Fair trade
by Chris Woodford. Last updated: December 8, 2022.
Everyone likes a bargain, but you have to wonder about a T-shirt
that costs only five dollars. How is it possible for someone to grow the
cotton, harvest it, make it into a shirt, transport it, sell it on to a
retailer, and still make a profit for a price like that? The answer
should be blindingly obvious, but we choose to ignore it. Cut-price
clothes and food are all too often produced by exploiting people in
developing countries, who make the cheap goods we've come to love by
working long hours for low pay, often in appalling conditions. We try
not to put up with this in our countries, but when the label says "Made
in India" or "Made in Chile", we conveniently push it to the back of
our minds. Fortunately, many people are waking up to the basic
unfairness of world trade and demanding a better deal for the people
who do our dirty work. It's called fair trade. Let's find out why
it's important and how it works.
Photo: Fair trade tea, coffee, sugar, and chocolate. You can find the FAIRTRADE mark on every one of these products; it means, wherever possible, the ingredients are fair trade. But what does that mean in practice... and how can you be sure the workers were treated as fairly as you'd expect?
Bargain... or exploitation?
It's easy to find cheap goods on Main Street, but finding out why
they cost so little isn't always so easy:
- How about that cotton T-shirt you just bought for $5?
Oxfam tells us: "A typical cotton producing household in West Africa
has about 10 family members, an average life expectancy of about 48
years and an adult literacy rate of less than 25 percent. Cotton is
often the only source of cash income for these families who live on
less than $1 a day per person." [1]
- What about the oranges from Chile you just put in your shopping cart?
Oxfam again: "In the fruit-picking sector, 75% of women work more than
60 hours a week in season, on temporary contracts, and a third of them
do not earn even the minimum wage." [2]
- Maybe you fancy a nice bunch of cut flowers for your mom? Green America
tells us that over two thirds of American flowers are imported,
typically from countries where cheap labor and poor regulation of toxic
pesticides is commonplace. Way back in 2002, the Pesticide Action Network reported that "In Ecuador, nearly 60% of flower workers
surveyed showed poisoning symptoms, including headaches, dizziness,
trembling hands and blurred vision." A decade and a half later, in 2017, researchers at UCSD School of Medicine
were still able to chart links between the mother's day, peak flower-growing (and pesticide spraying) season in Ecuador and temporary impairments in local children's neurological behavior. [3]
- How about your shiny new smartphone? Green America tells us
half of them are now made in China, where "workers are regularly exposed to dangerous chemicals without protective gear or adequate training, and some are developing serious illnesses such as leukemia and nerve damage."
Don't think that's a big deal? Some 1.5–2 billion cellphones are made in
China each year. [4]
And these are some of the less extreme examples, before we even start talking about child labor and sweatshops.
Why do we put up with this kind of thing? According to Co-op
America, the answer is obvious: "Ultimately, sweatshops exist because
the human links of the supply chain are hidden from us when we shop. If
working conditions at producer factories were visible to consumers at
the point of purchase, it would be harder to convince shoppers that
cheaper goods are worth the price of worker abuse." [5]
That's another way of saying "out of sight, out of mind."
Why "free trade" often means "unfair trade"
Globalization—the tendency of companies to treat the world as one
giant kingdom of potential profit, without all those pesky borders—is
largely to blame. If a company can sew its jeans in Honduras for a
fraction the price it can do it in Chicago, the decision to outsource
is a no-brainer. And if competitors have already packed their factory
bags and cut their costs, and you hold out for "Made in the USA" and
higher prices, guess where your business might be heading?
Free trade is a part of globalization and it sounds great in
theory: if we removed all barriers to trade, such as import tariffs
(the taxes companies have to pay to get their goods into another
country and sell them there), all countries could compete on a level
playing field—and what could be fairer than that? In practice, it
doesn't work out quite like that. Some countries are inevitably far
more powerful than others and they want things to stay that way. Even
while promoting "free trade", they use all kinds of tactics to ensure
they can trade more freely than other people.
