Fair Trade – an ego massage for the rich?

The Fair Trade movement has always had its critics, including myself since the 1980s, who have said that it is just a mechanism by which consumers in the rich world can feel better about themselves. It is a movement based around the consumption patterns of the rich and not the needs of the poor.

Recently the Fair Trade movement has come under more scrutiny as its label licensing system now incorporates big companies such as Cadbury and Starbucks, the fear being that these companies are not interested in justice but are simply exploiting a marketing opportunity. The economic pressure of these companies and the dependence of the Fair Trade movement on income from them is, many claim, a recipe for the dilution of Fair Trade principles. These issues are explored here – “The pros and cons of Fair Trade Coffee”

Along with the fear of selling out to major food companies, critics have suggested that Fair Trade does not have the resources to monitor and regulate their producers, allowing for exploitation of workers to continue by certified Fair Trade producers.

A documentary was recently shown in Australia on SBS entitled “The Bitter Taste of Tea” which explores exploitation in tea estates and concludes that in many cases conditions in Fair Trade estates are equally as exploitative as other plantations. That documentary is on a website – http://digital.films.com/play/LSCQKZ#

The basis of the Fair Trade labelling and licensing system is their guarantee… “Guarantees a better deal for third world producers”. These are the magic words that allows the first world to consume coffee without guilt and allows coffee sellers to promote guilt free coffee to their market. With this in mind, I have examined one of the Fair Trade projects, coffee production in East Timor, to see what impact Fair Trade is having that justifies the warm inner glow of coffee consumers.

According to the Fair Trade association of Australia and New Zealand the Cooperative Café Timor (CCT), which has 23,000 farmer members, exported to Aust and NZ approximately $320,000 worth of Fair Trade Coffee. Divided by 23,000 members, this is an average income of approximately $14 per year, $2 of which goes to community projects.

$14 per year = 7 % of the income of the poorest of the poor (aprox $200 per year)
= 1.4% of the minimum wage (aprox $1000 per year)
= .58% of per capita GDP (aprox $2,400 per year)

The economic benefit identified by the Fair Trade website does not seem to take into account the cost of production to farmers or administrative costs of the CCT which must be deducted from the income to get a true picture of benefit to the farmer.

Fair Trade Aus/NZ promotes the CCT health program as a way that Fair Trade is supporting the farmers. CCT directs part of its Fair Trade premium to a rural primary health care service. Between 2004 and 2008 the CCT Fair Trade premium was $170,351 (average $42, 587 per year), which went towards the health service, a business education program and a consumer goods wholesaling business.

The health program services 115,000 people and provides free health care to coffee farmers.

Although the Health Service is promoted on the Fair Trade website, it is not a Fair Trade project. It is a project of the National Cooperative Business Association (NCBA) in conjunction with the CCT. It is funded by United States Aid, as is the development of coffee producer co-operatives.

It is the NCBA that has been rebuilding the coffee industry and organising for the needs of coffee producers such as health care. The NCBA co-operatives employ 300 full time staff and 3,900 seasonal workers and are the single largest private employer in East Timor.

All Fair Trade seems to have done in East Timor is attach itself to a U.S. aid project with tokenistic and minimal “benefits” in order to justify the Fair Trade label as an advertising gimmick to sell coffee in the rich world.

In the 1980s the World Vision model of child sponsorship came under intense scrutiny. The criticism included the religious and political affiliations of World Vision but the primary criticism was that the program was designed to fulfil the needs of rich sponsors rather than the poor target communities. More and more resources were spent on communicating with sponsors in order to secure their continued payments and less and less spent on real aid on the ground. The focus on children was maintained as the most effective marketing device rather than any real strategy to tackle poverty.

It is time to take a similar critical look at Fair Trade to identify whose interests are really being served – the egos of the rich, the marketing departments of western coffee distributors or the needs of third world communities?

John Tracey

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6 responses to “Fair Trade – an ego massage for the rich?

  1. It seems you have taken only a superficial look at fair trade and, not surprisingly confused the movement with the label. They are not the same. If you want to look at the movement, look at the WFTO and have a chat with Paul Myers, the elected representative of producer groups across 7o countries. The label is following its own path and believes it is doing good. I like you have serious concerns about some of the decisions that have been made. But the label is not the movement.

  2. Hello Robin,

    Yes I believe the the above is superficial but I suspect not for the reasons you suggest.

    It does not look at the politics of Fair Trade being aligned to U.S. foreign policy, it does not explore the mode of monocultural cash crops for export as a a structure for dependence on multinationals, it does not look at the value adding (e.g. roasting) that occurs in the rich countries that keeps nearly all the profit from coffee in the rich world and it does not look at the carbon footprint of global food exports.

    As far as I can see, the “movement” is just the people who consume (or sell) products bearing the label. If it is more than this I would be curious to hear about it.

