Wednesday, 9 March 2011

A few reflections on Fairtrade Fortnight

By Neil McCulloch

We’re in the middle of Fairtrade Fortnight at the moment (28 February – 13 March 2011). Organised by the Fairtrade Foundation here in the UK, it’s two weeks of campaigning about ‘why Fairtrade matters’.

The campaign was launched with the announcement that sales of Fairtrade products soared by 40% in 2010 to an estimated retail value of £1.17bn compared with £836m in 2009. Apparently UK consumers are now drinking 9.3 million cups of Fairtrade tea every day.

Added to this, a whole host of celebrities are putting their name and fame behind Fair-trade – Harry Potter star Emma Watson has just launched her new clothing collection for ethical brand People Tree.

Retailers are placing increasing importance on Fair-trade in their marketing practices. Last month The Co-operative, a diverse business whose products range from food to funerals, banking to pharmacy, announced plans to make 90% of its products Fair-trade. Chris Anstey, a consultant with over 30 years experience in the food industry (including for retail giant Tesco) gave a seminar at IDS last November about this very issue. He explained that the emotional aspects of a product, such as animal welfare or how the producers are treated (Fair-trade) are becoming more important to consumers. As a result, these aspects are also becoming more crucial to retailers, and many are incorporating these ethical properties in their private-label products, generating profits as a result.

But not everyone is so excited about the Fair-trade trend. Writing in the Daily Telegraph Philip Booth, Director of the Institute of Economic Affairs is critical about what Fair-trade achieves. He questions whether Fair-trade actually brings better working conditions to poor producers, due to weak monitoring. He also says that there are costs to producers of joining up to the Fair-trade movement. Booth is also critical of the Fairtrade Foundation’s connections to government and of its disapproval of free trade.

I don’t share Philip Booth’s scepticism about the Fairtrade Foundation’s achievements – perhaps I’m biased because it is lead by former IDS graduate Harriet Lamb! But the general issue about whether mechanisms like Fair-trade are effective at helping the poor is an important question. As an economist what Fair-trade does is pretty clear – it’s a brand and a very successful one. Like all brands, it allow the holders of the brand to capture market share and command a small price premium by differentiating their product from otherwise identical competitors. Hence I don’t doubt that Fair-trade businesses do pay better wages and ensure workers have slightly better conditions than others, precisely because the brand allows them to capture this premium.

However, in a sense, this doesn’t matter very much. The total number of people employed as a result of Fair-trade is miniscule compared to the overall workforce in the sectors in which they operate, so the benefits from them paying better wages or providing better conditions only go to a very small share of workers. What really matters is whether Fair-trade is successful in changing business norms of behaviour. I’m not aware of any studies that look at this issue (please someone enlighten me) – and yet it matters much more than whether the people directly employed as a result of Fair-trade are better treated.

So I will be raising a glass of (Fair-trade) wine to Fairtrade Fortnight – not because the people who grew the grapes were slightly better off, but because, hopefully, they help to change the way that businesses think about their role in, and obligations to, the society of which they are part.


John Humphrey said...

Neil's commentary is a very interesting issue about the benefits of Fairtrade. It is certainly worthwhile to look at the costs, benefits and scale of Fairtrade-certified production. Millions of farmers are benefiting from the premiums offered for Fairtrade tea, coffee, bananas etc. Even if the proportion of workers and farmers benefiting from Fairtrade is 'minuscule' in relation to agricultural employment as a whole, this still adds up to a large number of people. If a new initiative looked likely to provide some improvement to the lives of millions, would we have reservations because millions more will not benefit? Fairtrade is a big success.

But, as Neil points out, greater benefits may arise if Fairtrade changes norms of business behaviour. How might this happen? Some business leaders might be convinced of the moral case for reducing poverty and inequality, but the bigger effect will occur when businesses see that there is money to be made from the values expressed by the Fairtrade brand. When this happens, will they sign up to the Fairtrade brand, or will they create rival brands to compete with Fairtrade and capture not only the income is going to Fairtrade Labelling Organisations could also control of how the brand is focused, managed and developed. Competition already exists. We don't know how far such competition will develop, and we don't know whether the rival brands will be more or less beneficial to poor farmers.

SSuri said...

While it seems that more small businesses around the world need to sign up to the FairTrade brand in order to benefit from it, it seems less clear how they can do this. For larger businesses in the global value chain, recognizing the importance of this branding may be more of a hurdle than financing any changes needed to adopt the standard, but how do micro and small enterprises both realize the importance and then upgrade their practices? Then after implementing these standards (which may be more costly to adopt than for a larger firm) is the return to the enterprise greater than cost to adapt?

Alvaro said...

I am a little bit more skeptical about this issue, from the fact that our own capitalism and consumerism made us incur in unfair practices with small producers in the South to increase our consumption and at the same time reduce the cost associated to it. The creation of the Fair-trade label is a good/profitable reaction of the big companies to address the increasing needs of fairness and ethics that the final consumer have, but this is not a solution, it is a mere band aid to cover a bleeding wound deep in the values of our societies. We want to keep consuming as much as we do, but maybe paying a bit extra to feel better when we buy unnecessary things. We know that we don’t need that extra pair of trousers but we want to excuse ourselves behind the act of doing something good for the mother earth or for the poor people in Uganda…
What worries me the most is this generalized tendency to make everything fair trade. What will happen next? Will fair trade become the norm? What kind of consequences could this have? How will then the people calm their need to do something good for the environment/people? We will probably need something more… maybe another label?