You might have heard of a practice called dumping? That's where an
industrialized country subsidizes production of finished goods, which
it then exports to a developing country at a price that's lower than
the goods the developing country can produce at home. The developing
country has to cut the prices of its own goods to a level that makes it
impossible for poorer people to support themselves. Another tactic is
for rich countries to impose high tariffs on finished goods but low
tariffs on basic, raw materials. That gives poorer countries no option
but to export raw materials: they can't turn those materials into
high-value finished goods themselves because they won't be able to
export them. The rich countries import the low-value, raw materials,
make them into high-value finished goods wherever it suits them, then
export the finished goods back to the poor countries. Practices like
this mean "free trade" is all too often a synonym for "unfair trade."
[10]
Photo: Brands like NO SWEAT are rejecting unfair, sweatshop labor. Unlike some footwear brands, these sneakers were made by trade-union members who earn a decent wage and work in good conditions.
They no longer make sneakers, but they do still make T-shirts, hoodies, totes, and other apparel.
According to advocates of globalization, free trade has brought greater wealth
to people in poorer nations, giving them a foothold on the ladder of
progress and prosperity. On that view, wealth gradually
"trickles down" society from the richest to the poorest, making
everyone's lives better in the long run. The trouble is that very often
it doesn't. Big corporations haven't outsourced their operations to
low-wage economies in developing countries through any desire to
alleviate poverty; they've done it to keep prices down and compete in a
marketplace where everyone else is outsourcing too. Now there are many
good examples of companies working respectfully with partners in
developing countries, providing fair prices that help communities gain
access to such vital things as education and basic healthcare. But
there are many more corporations supporting a shadowy world of
sweatshops, where working conditions are appalling and wages are too
little to meet even basic daily needs, never mind climb out of poverty.
Unchecked, globalization swiftly becomes a "race to the bottom."
If "trickle-down" theory works, why are so many of the world's people still in poverty?
What is fair trade?
Photo: Fair trade goods have to be properly labelled
through a recognized licensing scheme such as the FAIRTRADE mark,
licensed by the Fairtrade Foundation.
Fair trade is a different system that starts from the premise that
workers lives have a value; this social benefit is partly what you pay
for when you buy something. Fair trade doesn't just means farmers and
producers receive more money so they can support their families in the
short term—though that's vitally important. It also means they work
under long-term contracts so their communities have enough security to
invest in improvements both to their businesses (with more land or
animals or better machinery) and their societies (with things like
schools or health clinics). Typically, fair-trade producers are small
cooperatives of workers using no child or forced labor, using organic
or environmentally sustainable methods, and having high standards of
animal welfare. Workers are free to join unions and bargain
collectively to help improve their lives. Typically, fair trade
producers sign up to some sort of labelling scheme that guarantees
things have been made under good conditions. You can read some typical
standards from the Fairtrade Labelling Organizations
and from OneVillage
(a UK-based retailer of artisan goods from developing countries and a
long-established pioneer of fairer trade).
Is fair trade as good as it seems?
"Fair trade pays a premium, but on a global coffee price that remains catastrophically unfair to the
coffee farmers."
Fred Pearce, Confessions of an Eco-Sinner, 2008.
Fair trade sounds brilliant—and it's now very big business. How big?
In the UK alone, which remains the largest international market, annual sales of fair trade products
grew from GB£1.3 billion in 2011 to GB£1.7 billion in 2013, and remained
at more or less that level until hitting a record of GB£1.9 billion in 2020.
[8]
Market growth isn't evenly distributed: some fair trade products are much better known (and more
popular) than others. In the first decade of the 21st century, the UK saw massive growth in retail sales of fair trade coffee (+944%), tea (+136%), wine (+128%), and flowers (+511%).
[9]
Elsewhere, fair trade has struggled to make much impact:
just because there's lots of fair trade coffee to choose from,
and plenty of fair trade bananas on the shelves, doesn't mean everything,
everywhere in the world is being bought and sold at fair prices.
