An Analysis of the Fairtrade System

An analysis of the Fairtrade system in terms of food production and distribution by the Boğaziçi University Sustainable Development Goals Student Hub

By Doğa Çınar, Department of Economics, Boğaziçi University

We, humans, have a limited time on earth like every other living organism. However, we are the only ones aware of our mortality. Thus, getting the most out of our lives truly matters for us. In order to make a decent living, we rely on getting jobs and we expect them to satisfy our basic demands such as security, equality, and a decent income. Unfortunately, not everyone is able to meet their basic expectations. According to World Bank (2020), over 700 million people live on less than $1.90 a day and it is defined as the international line for extreme poverty. Whereas some of us with decent livelihoods have the privilege to enjoy a bar of chocolate or go out with friends to grab a cup of coffee. For others, this can be seen as a treat, an award or perhaps they are so much embedded in their lives that the foods true value and the costs that are paid for their production is not realized. Meanwhile a brutal story of exploitation is taking place in the background and lack of public awareness contributes to deepening of this issue. However, we are not helpless for finding alternative solutions for this problem and luckily, there are organizations which aim to contribute tackling the ongoing issues in food production and distribution systems.

In this essay, I will be introducing The Fairtrade Foundation by discussing their aims, their objectives, some of their projects and, the related ongoing issues in food production and distribution systems. Finally, their impact on food systems and the communities they work with will be evaluated.

The Aims, Objectives, and Methods of Fairtrade

Fairtrade International is: “a non-profit, multi-stakeholder association of 22 member organizations. – three producer networks and 19 national Fairtrade organizations. Fairtrade International coordinates activities for its member organizations and owns the FAIRTRADE Mark, a registered trademark of Fairtrade that appears on more than 30,000 products” (Fairtrade International, 2020).

Fairtrade seeks a world where: “the benefits of trade are distributed more equitably, human rights are respected at every stage of the value chain, from the largest multinational to the smallest producer organization, business does better, fairness and justice come first, governments and policymakers actively foster the environment required for trade to drive living income and living wage.” (Fairtrade International, 2020).

Fairtrade is not only about fair prices but also sustainability. It namely focuses on people and meeting their needs today without compromising the needs of people in the future. Since issues regarding sustainability are closely interrelated with economy, societies, and the environment, Fairtrade takes a holistic approach for tackling them by empowering farmers and workers to face a range of economic, environmental, and social challenges.

Projects of Fairtrade

Fairtrade supports and challenges businesses and governments to make trade fairer and inspires shoppers to think a bit more about what they buy. By these means, Fairtrade partners with governments, NGOs, and the private sector to develop projects which are producer led, innovative, impact-oriented and time limited. “The projects range from the ones that test new approaches for farmers to improve their business and incomes, to projects raising consumer’s awareness of sustainable consumption and production.” (Fairtrade International, 2020).

For example, “Framework Partnership Agreement Project” and “Switch-Asia Project” are co-funded by the European Union; “Trade Fair, Live Fair Project” is co-funded by the European Commission’s Development Education and Awareness Raising (DEAR) Programme and “Cost Of Sustainable Production For Coffee Farmers Project” is co-founded by the GIZ, German Society for International Cooperation (GIZ) (Fairtrade International, 2020).

Fairtrade’s Role in Tackling the Ongoing Issues in Food Production and Distribution Systems

The FAIRTRADE Mark is the symbol of the international Fairtrade system and the most globally recognized ethical label (Fairtrade International, 2020). There are more than 300 commodities promoted under the Fairtrade label, but the main products are coffee, cocoa, banana, flowers, tea, and sugar (“Fairtrade International,” 2020, para. 1).

When you buy products bearing these marks, you contribute to improve the life standards of producers in the developing world. For a product to be Fairtrade certified, the conditions under which it is produced must satisfy Fairtrade standards. These standards encourage sustainable, social, economic, and environmental development of producers and their organizations.