  3. “Tracing the bitter truth of chocolate and child labour”
    http://news.bbc.co.uk/panorama/hi/front_page/newsid_8583000/8583499.stm

    On MAy 3 “Four Corners” (Oz current affairs TV show) screened the documentary “Chocolate, the Bitter Truth” which like the tea documentary above shone a light on the inability of Fair trade to properly moniter or regulate such things as child slavery in the production of their fair trade product.

    There is a more serious aspect to this which is not a focus of the program but is implicit in the information provided by the program, and tthat is “Fair Trade” and the public assertion of its credibility lends weight to the regime of self regulation by the chocolate companies as an alternative to legislation to outlaw child slavery. Fair Trade legitimises a self regulation system that has been shown to fail.

  4. Hi John,

    I have serious reason to agree with Robin: both on the simplicity of your desk study, and on the nuances of the Fair Trade movement.

    Your view that the movement is only people who buy certified goods betrays your critical lack of knowledge of the subject and would I advise a little more research. While many of those people do just buy certified products (which are obviously far from perfect – although perhaps better than those which outright refuse to consider the welfare standards of producers), a huge proportion of Fair Trade consumers also give considerable amounts of their own time to campaigning for a political restructuring of international trade rules or raising awareness among those who don’t think twice about anything they buy. A key issue here is counter-factuals. Saying something is no good is easy – but if you expect the situation to be realistically preferable without it, is a whole other question!

    Concentrating on your analysis of one particular project, I obviously do not have sufficient empirical experience of this example to make concrete conclusions, but the point I wish to make is that neither do you. It’s largely down to an issue of interpretation and I would like to question the rigour of yours based on the evidence available.

    Firstly, you divide the income gains between the full memberships of the co-operative. In doing so you assume that all 23,000 farmers are all selling their crop through the Fairtrade certified channel. Reflecting on other examples of FT certified organisations, this can reasonably assumed to be unlikely and thus your subsequent figurers carry little meaning. The aggregates could either reflect one single farming making $320,000, or a reasonably sized group of farmers making a reasonable annual income. (Naturally you might question how some gain when other don’t, but you also have to consider if we need to pick between helping everyone at once, or doing what we can). As you have not noted the percentage of overall output sold as Fair Trade, there is no way of knowing what other income accrues to the producer organisation. For these reasons, your calculations say very little about the welfare standards of the producers. I wonder if you could either justify your calculations or express them as the hypothesis so that readers are not mislead?

    Further to this, the development work is rebound with poor co-ordination, mirror projects and massive inefficiencies. What you have neglected to note, or are perhaps are unaware of, is that Social Premium payments are allocated by the local community on the basis of vote by the membership. For this reason, the decision to invest in an existing project can be hypothesised to reflect local desire and cost benefit analysis. Again, I have no evidence of the reality, but my point is that your article appears to be more the result of your own predetermined ideas about Fair Trade than an empirically derived expose. I’m offering the other as a balance.

    If you want to pass meaningful comment, it would be great if you could offer more detail, and not least, a robust and logically derived counter-factual scenario to show what life would be like without Fair Trade. An easy starting place would be the unit price of market versus Fair Trade goods; and I can tell you that as FT requires the payment of the market price (plus the social premium percentage) where it is higher than the minimum set price, this is always going to be higher. Certification costs are certainly a factor, but you need to bear in mind that farmers are making a free business decision to invest in certification or not. While there is always going to have to be room for experimentation (which comes with risk of wrong decisions) organisations are free to stop renewing the certification whenever they feel they’d be better off without it.

    I’m not saying that Fair Trade is perfect, or that you are necessarily wrong about this situation. However, you (like most critical accounts of Fair Trade) need a lot more robust evidence to reach the conclusions you have. If you or anyone else is interested in reading about these issues in more detail, why not check out:

    http://www.brass.cf.ac.uk/uploads/TheFairTradeCupResponsetoAdamSmithD9_1.pdf
    http://www.informaworld.com/smpp/content~content=a916449660~db=all~jumptype=rss
    http://www3.interscience.wiley.com/journal/123189628/abstract

    P.S On child slavery and labour standards, I think you’ll find there is adequate legislation on the subject. The thing missing is that the economic realities of the developing world confirm little to western middle class moral outrage about children working. I’m not sure if it was the same program on chocolate that we had in the UK, but there were again serious problems of interpretation with the account. Informants said they came in trucks from the north – however, alternative investigation found it was a part of family migration to find economic opportunity. This wasn’t trafficking but a standard and conscious livelihood strategy to stay alive. Although poverty and exploitation are not an acceptable part of the future, these issues are a little more complex I’m afraid.

  5. Hello Alistair,

    Thank you for taking the time for a considered response. I have been inviting fair trade people in Australia to respond but they don’t want to speak publicaly on behalf of the organisation.

    I chose the East Timor project because it is the closest project to Australia and because local FT distributers and retailers (here) sell East Timorese coffee.