Fair trade cotton clothes, for example, represent a tiny fraction
of all clothes sold globally; a lot of fair trade cotton is
also organic but, as of 2020, less than 1 percent of all the
world's cotton was organically grown.
[12]
Some countries also have a notably bigger commitment to fair trade than others:
the UK and Germany are the two biggest markets. Despite its size, the
United States has a significantly smaller
fair trade market, worth only around $1 billion in 2018 (roughly two thirds as much as the UK market
that year).
[11]
Fair trade has other drawbacks too. One obvious problem is that fairly traded goods
can cost significantly more; though the difference between a fair-trade
candy bar and an ordinary one is often marginal, fair-trade clothes or
household items can be significantly more expensive than goods traded
in the usual way. Many people, especially those struggling on low
incomes, cannot afford to pay the difference—which is perhaps a bit
ironic: if fair trade really is purporting to help poorer people and
make the world more equitable, shouldn't it be aiming to help poorer
consumers as well as poorer producers? Do we care about poverty
in our own countries?
Unless it reaches mass markets, there's a danger that fair trade
remains a token gesture, more about making middle-class,
liberal-leaning consumers feel less guilty than about fundamentally
reforming the relationships between producers and consumers. If you
return home from the store with a bag of fair-trade coffee in your
shopping, and feel good about it, maybe you won't worry that the other
99 percent of your shopping has been produced by dubious, unfair trade
practices? While some grocery stores (such as the UK's Co-op and Sainsbury's) have
embraced fair trade in a very big way, and apparently quite sincerely,
others have used it to suggest they're perhaps more ethical than they
really are.
Photo: Fair trade coffee (left) and tea (right)
sold by The Co-op, one of the UK's leading fair trade retailers.
There's little doubt that the term "fair trade" can be hijacked and
used cynically. One often-cited problem of the UK Fair trade symbol is
that it certifies only raw materials and not finished goods. You can
buy a T-shirt made from fair-trade cotton that could, in theory, have
been made into a finished article in a sweatshop. There's nothing to
stop the manufacturer advertising this as an ethical shirt and branding
it with a fair-trade logo. According to Mark Engler, writing on sweatshops
for New
Internationalist: "Consumers who think they are choosing an ethically
untainted product might actually be buying clothing sewn with child
labour or finished in a dangerous overheated factory." [6]
It's for reasons like this that OneVillage, a pioneering UK retailer
of artisan-made items, shuns the term fair trade altogether. According
to founder Roy Scott: "There remains an enormous discrepancy between
pay, conditions, and opportunity that Europeans would regard as
acceptable, compared with those of the producers of most products being
bought. Claims of 'fair trade' are therefore inaccurate and misleading.
To say 'This is fair trade' to such workers whose pay is insufficient
to enjoy an adequate quality of life—or is grossly out of step with
those of the owners of the businesses in which they work, or those of
the buyers—to claim and say 'This is fair' is shocking and in itself a
great injustice." [7]
OneVillage promotes its products as a step "towards fairer trade";
ultimately, that's perhaps the only honest approach. Buying fair-trade
products is almost always preferable to buying (implicitly unfair)
alternatives, but it's only a starting point. Trade is about long-term
relationships, not just between producers and consumers but between
entire countries and regions of the world. Achieving truly fair trade
means seeing the world in a different way, as a planet of partnership
and mutual prosperity rather than plunder and exploitation. Fair trade
is not about paying 50 cents more for your coffee; it's about caring
for your "neighbors"—even when they're on the other side of the world.
Fair trade or direct trade?
Photo: Fair trade? This jar of Kenco coffee doesn't describe itself
as "fair trade" but carries the Rainforest Alliance Certified logo, promising it's "helping coffee farmers and protecting the planet" when you buy it.
That's certainly an improvement on ordinary, commodity coffee, which makes no promises at all.
Even so, critics have charged that
the Rainforest Alliance program falls short of other fair trade initiatives.
One of the lesser known disadvantages of ecolabelling is
that it can mislead consumers
by oversimplifying: just because one product loudly claims to be
good, it doesn't automatically follow that its competitors are bad.