To understand the role of Fairtrade for tackling the ongoing issues in food production and distribution systems, I want to give a real-life example of Teresa Riviera Palacios a Fairtrade coffee farmer in Nicaragua. She is a member of a Fairtrade certified cooperative and organized group of farmers. Before Fairtrade, she was facing some serious problems which most farmers today face. For instance, she was not able sell her coffee in the market at a fair price, so she was not getting as much as she deserved. Since coffee is traded in stock exchange, her earnings used to be vulnerable to the constant price fluctuations in the market. When coffee beans purchase price rock-bottom for farmers, she was not even able to cover the production costs. Now, even if the prices drop, she earns at least the Fairtrade minimum price to cover the cost of producing them. Consequently, in the case of the market price being higher than the minimum price, she still gets the market price. As a result, she is not affected by the volatility of prices and continues her production safely. Most farmers in the developing world do not have access to decent living conditions. They face problems related to infrastructure, health care services, education, and food security. However, after joining Fairtrade, farmers get a so-called Fairtrade Premium which is an extra sum of money that companies agree to pay on top of the selling price of the product. They could use this, for example to invest in business or community projects. The producers receive this money directly and they get to vote on whether to distribute the money as a bonus or use the money for starting community projects to support women like Teresa to market their coffee and gain more independence or a scholarship program or building a daycare center (Fairtrade Foundation, 2020).

Around the world, there are a lot of women working in coffee farming and processing areas, however a lot of women are not in the position to make a final decision. Whereas in Teresa’s cooperative, all members of the organization have access to democratic decision-making and collective bargaining processes, and no one is discriminated against any member or social group. “Moreover, child labor and forced labor are strictly prohibited. Also, the conditions of employment exceed legal minimum requirements in these communities. Furthermore, adequate occupational safety and health conditions are provided.” (Fairtrade International, 2020).

In addition, through the support and shared knowledge of other farmers in the cooperative, she has been developing her farming skills and sells better quality beans. Prior to the training opportunities which Fairtrade offered, neither her land nor the environment was among her priorities, she did not know about climate resilience and used to sell her coffee for the sake of selling. As a result of this project, she raised her awareness about environmental issues and learned how she could adapt to changes. With the knowledge she acquired, the quality of her coffee improved which made her livelihood more stable and, her farm more environmentally friendly. Teresa also used a small loan scheme funded by the premium to buy more land which allowed her to increase her productivity and income and make her a more reliable supplier.

Evaluation of Fairtrade’s Impact

Fairtrade is much more than a label and it is a big step towards getting wage equity in the supply chain. Yet, we cannot dream of living in a fairer world without making structural changes in the system.  The system we are living in is a closed system, meaning that our resources are not endless, and we have limits to growth. According to Meadows et al.’s (1972) The Limits of Growth report, “Given business as usual, i.e., no changes to historical growth trends, the limits to growth on earth would become evident by 2072, leading to “sudden and uncontrollable decline in both population and industrial capacity”.”.

They argue that: “Growth trends existing in 1972 could be altered so that sustainable ecological and economic stability could be achieved.” (Meadows et al., 1972)

If we keep focusing on GDP estimates as an indicator of economic growth and solely concentrate on increasing those numbers, it will never be possible for us to live in a thriving, prosperous society. Thus, the fate of our species is strongly correlated with altering current growth trends into an ecologically sustainable one. In terms of sustainable development, I find the United Nations Sustainable Development Goals (SDG) very significant and particularly, the first SDG “ending poverty in all its forms everywhere” and the tenth SDG “reducing inequality within and among countries” extremely important (United Nations, n.d.).

By these means, I believe in regional development and the cooperation of both developed and developing countries. Poverty cannot be the default option for the developing world. Therefore, a way to develop people’s own capacity to solve their own problems needs to be found.  In this case, what Fairtrade does is this amazing development process which is not driven by anyone’s charity but is just driven by this simple powerful concept of a fair price for a great product and that means a better income for the farmers. As it is often said: “Give a man a fish, and you’ll feed him for a day. Teach a man to fish, and you’ve fed him for a lifetime.”

