[permaculture-oceania] Fairtrade - a costly optional extra?

[Russ Grayson]

The following article appears in the latest edition of the newsletter of the
Brisbane Institute (http://www.brisinst.org.au/).

I post it here as fair trade is promoted by food and local economic
development advocates, and some Permaculture trainers, as a component of a
fairer form of economic globalisation and as a means of local economic
development in lesser developed countries. I thought it would be of interest
to some on this list.

The article presents another view of fair trade. Note that it written by a
person with interests in the Dilmah tea company of Sri Lanka.

Article starts...

The Fairtrade brand is now a worldwide phenomenon which is receiving
increasing support from major corporations. Dilhan Fernando questions their
motivation and warns that paying lip service to fair trade is not benefiting
Third World citizens.

Fairer than Fairtrade
Author: Dilhan Fernando
Date: 14 September 2006

In the 20th Century capitalism gradually spread to all but a few outposts of
communism. At the same time the role of the state continued to recede,
giving pre-eminence to the corporate sector. The result is that global
corporations, many larger and more powerful than the governments of some
countries, wield such economic, social and political power, that they are
replacing the state as the catalyst for social justice, and are obliged to
be a part of the solution to the growing problems the world faces.

In addressing third world poverty, the most pressing and urgent problem the
world faces today, aid is clearly not a sustainable solution. The most
effective and sustainable solution is through the market mechanism - through
fair trade. That refers to the concept of trade in a fair and equitable
manner with less developed countries and not to the organizations known
collectively by the brand 'Fairtrade' which largely brought this concept to
prominence.

Fairtrade began with very noble intentions. However, in the case of tea they
unfortunately have themselves become obstacles to what they set out to
represent. The Fairtrade Foundation claims to offer an 'independent
guarantee that disadvantaged producers in the developing world are getting a
better deal.' It assures consumers that it verifies that fair-trade labeled
product comes from producers 'whose employers pay decent wages, guarantee
the right to join trade unions and provide good housing when relevant'.

It does achieve these objectives but also forms an obstacle in that,
contrary to what they imply, these objectives alone are not the solution to
the problem they purport to solve.

In Sri Lanka, the country that exports the largest volume of tea, whilst the
Fairtrade organizations have benefited only a handful of estates (around
10), more than 300 operate in the country. The assurances that the
organization holds out to consumers on worker welfare are all minimum
standards that are enforced by law in Sri Lanka. Almost every tea estate
worker is a member of a trade union and that union renegotiates wages every
two years - with constant increases unrelated to the fortunes of the ailing
tea industry. Certainly there is much more that needs to be done to offer
these workers and their families a good standard of living, but that
requires much fairer trade than Fairtrade.

Importantly Fairtrade is growing. Supported by a major international
advertising campaign, awareness of the Fairtrade brand is increasing and
sales are estimated at around US$500 million globally. Naturally producers
should be grateful for whatever benefit they receive from Fairtrade.
Unfortunately the problem is that Fairtrade hides the reality of truly fair
trade.

In any industry, the fairest form of trade is for the producer to offer
their product to consumers using as few intermediaries as possible. In the
case of Ceylon Tea, adding value at origin benefits the grower in the form
of a fair price for a product that requires effort, expertise and dedication
to produce; it benefits the tea industry, which is ailing from years of
exploitation and deprivation of a fair share of the revenue from the sale of
its produce; and, it benefits the under-developed economy of Sri Lanka.
Importantly, it also benefits the consumer in presenting a better quality,
fresher, more authentic and healthful tea.

Fairtrade has become another middleman in tea, benefiting from the enormous
goodwill of consumers and their willingness to pay a little more for a
fairly traded product. It offers producers token benefit in the form of a
premium on tea supplied, but does not fundamentally change the system that
has led to near bankruptcy and suicide for many tea growers.

People, as consumers, are generally good and would like to help poor growers
and producers of the products they consume. Properly directed, that sense of
humanity can dramatically change the world. In reality Fairtrade gives
consumers the comfort of knowing that they are supporting marginalized
producers through their purchase. As an interventionist scheme, however, it
fails to offer widespread benefit to producers with significantly more
benefit going to retailers and the Western brands that adopt the Fairtrade
mark than to producers. Increasingly, Fairtrade is also being associated
with poor quality product, especially in the coffee industry.

In being perceived as the solution Fairtrade, with its system of producer
registration and certification, producer fees and a conventional system of
exporters and brokers, is counterproductive. It offers benefits to a few
producers but it diverts the goodwill of consumers from the core solution -
there can be no fairer trade than buying direct, from the producer. The
benefit in buying direct is in eliminating the middleman which Fairtrade
should do - but does not.

More ominously, the enormous market opportunity that consumers have created
for Fairtrade, by expressing a willingness to pay more for fairly traded
products, has corroded the concept further. Major corporations who have
precipitated crises amongst producers are using Fairtrade to whitewash their
reputations. Some offer lip service to fair trade with one or more products
in their portfolio featuring the Fairtrade mark. All charge a large premium
for the 'privilege' of buying a fairly traded product. In most cases, that
premium is several times larger than the amount that goes to the producers
under the Fairtrade scheme.

The fact is that all trade should be fair - not just a small, token part of
a brand's product range. Neither quality nor price should change in a fair
trade product. 'Fairness' must be integral to the product and not an 'added
option'. The so-called Fairtrade premium that consumers are asked to pay
preserves the prevailing, exploitative system of trade, making a token
payment to producers to make the consumer feel good. That token is usually a
fraction of the incremental amount the consumer actually pays for the 'fair'
product and certainly a fraction also of the promise of fairness held out to
consumers by the associated marketing communication.

A simple but inescapable fact is that every product should be fairly traded.
Consumers pay a premium on shelf for fair-trade products; eliminating the
middleman and giving the producer access to markets would in fact result in
ethical and fairly traded products being offered to consumers without any
premium and with the right quality. In eliminating the middleman, producers
like Dilmah Tea (http://www.dilmahtea.com/web/home.asp) and Juan Valdez
Coffee (http://coffeetea.about.com/cs/culture/a/juanvaldez.htm) can offer
consumers a better quality product, benefit the growers, their industry and
its future and the economy of less developed countries.

As the 'market' for products perceived to be fair and ethical grows, more
corporations will join the fray under various guises legitimizing their
market behaviour. The most recent is Wal Mart whose declaration that they
will support sustainable products comes amidst declining fortunes. The
company has identified a market opportunity and is doing what it always has
- maximizing shareholder value, and thus profit, even if it means straining
its credibility in declaring a newfound commitment to the environment and
sustainability. The Wal Mart commitment to 'democratizing' sustainability
may be based on CEO Lee Scott's premise that 'sustainability is good for the
environment'. It is also good for business.

Today Fairtrade has become a brand in its own right, strengthened by an
advertising campaign that few producers could afford. Joining hands with the
companies that precipitated the collapse of the coffee market, and untold
hardship for coffee growers, Fairtrade has become 'corporatised'.

Dangerously, Fairtrade is also attempting to monopolise the concept of fair
trade. Its website states 'some companies make their own "fair trade" claims
without having the independent scrutiny of the FAIRTRADE Mark, or the
interests of producers at heart. If you are shopping and see tea, coffee,
bananas and cocoa products without the Mark, there is no guarantee that they
give producers a fair deal.'

Unfortunately, Fairtrade is a good idea that is attempting to exceed its
usefulness, becoming a misnomer that hides a truly potent solution to the
problem of third world poverty.

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RUSS GRAYSON
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manuals, media services for overseas aid

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