity to fix, controversially leaving ethical consumers with an ethical market to invest their energies in, while the bulk of producers continue to suffer the conditions that afflict the conventional market. This is exemplified in the case of Fairtrade’s most mature commodity market – coffee.

Is free trade ‘fair’? Coffee producers in crisis

At the turn of the twenty-first century, coffee – one of the most heavily traded agricultural commodities – was thrown into arguably the worst crisis it had faced in 100 years when prices fell to their ‘lowest levels in 30 years, and to 100 year lows if adjusted for inflation’ (Lewin, Giovannucci and Varangis, 2004, p. 1). The severity of this crisis not only ‘plunged’ millions of producers into poverty, but it also captured the attention of global civil society organisations, with them the corporations they accused of exploitation, and perhaps for the first time it captured the attention of the humble coffee drinker. NGOs were relentless in their outrage, with Oxfam claiming that for ‘25 million coffee producers around the world . . . [t]he coffee crisis is becoming a development disaster whose impact will be felt for a long time’ (Gresser and Tickell, 2002, p. 6). Prompted by civil society groups, consumers began to understand that the importance of a cup of coffee extends beyond the pleasure of taste or of the café culture enjoyed in the predominantly developed countries of the world. In fact, the importance of coffee in trade lies less in the sustenance it gives the coffee addicts that drink it, but more importantly in the sustenance it should, yet fails to offer the producers that grow it.

Lewin, Giovannucci and Varangis (2004, p. 1) estimate that ‘between 17 and 20 million families are directly involved in coffee production’. Most of this production occurs in the so-called developing countries and is undertaken by ‘smallholder’ coffee producers, who work ‘small’ plots of land, typically less than five hectares, to grow their crop. Considering the enormous magnitude of global coffee production, not only in terms of the scale of production but also in terms of the scale of production by marginalised producers, it is not surprising that the coffee trade is perceived as vital to development across the globe. In fact, the poor performance of coffee and other tropical commodities, which are also characterised by extreme volatility in prices, are causally linked to global poverty and has led Robbins (2003, p. 3) to conclude that ‘[t]he collapse of tropical commodity prices represents the most formidable obstacle to efforts to lift huge numbers of people out of poverty’.

The poverty associated with smallholder coffee production stands in stark contrast to the income it raises for traders in the consuming markets, and the value it holds for consumers in these markets. Coffee is a highly valuable commodity in the global economy. For the period following World War II it was second only to oil as the most valuable traded commodity, a position it only surrendered in the mid-1990s (Daviron and Ponte, 2005, p. 50). Predominantly consumed in the ‘north’ or wealthier economies, and predominantly produced in the tropical ‘south’ or developing economies,¹ why is it that the consumer value of this commodity does not translate into higher incomes for coffee producers? After all, as most coffee addicts will tell you, it is a commodity they simply cannot do without. It is this contradiction, the fact that low coffee incomes have impoverished millions of smallholder coffee producers while consumers continue to depend on, and enjoy, sipping their espressos or lattes, which has set a challenge to the perceived integrity of current free trade arrangements. This contradiction, this inequity in the distribution of wealth, firmly raises the fundamental question: are current ‘free’ trade arrangements ‘fair’? The answer to this question appears to be a resounding ‘No’! Yet can Fairtrade offer the ‘coffee fix’ it promises?

The chapters

This book will navigate the various concerns outlined previously in a number of ways. It begins with an examination of the conceptual debates around fairness in trade and then turns to an evaluation of the performance of the free trade regime. Fairtrade, including its history in the alternative trade movement, is then examined in-depth across four chapters. The book concludes with an evaluation of the rise of ethical consumption in an effort to contextualise the potential value of ethical initiatives like Fairtrade.

Chapter 2 will outline a conceptual framework for identifying and understanding different arguments for fairness in trade. These approaches are broadly categorised as a ‘freedom’, a ‘rights linkage’, a ‘value distribution’, an ‘ecological sustainability’ and a ‘business accountability’ approach to fair trade. The ‘value distribution’ approach, which is at the heart of this research, is associated with fair trade models that prioritise enhancing producer participation in, and benefit from, trade. Through its focus on value distribution, this category of fair trade is particularly relevant for an analysis of the capacity of Fairtrade labelling to enhance the livelihoods of marginalised producers.

