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.