    Fair Trade producers seem to be a small minority of the CCT growers and you are right that there are some producers with a significantly higher income from FT than $14 per year. Conversely, it would seem, that most CCT producers get nothing at all from free trade. (except of course from FT growers premium payments to the medical service at a per capita rate of $2 per year).

    In East Timor, the agency for development is the CCT of which FT is just a small insignificant add-on. The path out of poverty for the growers is the CCT, not FT. It is dishonest for Fair trade to claim that they are more liberating than the US aid program (that funds CCT).

    FT, and yourself, repeatedly make the claim that FT is not perfect but it is better than the alternative. In East Timor this is not the case. The success of the CCT is its integration into mainstream global markets as per U.S. foreign policy. The FT component is just symbolic and tokenistic and, (apart from $2 per year per capita subsidising the U.S. aid medical program.)

    This analysis……..

    “The Fair Trade response to the coffee crisis” by Ruth Fend (2005)
    http://fletcher.tufts.edu/research/2005/Fend.pdf

    …….suggests that the FT pricing and certification mechanisms sometime achieve minimal benefits and sometimes creates an (minimal) obstacle to economic development. It suggests that the main success of FT has been the process of community and business development to organise producers into a co-op and acquire business skills with which they can engage in the mainstream market.

    In the case of East Timor, US aid is doing all the community development and business training. FT is just a tokenistic add-on.

    On the question of child slavery.

    I agree with you about child slavery and Western middle class moral outrage. The “slavery” that the film found could well have been the tribal indigenous custom of boys, when they reach a certain age, are taken from the women to live with the men where they learn not only the tribal laws etc but also basic skills of survival. The men teach the boys the family business whatever it is.

    In Mt. Isa, an outback mining town in Australia, at one time there was a major problem with teenage Aboriginal boys hanging around the streets sniffing petrol. People were dying. The Aboriginal elders organised themselves to go into town and pick these young men up and take them, often against their will, into the bush for extended periods of time for healing and tribal cultural education.

    The elders were told by the police they would be charged with kidnapping and assault if this practice continued. The police continued arresting the boys and putting them in gaol.

    However, back to the film. The key point is that FT did not have the systems to monitor and regulate its projects. Whatever the story was of the young workers, FT has deemed that situation to be child slavery and some growers had been previously suspended for having child labourers. (FT = western moral outrage) Yet there was no mechanism to stop the ongonig process.

    I suspect you may be wrong when you say ” there is adequate legislation”. The film documents the public debate about anti child slavery import legislation in the U.S. where vested interests have repeatedly obstructed and delayed legislation, their alternative being industrial self-regulation. This, I suspect, is why Cadbury and Starbucks etc. has embraced FT minimalism because it adds weight to their arguments that they should be self regulated rather than being subject to industrial human rights legislation.

    I do not think we have legislation in Australia prohibiting imports produced by child labour.

    Anyway,

    My references for the article are Fair Trade and CCT. The links are in the article. If there is any inadequacy in my sources of information then the same problem exists with Fair Trade’s reporting of its projects.

    The issues are indeed complex and there is not just one perspective on the complexity. This is why the simplistic and apparently meaningless guarantee of Fair Trade certification should not be used to give the rich world a warm inner glow when it drinks coffee.

    One final point, you speak of “campaigning for a political restructuring of international trade rules.”.

    The primary problem is not the trade rules but rather it is the question of the ownership of the means of production, the nature of the mode of production and the nature of the marketplace.

    Tinkering with trade rules in accordance with the UN millenium development goals only reinforces the dominant paradigm of the global market place developed and directed by the world bank.

    In this model, the path out of poverty is to get a job on a farm or in a mine or a coffe plantation for a multinational conglomerate that owns the land and everything on it. Jobs, according to the UN and US aid programs (such as CCT in East Timor) is the answer.

    The alternative is land rights and land reform so that people own land, they own the means of production and this wealth can be passed from generation to generation, accumulating wealth in the community and not in the stock market.

    Local markets and trade and distribution systems should be developed to raise the lifestyle and choices of the local people as well as creating a market that the producer is themselves a part of and fully understand and can manipulate – unlike the powerlessness of trade on the global market.

    And lastly, there has to be some ecological sensibility in development projects in that food needs to be produced as close to the market as possible.

    Coffee, for example, does not provide for the needs of a local market, it supplies foreign markets. All of the value adding to the raw product occurs outside of the local community and market. Wealth is generated in foreign markets – controlled by multi-national conglomerates. By the time coffee reaches our lips it has travelled extensively and the carbon footprint is massive

    World Vision and Fair Trade have both aligned themselves with US foreign policy in their projects and as such have nothing to offer in the de-colonisation of poor people which is the only path out of poverty.

    If there is indeed a movement beyond the FT certification system then it needs to analysing global poverty in frameworks that reflect the complexity of the problem and not the simplicity of western affluent illusion.

  6. Pingback: Fair Trade – what does it mean? « O ECOTEXTILES

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