Chapter 3 assesses the operation of the current free trade regime and the historic shift from regulation to trade liberalisation in agriculture. It evaluates value distribution trends in agricultural trade, focusing in on the coffee case study. This chapter functions in two ways. First, it provides a context for the development of alternative trade practices that are currently operating within the trading superstructure and that typically aim to redress perceived failures within it. Second, the results obtained in this chapter provide ‘control’ data and observations, against which the relative results obtained for Fairtrade practices can be measured and understood.

Chapter 4, while acknowledging the important links between Fair Trade through ATO networks and Fairtrade labelling, especially in terms of shared history, shared principles and some overlap in activities (particularly in coffee), explores some of the important differences between these two models. The process and scope of inclusion of conventional businesses in the Fairtrade labelling model is the key point of departure from ATO Fair Trade. In this chapter, the argument is put forward that mainstreaming is made possible through the device of the Fairtrade ‘label’, which signifies the product assurance given in Fairtrade labelling, as opposed to the business assurance given in ATO Fair Trade.

To evaluate the integrity of product assurance in Fairtrade, considering that there is no guarantee of the integrity of participating conventional businesses, Chapter 5 will evaluate the governance structure and standards that underpin the Fairtrade labelling model. Questions regarding multi-stakeholder participation in Fairtrade labelling, as well as the burden of responsibilities conferred on traders and producers by Fairtrade standards, will be examined.

Chapter 6 provides an examination of the opportunities for smallholder coffee producers to access Fairtrade labelling. This chapter recognises that an evaluation of the impact of Fairtrade on smallholder coffee producers (in Chapter 7) is meaningless without first understanding how relevant (i.e. accessible) this market is. It quickly becomes apparent that only a limited number of smallholder producers (who, as required by the rules of Fairtrade, are mobilised through collective organisational structures) presently have access to the Fairtrade market, a situation that is unlikely to improve dramatically in the future. If we examine the terms of access, we begin to build a profile of the type of producer that is eligible to join. This profile does not typically meet the self-professed mission of Fairtrade to enlist the most marginalised producers.

Chapter 7 looks holistically at the impact of Fairtrade by bringing together a range of the arguments examined in previous chapters, as well as new analysis and data on impacts. In particular, data on Fairtrade incomes for coffee producers, through Fairtrade minimum prices and premiums, is evaluated. This chapter also includes an examination of the opportunities offered by cooperative production and trade networks, which are also important, although not exclusive, features of the Fairtrade model.

Finally, Chapter 8 contextualises Fairtrade labelling within the broader ethical consumption movement. Here the analysis turns to the potential value of ethical consumption more generally, as a means to trace the potential trajectory and value of ethical initiatives like Fairtrade. Despite the constraints of Fairtrade’s niche market, this chapter suggests that as part of a broader shift towards transformation in consumption practices, ethical initiatives like Fairtrade may have a greater potential impact on market transformation in the future. At the same time, it questions the participation of corporate actors in ethical trading schemes, and the scope for ethical consumption to transform the behaviour of commercial businesses.

2

What’s Fair about Fair Trade

Ownership of fair trade is claimed across a diverse range of ideologies and practices. Fair trade has even been used by some free trade advocates to represent their own methods and achievements. Consequently, affiliation with the fair trade banner does not necessarily exclude free trade strategies as might be expected. A key challenge is to ensure that the distinction between fairness arguments is understood. Some posit a conventional trade liberalisation model while others advocate alternative trade practices and their networks (defined as distinct from the dominant free trade paradigm). This understanding is fundamental to identifying and evaluating not only free trade strategies and practices but also to identifying and evaluating applied alternatives to conventional trading practices.

