Fairtrade

What is Fairtrade?

Fairtrade incorporates so many issues that a definition has proven difficult to produce. The closest thing to an official definition comes from FINE, 2001 which incorporates Fairtrade Labelling Organisations (FLO), International Federation for Alternative Trade, Network of European World Shops and European Fair Trade Association:

"Fair Trade is a trading partnership based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers - especially in the South.

Fair Trade organisations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade."'' [1]

Fairtrade products not only guarantee a fair price for products in the Third World but also provide producers with a premium to be used in development.

The first bar of Fairtrade chocolate was produced by Green and Black's

Fairtrade Mark

The FAIRTRADE Mark is an independent consumer label which appears on products as an independent guarantee that disadvantaged producers in the developing world are getting a better deal. For a product to display the FAIRTRADE Mark it must meet international Fairtrade standards. These standards are set by the international certification body Fairtrade Labelling Organisations (FLO). Producer organisations that supply Fairtrade products are inspected and certified by FLO. Fairtrade Foundation UK licenses the FAIRTRADE Mark to products in the UK which meet FLO standards. The supplier (brand-owner or main national distributor) must sign the Foundation’s Licence Agreement which provides a licence to use the Mark.

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Until recently many different fairtrade logos existed making it difficult for consumers to relate to common fairtrade standards or recognise easily which products were fairly traded. Since 2003 however one international logo has been used which has been developed by FLO although the rate of introducation has varied from country to country. The logo can be seen at: [[3]]

Issues with Fairtrade

Cost

One of the main issues critics have of the Fairtrade movement is the apparant high cost of the products.

As part of the Fairtrade deal traders must pay a 'premium' to producers which enables them to invest in development and this accounts for some of the additional cost of Fairtrade products compared to 'normal' products. Issues may arise in guaranteeing that the money gained from the premium is filtered down to the correct people and also used for sustainable development.

Fairtrade products can incur additional costs in the supply chain between farm gate and shop shelf compared to conventional products. Mostly this is due to the smaller scale of Fairtrade sales, compared to the leading products in the conventional market. Costs like shipping, importing and packaging will all be higher on a unit basis for products traded in relatively low volumes. [4]

Supermarket mark-up

This issue was subject to scrutiny in a recent BBC2 documentary by the Money Programme 10/03/2006. ^[5] Consumers such as those interviewed in thir programme are concerned that the extra cost payable is not going to the producers. Instead, they believe supermarkets are taking advantage of those who are willing to pay more for Fairtrade products and making extra profits themselves.

It is impossible to calculate the “extra” price that is charged by retailers for Fairtrade products as the price of conventional products lacks any transparency or consistency and therefore doesn’t provide a valid comparison.

The Fairtrade Foundation is not legally allowed to intervene in retail pricing discussions – it only sets the prices and premiums for the producers. It would be impractical to set prices further down the supply chain than at producer level – and it would be illegal to do so at the final wholesale or retail level under British and European competition laws. [6]

Big Business

Concern was raised in October 2005 when Nestle launched a Fairtrade coffee product. See Nestle page for more details. This product and other Fairtrade products launched by big businesses are seen by many to be token gestures and not conducive to the ideals of Fairtrade. Trust of Fairtrade buying consumers may well dwindle.

The problem facing the Fairtrade Foundation is whether they can go mainstream without making too many compromises with big business, and whether core supporters will continue to stick with them. ^[7]

Percentage of Fairtrade Ingredients

In order for a product to be considered Fairtrade and be allowed to use the Fairtrade logo not all of the ingredients have to Fairtrade.

For example a Traidcraft Raisin and Chocolate GEOBAR only contains 30% of its ingredients certified to International Fairtrade Standards.

With the exception of single commodity products (eg coffee or tea) which have to contain 100% Fairtrade ingredients, different rules exist for composite products.

The FAIRTRADE Mark or label may be put on a composite product if more than 50% of its ingredients, by dry weight, are sourced from Fairtrade certified producer organizations. In case of liquid composite products, a FAIRTRADE Mark may be put on the product if more than 50% of its volume is sourced from Fairtrade certified producer organizations. If the total Fairtrade content is less than 50%, a composite product qualifies if it has a significant ingredient and if this ingredient represents more than 20% of the product’s dry weight. A 'significant ingredient' is defined as one that meets at least one of the following requirements:

• eligible under appropriate trading standards to be part of a product’s name e.g. 'orange juice drink' of which the main ingredient is water, but the significant ingredient is orange juice
• an ingredient normally associated with the product e.g. 'cocoa' in drinking chocolate
• an ingredient crucial to the formulation of the product, without which the product would not be viable e.g. 'hibiscus' in 'hibiscus tea'

Due to UK Food Labelling requirements, the ingredients of products carrying the FAIRTRADE Mark need to conform to QUID requirements. On some products the label will show that Fairtrade certified ingredients make up less than 20% of the product. However, Fairtrade requirements are based on the dry weight formulation of the product & one significant Fairtrade certified ingredient must be at least 20% of the total in order to be labelled as a Fairtrade certified product. All products bearing the FAIRTRADE Mark conform to this requirement.

[8]

Fees

Since 2004 there has been a fee involved for producers wishing to be certified as 'Fairtrade'. The initial certification fee for producers is based on the organisation's total number of farm workers or co-op members. The subsequent annual renewal fee comprises a flat fee plus a small volume-based fee. (the more you produce the more you have to pay) Fees for initial inspection range from €2000 to €5200 See http://www.fairtrade.org.uk/about_standards.htm for the full fee structure.

Local vs Fairtrade

An issue also arise when the number of airmiles Fairtrade food travels is considered. Fairtrade products ingredients must be sourced from the Third World and so in order to be made into the final product and packaged they must either be shipped or flown to another part of the world and then transported to the selling country. Many would argue it is better therefore to buy local products reducing our 'food miles' and lessening the environmental impact.

Supply

There is not enough Fairtrade supply currently if all companies decided to go Fairtrade to meet market demands. For example the total global volume of fair trade cotton being produced is 600-1,000 tonnes a year; M&S uses a total of about 50,000 tonnes. ^[9]

Encourages Consumerism

Is Fairtrade simply encouraging us to spend more and therefore encouraging our capitalist society? There are those who argue we should instead spend less on products (eg buy supermarket value brands) and give the extra money we would be willing to spend if it was Fairtrade to charity thus reducing our large consumption tendencies.

Branding

The rise of brands has been incessant in the last few decades and this has been criticised by many They believe companies are using logos and advertising to make people think that their products 'means' something and that brands are continually being forced upon us.

Rob Paton, Professor of Social Enterprise at the Open University Business School states that Fairtrade has become a strong brand[10] and so are getting caught up in this 'ugly' practice. ^[11]

This is underlined by the fact that one of the Fairtrade Foundation UK board members is CEO of Interbrand.

External Links

http://www.worldshops.org

http://www.fairtrade.org.uk

http://www.open2.net/money/briefs_20060310_fairtrade.html

^ Andy Webb 'How fair is Fairtrade?' BBC2 The Money Programme 10th March 2006

^ Lucy Siegle 'Fair Trade: Dilemma as ethics enters mainstream' The Observer March 12 2006