by Maria Stevens, February 2010

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What is Fairtrade?

Fairtrade is a globally recognised term that represents a commitment to better prices, decent working conditions, sustainable cultivation practices, and fair terms for the developing world, where exploitation and injustice are rampant. Fairtrade supports the poorest and weakest producers of controversial foods: bananas, cocoa, coffee, dried fruit, fresh fruit and vegetables, honey, juices, nuts/oil, seeds/oil, quinoa, rice, spices, sugar, tea, wine

Fairtrade requires that minimum social, economic, an environmental standards be met in order to carry the Fairtrade logo. Additional progress requirements, such as investments in sustainable farming methods or education, must also be met.

Fairtrade sets a minimum price that must be paid to the producer for any product, no matter how the non-Fairtrade price for that product fluctuates, thereby providing a realistic safety net against the distortions and fluctuations of the intangible market. On top of the minimum price, Fairtrade also demands that buyers pay a premium; this amount may only be invested by Fairtrade co-operatives in social, environmental, and economic development projects. Investment decisions are made democratically, with each farm representing one vote.

Because Fairtrade only works with co-operatives of small farmers (because small farmers are the most vulnerable to the systemic flaws of industrial world food production), Fairtrade products are not sourced from plantations.

Fairtrade is good for the environment in the sense that it promotes a return to traditional and sustainable farming methods, and also prohibits the use of GMOs. Due to this standard, many co-operatives find it is much easier to make a switch from conventional to organic production. When the question of whether Fairtrade is good for the environment with respect to food miles, the answer can only be decided on a region-by-region basis. It is, of course, more ideal for Ireland to purchase oranges from Spain than from South America. For the most socially and environmentally utilitarian scheme, items that are produced locally should be consumed locally, and items which are produced in the developing world should be consumed from sources produced fairly, sustainably, and ethically.

Criticisms of Fairtrade:

Criticism (economics): Fairtrade is similar to other farm subsidies, and sets a price floor for a good that is, in many cases, above the market price. This, therefore, encourages existing non-Fairtrade producers to produce more and new producers to enter the market. A subsidy, in short, can lead to excess supply, and have very disadvantageous effects on non-Fairtrade farmers. Economists remind the public that in some cases where subsidies contribute to this effect, the result was market collapse.

Response: Fairtrade’s response is two-fold. First, exchange between producers and intermediaries generally do not occur in a truly competitive framework, and general economic laws of supply and demand cannot be applied. Second, Fairtrade products cannot be viewed as the same as non-Fairtrade products; Fairtrade represents product differentiation, and therefore does not even compete on the same market. These facts explain why there yet no examples of market collapses or hurt competing producers. In many cases, Fairtrade production has helped non-Fairtrade producers; many non-fair trade producers benefited from fair trade funded infrastructure and programs: processing, credit facilities, quality improvement, crop diversification, conversion to organic production etc.

Furthermore, this criticism focuses merely on the potential economic impacts of Fairtrade, and does not consider positive impacts that extend beyond the sphere of economics.

Criticism (poorly predicated): Fairtrade certification is predicated on assumptions about the best way to organize labour (e.g. democratic farm co-operatives). Large family firms and plantations may not be certified. It also excludes small farmers hesitant and uncertain about joining co-operatives.

Response: Fairtrade’s mission was to address a specific population, which it did. Success in a narrow field is better than failure over a wider field; this is true particularly if the successes do not yield adverse effects elsewhere. So far, criticisms of Fairtrade are not identifying any major failures—they only identify potential failures. At the moment, Fairtrade aids the most in need, who do not have the same market information, access to credit, or ease in switching production techniques as their larger competitors.

Criticism (misleading): Retailers use the Fairtrade logo to mark-up their prices, thereby misleading buyers to think that more money is going to small farmers than is actually the case. The Economist, in its December 7, 2006 issue, estimated that only 10% of the premium paid by consumers for coffee trickles down to the producer.

Response: This is how product differentiation behaves in markets; it should not come as a surprise. It is a given and should not be used as a criticism unless critics assume Fairtrade aims to completely abolish capitalism. Furthermore, it is illegal in the EU and the USA to intervene in price fixing discussions between retainers and importers. Rather than disregard the efforts being made by Fairtrade merely because consumers are unaware of how prices are reflected back to production methods, more attention should be paid to educating the masses and restoring production transparency and food sovereignty.

Criticism (wrong approach): Fairtrade, although acting with laudable intentions, has taken the wrong approach by focusing too much attention on small farmers and no advocating immediate trade policy changes that would have a larger impact on disadvantaged producers’ lives.

Response: Fairtrade, then, is being criticized for not attempting a top-down approach. These critics would hope that the issues affecting small farmers will be solved by, for example, the World Trade Organization; one should not forget that the WTO is largely responsible for the current situation by continuing to open one giant market to players who were not initially all equals.

Criticism (neglecting industrialization): The movement doesn’t address issues of mechanisation and industrialisation – radical changes that might allow farmers in the developing world to stop doing back-breaking work and break out of the poverty cycle.

Response: Industrial agriculture is counter to the principles of sustainability. Furthermore, encouragement of farmers to convert to intensive methods encourages them to take on debt, as well as rely on the First World for the capital needed. Change does not occur from the ground up.

Criticism (dependence of a minority product): Fair trade can end up being a trap for farmers, tying them into a relationship of dependence with charity-minded shoppers in the West. Madsen Pirie, of the right-leaning think-tank the Adam Smith Institute, says that in protecting the market for certain producers, the movement effectively makes farmers “prisoners to our market”. “They become dependent on us continuing to pay premium prices for their goods.”

Response: What stops a farmer from dropping out of the co-op, and going back to conventional production? Furthermore, farmers in the developing world are already heavily dependent on the Western market. “If I were a poor farmer, I would definitely prefer fairer wages than being exploited and having no way out. If I were short sighted enough not to use any extra income to invest in my children’s education and health, then it would be my fault if I remain dependent on “charity-minded shoppers in the West”. The Fairtrade movement is at least giving me the choice to get me, my family and my community out of the poverty trap created by unfair trade policies.” —Joanne Wong, Coventry

Criticism (not a noteworthy contribution): [One critic] is concerned that the fair trade movement is reshaping the debate about underdevelopment, so that the main concern today is with increasing farmers’ wages by fairly small amounts rather than really transforming poor communities through development, modernisation, even industrialisation.”Fairtrade seems to be rooted in a conviction that ‘small is beautiful’,” says Mr Daley, who argues that the movement does not focus enough on developing modern agricultural methods, which is “surely what farmers in the developing world need”.

Response: “Major, mechanized farming methods are what made these people reliant on the so-called First World to begin with. Coffee is a primary example. All coffee used to be shade-grown. Today most of it is produced in cleared fields. This clearing of the native environment eliminated the natural system of pest control, necessitating the use of chemical insecticides. It depletes the soil, meaning that you also end up using chemical fertilizers. Between the use of these chemicals and modern tilling techniques, the soil is utterly depleted and a layer of hardpan is created below it, eliminating drainage. The result? Environmental devastation. Anyone who claims that these people need to convert to our way of farming is really saying that they need to convert to our way of life (such as it is) because there is something wrong with theirs.” – Martin Espinoza, Kelseyville, California

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