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Fair trade: All it’s cracked up to be?

Fair trade: All it’s cracked up to be?

Did you know October was Fair Trade Month in the U.S.? You might have easily missed it if you’re not working within a fair trade-related field. In any case, how much social impact fair trade creates has been in question since the movement took root. So, let’s try to figure out if you should feel bad for missing the Fair Trade Month hype.

As I mentioned in my previous post, fair trade is “an organised social movement whose stated goal is to help producers in developing countries achieve better trading conditions and to promote sustainability.” Imagine my surprise when a quick Google search revealed that some fair trade farmers receive a lower wage than their counterparts working for private farms! We’re not even talking about bridging the poverty gap (I gotta use the development lingo here, don’t I?) or sending one’s kids to school. One farmer whose story I found (appropriately named Prosper) works for the fair trade-certified Kuapa-Kokoo cooperative in Ghana, and every month he earns $10 less than his peers. So, I asked myself, what is the point?

The “point” can be found in the fair trade premiums paid by fair trade-certified companies to be spent on local projects voted on and chosen by a local community. These projects can take the form of re-investment into businesses or socio-economic undertakings, such as building wells or schools. Don’t we all just LOVE local initiatives, especially those “democratically decided” by the community in question? It must be a development fairy tale!

Unfortunately, it is not. First, the fair trade model itself is partly to blame: Fairtrade International charges a fee for its certification, which strains the already tight budgets of the farms, leaving less cash flow to spend on wages (and lowering their competitive advantage). Point goes to private farms. Second, the prices Fair Trade International offers to farmers are only marginally higher than minimum (not even median!) market wages. Essentially, what the FairTrade Labelling Organization (FLO) does is set up price floors (minimums) to protect farmers from negative price fluctuations. Generally, FLO pays 44 cents/kilogram above market minimum prices and 11 cents/kilogram in premiums. These statistics are for coffee prices only. From them, it is fairly easy to extrapolate the magnitude (or lack thereof) of the fair trade price difference. The point is that guaranteed fair trade prices are, more often than not, lower than market prices, and when they are actually higher, it is NOT enough to create impact. (You can find the full updated list of Fairtrade product prices here.)

What about the premiums and community projects? The Fair Trade, Employment and Poverty Reduction Project at the University of London’s School of Oriental and African Studies (SOAS) has a rather unequivocal answer: they don’t make a difference. The four-year research project funded by the U.K.’s Department for International Development had a primary goal of finding out whether the presence of fair trade employment opportunities had any effect on the wellbeing of people living in poverty in rural areas. The resulting comparative and longitudinal assessment of the benefits and disadvantages created by fair trade and non-fair trade schemes concluded: “This research was unable to find any evidence that Fairtrade has made a positive difference to the wages and working conditions of those employed in the production of the commodities produced for Fairtrade certified export in the areas where the research has been conducted.”

In other words, wage-employees working with fair trade-certified organisations are not paid any more than workers working with non-fairtrade certified companies, and their working conditions are no better (and sometimes worse and sometimes involve child labour!).

Yet another troubling finding stated that, in some cases, the structure of fair trade cooperatives was aggravating rural inequality.

These latest (April 2014) findings seem to confirm something that has long been known but has only been whispered about in academic circles. Perhaps this is why Fairtrade International so publicly displayed its disappointment with the research in its statement. While Fairtrade International has a right to challenge the research findings, the company’s status quo should have been challenged long ago. Fair trade is a great idea, and at least some consumers are buying it (no pun intended!). But, it seems ludicrous to me to continue buying fair trade products now that I know the farmers working with fair trade companies are no better off than those working with regular companies! Essentially, what this means is that fair trade’s social impact is zero. That’s disheartening, and calls not only for more research, but for systemic changes within the Fair Trade Movement.

Featured image is coffee farmers in El Salvador. Photo from Wikimedia Commons.

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Liza Moiseeva

Liza is the Co-founder and Director of Marketing at GlobeIn, a social enterprise connecting artisans with the global economy, and she formerly served on the Advisory Board of Color Me In!, a non-profit that gives small loans to entrepreneurs in Zambia. Liza holds a Summa Cum Laude B.A. in International Studies from Old Dominion University and an MBA in finance. She hopes to contribute her knowledge of business, finance and the non-profit field towards creating a social impact.

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4 thoughts on “Fair trade: All it’s cracked up to be?

  1. REALLY interested in the developmental impacts of Fair Trade? Read more than five years of critical reflections on the topic from a development worker who has gone down the rabbit hole on coffee: http://coffeelands.crs.org/tag/fair-trade/

    While you are there, check out related discussions on coffee farmworkers (the most vulnerable participants in coffee supply chains and the least engaged in industry-led sustainability efforts), coffee leaf rust (a climate-change-induced outbreak that may be accelerating consolidation of the coffeelands in Mesoamerica), smallholder economics (tenuous), decision-support tools (traditional varieties for quality or hybrids for resistance), etc.

    I promise NO shiny-happy-farmer narratives.

    Saludos from the coffeelands in Central America and thanks for the unsentimental look at Fair Trade.

    Michael

    1. Michael, thanks for the link! I have to dig through your blog a bit more! You clearly know much more about coffee industry than me 🙂

      It was surprising for me to find out (through your blog) that fair trade movement has entirely overlooked the existence of poor wage workers. This is where potential for the most social impact lies and this is why the research did not find any social impact created by the fair trade farms.

      1. Liza:

        Sorry I missed your reply.

        I agree fully with you that improving farmworker conditions in coffee (and agriculture more broadly) represents one of the lowest-hanging fruits for companies interested in driving impact to farming communities overseas and improving the quality of life of vulnerable people in our food systems.

        Please join the ongoing conversation on farmworkers in coffee on the Coffeelands blog!

        Michael

  2. […] Fair trade-certified companies are ethical and sustainable, and they pay their workers a living wage. Right? Liza Moiseeva investigates how fair trade really affects farmers.  […]

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