There is an evident theoretical gap in trade discourse which the conceptual approach developed here seeks to engage. It identifies five broad fair trade arguments based on different understandings of the concept of fairness in trade. These five approaches to fairness in trade are: freedom, rights linkage, value distribution, ecological sustainability and business accountability. There are significant overlaps within and between these conceptual categories. However, the framework makes it possible to identify key differences in fairness values for trade. Further it identifies mechanisms for fair conduct in trade, which vary in terms of their alignment with the free market model. In particular, a value distribution approach to fairness in trade – associated with traditional alternative trade and also Fairtrade labelling practices – focuses on enhancing the opportunities of marginalised producers.

The argument will be put forward that the opportunities offered to marginalised producers in value distribution Fair Trade models must be understood comparatively against the performance of free markets. Even so, the legitimacy of this approach also needs to be advanced against self-defined principles and measures assessing the capacities of associated models to create enhanced opportunities, relative to those already offered in conventional trade. Too often attacking the perceived weaknesses of a competing approach or model defends the merits of an individual approach and of associated models. Later in this chapter, the idea will be put forward that the merit of an individual approach needs to be tested on the integrity of its application and its performance against independent measures.

Conceptual approach to understanding fair trade arguments

McDonagh (2002, p. 643) claims that ‘[N]o universally accepted, authoritative definition of fair trade exists.’ It is certainly difficult to arrive at a universally accepted definition of fair trade. If we were to discuss the concept of free trade, it would be cloaked in the authority of neoclassical theory of economics and would be defined in practice as the elimination of market barriers facilitating an open trade regime. Fair trade, however, is less easy to define, as its foundations are not rooted in a distinct or cohesive body of theory.

Robert Freer (1938, p. 303) took the approach that it is only possible to decipher the ‘intended meaning of such labels as . . . “fair trade”’ with reference ‘to the context in which they are used’. Certainly, there are a variety of different contexts in which the words fair trade are applied. Fair trade is traditionally associated with the commerce of dedicated alternative trade organisations (ATOs), which actively trade in handicrafts and food products with the aim of supporting marginalised producers in the developing world (see discussion in Chapter 4). Today it is perhaps more commonly identified with ‘Fairtrade’ certification, of which certified coffee remains the most popular product in a growing range of goods labelled Fairtrade. However, it has also been used in many other contexts, including its use by free trade proponents endorsing trade liberalisation, advocates of organic production practices and labour rights campaigners. In fact, by employing a conceptual approach to fair trade, distinguishing between different propositions for what is fair in trade, it is possible to identify a range of both explicit and implicit fair trade arguments. There is after all, no limit to the range of possible opinions, approaches and models for defining and implementing fairness in trade.

Table 2.1 reproduces the basic structure of this conceptual approach to fair trade, which is based on respective arguments for fairness in trade. The inclusion of a freedom approach to fair trade, even though this approach is usually identified with free trade, is based on the premise that both the language and definition of fair trade remain malleable and have been adopted broadly in the debate over international trade. The rights linkage approach recognises strategies, which promote the realisation of universal rights and standards comprising labour rights, human rights and, in some cases, environmental standards. The value distribution category is specifically concerned with the distribution of value between wealthier and developing countries through the international trading system. An argument for ecological sustainability recognises the ecology as a finite resource, which in order to be protected, needs to be valued in market transactions. Finally, the category of business accountability refers to the argument that corporations have a fundamental impact on sustainable development, and as such a primary responsibility in fostering sustainable development, a responsibility to which they should be held accountable. Each of these categories will be examined in turn, though noting at the outset that the examples provided to clarify each category are not exhaustive and that, while it is useful to examine them individually for conceptual clarity, there are important and often significant overlaps across the principles and st...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• Acknowledgements
• List of Acronyms
• 1 Introduction
• 2 What’s Fair About Fair Trade
• 3 The Market: an Unequal Exchange?
• 4 The Birth of a Movement and Trade Alternative
• 5 Fairtrade: Peeling Back the Label
• 6 Fairtrade Coffee: a Niche Market
• 7 Fairtrade Impacts On Coffee Producers
• 8 Ethical Consumption: Revolution from Within?
• 9 Conclusion
• Notes
• References
• Index