In today’s world, however, the reason why producers in developing countries cannot eat fish is not because they do not know how to fish. It is because after a long period of colonization, they made them forgot the process. At that time, even though they caught fish, their stock was consumed by others. Or perhaps, they were forced to harvest pearls all day and they did not have time to find something to eat. In other words, farmers were obliged to grow cash crops instead of subsistence crops, therefore knowing how to fish was not enough to feed themselves. Without any harmful external intervention of developed countries, I believe that developing countries can “remember” their capabilities and unlock their true potential. Fairtrade connects disadvantaged producers and consumers through this direct market linkage, and it enables farmers to rise out of poverty based on their own efforts. Now, they can catch their own fish, sell it to the world and get a decent return for all their hard work.

Thinking about the success of Fairtrade in eradicating poverty, it will certainly result in overall wellbeing of the society. However, in order to achieve this, there must be a demand for these Fairtrade products in the market. This system’s success completely relies on the buying behavior of consumers and their consumption choices have an enormous impact on the lives of workers around the world. Bearing in mind that Fairtrade products are relatively more expensive than other goods in the market, consumers may tend to buy the cheaper product. There can be two reasons behind not choosing the Fairtrade products. First, consumers might be not aware of the cruelty behind the production process, or they might be aware but cannot afford such a high price, therefore buy the cheaper product. If consumers do not change their buying behavior, companies will maintain their unfair practices. For people with sufficiently high purchasing power, Fairtrade’s projects about raising public awareness might help. But still, there needs to be more arguments to convince the consumer to buy the Fairtrade product other than related to ethical concerns. First, the product needs to be of high quality and secondly, its relative price to other goods need to be as cheap as possible. Since a Fairtrade product complies with Fairtrade quality standards, probably the product’s quality would not be a concern for the consumer. Unfortunately, the reason why those alternative products are cheap is the corporate greed which violates producers right to get what they deserve in exchange for their labor. Companies try to maximize their profit by selling products for as cheap as possible to consumers who are willing to buy those products. And as the price gets low, there remains even less for the producer after paying the taxes for production and transportation. However, I cannot blame the poor consumer for buying the cheaper product rather than the cruelty-free one. But, probably, the cause of their financial status is exactly the same reason with the producers in the developing world: they do not get what they deserve in exchange of their labor. According to Shorrocks et al. (2019) in the Credit Suisse Global Wealth Report, the world’s richest 1 percent, those with more than $1 million, own 44 percent of the world’s wealth. Their data also shows that adults with less than $10,000 in wealth make up 56.6 percent of the world’s population but hold less than 2 percent of global wealth.

I believe Fairtrade can contribute to change these numbers into a fair distributed wealth statics. Its environmental and social impacts contribute to a more secure, equal, and sustainable future for producers like Teresa and her community and it goes further than that. Fairtrade works with over a million other farmers like Teresa every year and it also supports hundreds of thousands of workers on large plantations to improve their working conditions, their standard of living and their confidence by making sure they are treated properly. They also get the premium to invest in building a better life for themselves and their communities. For all these reasons, Fairtrade means sustainable trade.

References
Fairtrade Foundation. (2020, July 23). Teresa Riviera Palacios – SOPPEXCCA, Nicaragua. https://www.fairtrade.org.uk/farmers-and-workers/coffee/teresa-riviera-palacios-soppexcca-nicaragua/

Fairtrade International. (n.d.). Fairtrade International. https://www.fairtrade.net/about/fairtrade-international

Fairtrade International. (n.d.). Our Strategy.             https://www.fairtrade.net/about/strategy

Fairtrade International. (n.d.). Our Projects.
https://www.fairtrade.net/about/projects

Fairtrade International. (n.d.). The Fairtrade Marks. https://www.fairtrade.net/about/fairtrade-marks

Fairtrade International. (n.d.). Aims of Fairtrade Standards. https://www.fairtrade.net/standard/aims

Fairtrade International. (2020, November 18). In Wikipedia. https://en.wikipedia.org/wiki/Fairtrade_International#FLO_International

Meadows, D. H., Meadows, D. L., Randers, J., & Behrens III, W. W. (1972). The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind.  New York: Universe Books.

Shorrocks, A., Davies, J., & Lluberas, R. (2019). Global wealth report 2019. Credit Suisse.  https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html

United Nations. (n.d.). Sustainable Development Goals.
https://sdgs.un.org/goals

World Bank. (2020, October 7). Poverty.
https://www.worldbank.org/en/topic/poverty/overview