Is Fairtrade worthwhile?

According to the International Institute for Sustainable Development, there are over 400 voluntary sustainability schemes (VSS), such as Fairtrade and Rainforest Alliance, operating across the world. These markets are showing exponential growth, as consumers vote with their pockets, to demand better treatment for producers and higher environmental standards.

But a recent article in Ghana Business News, bemoaned the low earnings of Ghanian and Ivorian cocoa farmers and cites research by Bart Minton of the International Food Policy Research Institute to argue that such schemes have little impact on farmers incomes. This research shows that a small farmer in Ethiopia can benefit by as little as $6.70 a year. These findings are congruent with the experience of the Assam tea activists who visited Manchester with the ‘Who Picked My Tea?’ tour last year.

So what’s going on? Is the Fairtrade mark really worthwhile?

There is certainly unease within the sector. The Assam activists is fairtour was organised by Traidcraft Exchange, sister charity of Traidcraft, one of the oldest fair trade organisations in the UK and co-founders of the Fairtrade Foundation.

Traidcraft itself has recently faced a financial crisis and been forced to admit that many of its product lines are no longer viable.

 

Better conditions vs. higher profits

The first thing to note is that Minton’s findings are not as stark as reported.

What prevents the high premiums paid by consumers from reaching coffee farmers? Participating in VSS programs incurs high overhead and certification costs. To win VSS certification, farmers must pay workers minimum wages, ban child labor, and provide access to sanitation and water, in addition to paying documentation costs. Each of these contributes to higher production costs.

Our study shows financing communal services, partly paid for by these higher price premiums, led to higher school enrollment rates and higher levels of adoption of improved production practices, but there is limited evidence of any large-scale impacts.

So, perhaps looking at farmers’ earnings, which don’t necessarily benefit landless worker or children, is not the right way to look at it.

We should also remember that a key aspect of the Fairtrade scheme, unlike other voluntary schemes, is that it guarantees a minimum price to farmers, regardless of market fluctuations. It may be that the true test would be how many consumers stay with the mark should the price of coffee fall dramatically.

 

The Assam estates

The report from Assam is more concerning. When asked why they participate in such schemes, Ethiopian farmers cite the benefits of being members of the co-operatives that are associated with them: local proximity; access to advice; and shared dividends. Such co-operative relationships are not present on the Assam tea estates, which are large private holdings which fall outside government regulation and exploit an ethnic minority workforce.

The ‘Who picked my tea?’ campaign goes beyond Fairtrade certification, to demand complete transparency in the tea supply chain.  In response to pressure from the campaign, the big 6 UK tea companies have now agreed to publish lists of their Assam tea estates. This will make it possible to take targeted action in co-ordination with activists in Assam.

Read more about the struggle for decent livelihoods

Image by Traidcraft Exchange/HELM Studio

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