Fair trade products are a good example. The basic concept of "fair
trade" is to guarantee a minimum price for commodities, such as
tea, coffee, and sugar, so workers in developing countries are paid
more than they would otherwise earn. When commodity prices fall,
they're still paid the guaranteed minimum price for their products,
so they have a basic safety net against poverty.
That's the theory, anyway. It sounds like a great idea
and it's a sentiment virtually everyone would endorse—but
unfortunately it oversimplifies things.
Take "fair trade" coffee. If the price for
which ordinary coffee (also called "free trade" or commodity coffee) is bought and sold is relatively high,
it will exceed the guaranteed fair trade price. Under
fair trade rules, that means the coffee growers are paid almost exactly the
free-trade price (with a very small premium on top)—so they're being paid virtually the same as if
they were selling ordinary commodity coffee in the first place. They don't lose
out when prices fall, but nor do they really gain when prices rise, as you might expect.
So, when commodity coffee prices are high, you, as a consumer, are still paying a premium in store
for your "fair trade" coffee, but it's perfectly possible that the growers are being paid virtually the same as ordinary coffee growers. Who benefits? Most likely, the importers, the big grocery stores, the main-street coffee shops that loudly boast about their "fair trade" coffee to make you feel good (even though 90 percent of
the coffee they sell is probably not fair trade anyway), and absolutely
everyone in the middle of the chain. Who doesn't benefit? The growers
(who earn no more) and you, the consumer (who pay more to give
no more to the growers, but receive a product that is no
better in quality than basic, commodity coffee). This doesn't mean to suggest that "fair trade" has no value—it's
a hugely important step toward recognizing and correcting the unfairness of trade
with developing countries. The point is simply that there are flaws in the "fair trade" system and we shouldn't be afraid to look for something better.
What's the alternative?
Photo: Direct trade: This delicious chocolatey coffee from Fazenda Floresta is directly traded by its farmers, who earn twice as much as they would by selling it as "Fairtrade" coffee. It's also organic, biodynamic, and far superior in quality to most "Fairtrade" coffee. It's supplied by Nelson Ribeiro from his farm in Chapada Diamantina in Bahia, Brazil. Read all about it in Andrew Purvis's excellent article from The Guardian.
Many people (and larger stores) opt to buy only "fair trade" coffee,
rightly determined to do their bit to fight world poverty. In so doing,
they've automatically rejected other coffee not labelled as fair
trade and, in their own mind, deemed it "unfairly traded." But
how fair is that? An increasing number of small coffee suppliers in
regions such as North America and Europe now use an alternative
buying model called direct trade, where they purchase sacks of
coffee directly from farmers in tropical countries. Since they're
cutting out the middle-men, they can often pay substantially more for
the coffee than they would either for fair trade or commodity coffee.
Usually, small suppliers sell to discerning buyers who happily pay a
premium for the very best coffee, so direct trade also helps to raise
the standard of what's grown and drunk.
Direct trade isn't "fair trade"—it doesn't carry a "fair trade" label. But arguably
it's much fairer all round: for the coffee growers (who are sometimes
paid substantially more), for the importers (who earn more and are
more likely to develop rewarding, long-lasting relationships with
their suppliers), and for the consumers too (who get a higher-quality
product, for a similar price, and have the knowledge that workers
have been paid fairly). The main problem with direct trade is that
it's a very new model and currently only vaguely defined: unless you
know exactly how much growers have been paid, can you really sure
they've been paid a decent amount? Some coffee suppliers are now using independent
certification—and even publishing the prices they pay—to try to reassure their customers
that direct trade is transparently fair.
Photo: Left: In 2017, major UK grocery chain Sainsbury's abandoned Fairtrade Foundation certification for some of its products, adopting its own "Fairly Traded" labeling instead. At the time, it claimed the project brought "more tailored support to our tea farmers—protecting all of their current benefits and adding more." However, there was
considerable push-back from customers who felt they didn't trust independent initiatives like this.
Right: The project didn't last long and the same tea is now sold as "Rainforest Certified."
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