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Making Fairtrade fairer

Central America Report | Thursday, 9 December 2010 | Click here for original article

Fairtrade is largely regarded as a success story but what more should be done to make Fairtrade fairer? Megan Rowling reports on the perspective of producers.

NOW OVER 20 years old, the Fairtrade market is largely regarded as a success story. Global sales have more than trebled over the past four years and hundreds more producer organisations have become certified. The minimum guaranteed price and additional Fairtrade Premium that small farmers receive have brought social and economic benefits to their communities.

Consumer support has grown: in some national markets Fairtrade accounts for between 20 – 50% of market share in certain products.

Yet there are many challenges facing the Fairtrade system – not least the participation of transnational corporations like Nestlé and volatile commodity prices. Some producers feel Fairtrade has done little to help them gain ownership of brands or take control over of the more of supply chain. This raises the question of whether Fairtrade will have a farreaching transformative impact on international trade. Can it really play a significant role in making development more sustainable?

Sharp increase in the price of free market coffee

Since the beginning of 2010, coffee farmers have watched prices rise more than 45% to a 13-year high, with higher-quality arabica soaring on international markets to above $2 a pound compared with the Fairtade price of $1.35 including the premium. That contrasts with the period from 2000 – 2005, when prices plunged to around half the minimum Fairtrade price.

When free market prices rise above the minimum, Fairtrade buyers should match them. But, as Fairtrade Labelling Organizations International (FLO) notes, some farmers don’t benefit if the price in their contracts is fixed at an earlier date. According to a survey carried out earlier this year of 19 Nicaraguan producers’ organisations by Catalan research organisation Alba Sud, since 2009, the Fairtrade price has fallen substantially below that for uncertified coffee. That could tempt hard-up farmers to abandon Fairtrade and deter others from joining. Price spikes also have a destabilising effect on small producers, FLO notes, especially in the wake of the financial crisis, which made it hard for farmers to access credit.

Lack of investment in infrastructure and skills of Fairtrade producers

Albert Tucker, a consultant working in Fairtrade for many years, including with CLAC, the Latin American Fairtrade small producers’ association, says that Nicaraguan farmers want Fairtrade to help them do business better, but this hasn’t happened.

Tucker believes that, with higher quality Fairtrade products available, they can move beyond the traditional solidarity-focused producer-consumer relationship. He says companies involved in Fairtrade should invest more in building infrastructure and training farmers in marketing and other business skills so they can gain power and pursue more value-added activities in the supply chain.

“As (Fairtrade) gets bigger, the management side is getting larger, and it costs producers to implement management and traceability systems. In terms of investing in the market, there isn’t enough on their side. One idea is to use Fairtrade licensing money to reduce their costs and help change trade globally,” says Tucker. Inspection systems for Fairtrade and organic labels could be simplified, localised and harmonised, making it cheaper for farmers, he adds.

Role of major transnationals in the Fairtrade market

A growing number of transnational corporations like Nestlé, Cadbury, Dole and Chiquita offer Fairtrade products, a shift that has divided opinion among consumers since some have campaigned against their trade practices for many years. Albert Tucker says most producers want these firms to expand Fairtrade to more of their range and open up their practices to better monitoring. “Some big companies have a weak Fairtrade product and you don’t hear much about it – they are not that serious.

They should not just be paying farmers a bit more and change practices in that part of the chain only,” he says. “If we could get the big players to punch above their weight, and support the infrastructure and boost sustainability, farmers could engage more.”

Cadbury – now owned by US food giant Kraft – is one example of a company that has been moving in the right direction. It decided to make its annual production of 300 million Dairy Milk bars – its signature product – Fairtrade in 2009, and is working with 100 communities in Ghana to help farmers boost declining cocoa yields, as part of a wider sustainability partnership also covering India, Indonesia and the Caribbean.

Insufficient consultation with producers

According to the Alba Sud report, even though producers’ organisations claim they have built schools, houses, bridges and roads thanks to Fairtrade, it is unknown what proportion of these were paid for with the Premium.

“Most organisations interviewed highlighted the fact that Fairtrade hasn’t produced substantial changes in the life of members; the funds received are very small in relation

to the needs,” it says.

Producers feel Fairtrade certification requirements are fixed without properly consulting them, and are becoming more onerous without an accompanying increase in benefits at their end, the report notes. “Some producers are getting quite sceptical about us here – we are always demanding more,” explains Tucker, who is based in the UK. “We don’t think about them, we just satisfy ourselves and think about how to get our system working better.” Small farmers hope their voices will be strengthened at the international level following the announcement of a formal partnership between regional producers’ networks in Asia, Africa and Latin America.

Limited interaction between producers and consumers

One way farmers believe they could strengthen their ownership of the supply chain is to develop closer links with the consumers – even selling to them directly where possible. That may be challenging when it comes to Fairtrade exports to Europe or the US, but is it something that could be promoted more easily closer to home?

The Alba Sud survey notes that the Nicaraguan local market is still at an early stage, and there are only 10 markets specifically catering for small farmers in the whole country. “If there were a small producers’ market in each of the 153 municipalities... where the producers could sell their harvests at a more favourable price to consumers, this would be a great step

forward and it would represent the beginning of a producer-consumer alliance which could be developed at other levels,” the report says.

According to the findings of the survey, Nicaraguan Fairtrade producer organisations generally consider Fairtrade to best represent their interests, but there are still major challenges ahead to achieve greater fairness. These include taking greater ownership of more of the Fairtrade chain, achieving greater participation in decision making, ensuring the levels of transparency demanded of producers are also demanded of the rest of the chain, and achieving fairer prices for producers and consumers.

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Fairtrade facts and figures

Thousands of products carry the FAIRTRADE Mark, with standards in place for food products ranging from tea, coffee and cocoa to fresh fruits and nuts. There are also standards for non-food items like flowers, sports balls and seed cotton.

There are now 746 Fairtrade certified producer organisations in 58 producing countries. They represent over 1 million

farmers and workers; including their families and dependents, around 5 million people benefit directly from Fairtrade.

Sales of Fairtrade certified products have grown at an average annual rate of almost 40 percent in the last five years.

In 2008, sales amounted to some $2.9 billion (£2.5 billion) worldwide.

Source: Fairtrade Labelling Organizations International (FLO)

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