The Fairtrade Façade

“Trade not aid” – if you’ve been paying attention to the discourse on how to improve living standards for the world’s poor, it’s a familiar phrase. Over the past decade especially, armchair development experts (and, you know, “actual development experts”) have criticized aid for its failure to bring fundamental change. Meanwhile, virtually anywhere you turn, someone extols virtues of fair trade. But what happens when trade fails in the same fundamental ways as aid?

Take, for instance, the well-known Fairtrade program, which provides a baseline price for crops, allowing farmers protection against price manipulation and encouraging more democratic access to global markets. Criticism of the program has come from all directions; radical leftists revile its acceptance of and reliance on markets, while free-market conservatives dislike the distortions it brings.

These criticisms arise out of the biases of those making them. As far as criticisms based on actual results, economists and others have warned of the program’s ineffectiveness and potential to do harm. Most of the available studies in English have focused on South America, which accounts for over 90% of U.S. coffee purchases. However, a new study by the Forum for African Investigative Reporters (FAIR) confirms that Fairtrade really ain’t so fair for farmers in West Africa either.

According to FAIR, cocoa growers participating in Fairtrade programs in Nigeria, Ghana, Cameroon and Côte d’Ivoire see little of the additional money paid by Western consumers for Fairtrade certified chocolate. They are left in the dark about world market prices by the Fairtrade cooperatives meant to inform them of such things. For many, the membership fees they must pay to participate outpace the premiums they can earn.

In Côte d’Ivoire and Ghana, Fairtrade has become linked with the “cocoa mafia” and the historically corrupt state Cocoa Board, respectively. When FAIR team member Selay Kouassi first attemped to report that story, he was threatened and eventually forced to go into hiding. All this suggests that Fairtrade is not just ineffective; rather, it has been subjected to and complicated by the realities of the post-colonial African economy, namely elite dominance and the inability of the state to fully establish a legitimate monopoly on violence.

But the report’s most damning finding is that, of everyone involved with the Fairtrade program, Fairtrade itself walks away with most of the money. In the Netherlands, for example, for each chocolate bar sold for $2.50, Fairtrade earns about six cents of the fair trade premium. West African cocoa farmers, on the other hand, earn only 2.5 cents. Over the course of 2009, this meant Fairtrade earned $520,000 from chocolate sales in the Netherlands, while the coffee growers themselves earned only $218,750. This is obviously deeply problematic, and though FAIR’s study focused only on cocoa, and only on Max Havelaar – the Dutch incarnation of Fairtrade – its account is another piece of evidence in a case increasingly stacked against Fairtrade.

Why would FAIR’s Selay Kouassi face threats if Fairtrade were not benefitting powerful actors above and beyond the farmers it was meant to help? What are we to do, as Western consumers, if Fairtrade is little more than a marketing gimmick? Contra the prevailing logic, should we avoid products marked with its logo? Are we being conned?

While aid often fails to achieve its goals, caught up in processes endemic to the post-colonial state, the same can be said of trade – at least in this case. But it’d be naïve to assume we’re talking about a unique case.

Comments

comments

17 Comments
  1. Great post! It’s easy for us consumers to give ourselves a warm fuzzy feeling paying Fair Trade prices, but how are we to police the effectiveness and honesty of these programs?

  2. thanks for this post, I found it very informative. Do you have any suggestions what kind of coffee, cocoa one should buy in Europe or should we rather refrain altogether from buying these types of food?

    1. Nobody should have to refrain from coffee and cocoa — one of the sources I linked to wrote that we should ignore whether a product is Fairtrade or not altogether, so that’s one idea.

  3. Except for the well-known and established fact that Northern Fair Trade companies pocket a larger share of the value added than Southern producers (who are still better off than without minimum price and FT premiums), and the alleged threats against Mr. Kouassi, the case you are trying to make has little substance. I am sure there are many problems with fair trade and that it might be ineffective or even counterproductive in some cases, but please provide more facts to back up your generic criticism of FT. I would be very interested in a well-researches piece on the topic.

  4. Derek G, if you’re looking for research on the impact of Fair trade in West Africa, I’d encourage you to look at the findings from joint research by NRI (Greenwich) and IDS (Sussex) on the social impact of fair trade cotton in Africa and India. The report and a response to it from Fairtrade Foundation can be found here: http://www.nri.org/projects/fairtradecotton/index.html

  5. Good post, but I disagree with the implied take-away that Fairtrade not working means all trade doesn’t work, cf ‘What happens when trade fails in the same fundamental ways as aid?’ Fairtrade is just one type of trade, far from all of it.

  6. To be fair Justin, the blog post of mine that you linked to was one providing evidence that fair trade *did* benefit producers. Thanks though for the interesting post. Although I’d add that, in addition to low absolute margins for the farmers, you need to look at percentage changes — a 10% increase in annual income would still be significant even if it looked small in dollar terms.

  7. this is incomplete to the point of being almost useless. do the research, please. plenty has been written about fair trade, the people doing it are very accessible, the coops are there, etc. the most damning thing is not that disparity in money, which actually makes sense. use the ppp framework to figure out the money. it’s interesting to see this fair story make the rounds but i have yet to see any discussion with the fair trade people about it. what we have are people talking past each other with serious misunderstanding represented as informed debate. pretty pathetic.

    1. The question for me isn’t whether or not some benefits are going to farmers — I link to others who go into this, and FAIR’s report comes to some conclusions on that front. I’m more interested in whether Western consumers like myself are putting too much stock in schemes like Fair Trade at the expense of talking about a fundamental (and necessary) shift in systems and terms of exchange. Does buying Fairtrade make me a “responsible consumer”? I am not so sure..

      1. I agree with most of the criticisms above in terms of not enough information / research. However, I would have liked more exploration of the ideas you mentioned in your reply above. For me, the main problem of fair trade centres around ‘providing a helping hand to the poor’ – not that different from aid – rather than challenging the trade systems as is. And main impact is that Westerners like myself think they are doing good without really having to change.

  8. I find the notion that producers do not benefit from FT whatsoever suspect. Why would farmers be bothered with certification and compliance with all the standards if there was nothing in it for them? It has been shown over and over that farmers behave rationally. Justin, could you elaborate on what you mean by a “fundamental (and necessary) shift in systems and terms of exchange”? Isn’t that exactly what FT is about? It does directly improve the terms of trade for producers. They get better terms than they would have on the free market. If not from responsible consumers, where would such a shift come from?

    1. I don’t doubt that some benefits go to producers. What I wonder is whether the system is worth buying into as a consumer if it is as problematic as FAIR suggests. As far as what I meant about a “fundamental shift in systems and terms of exchange,” I don’t think a system that relies on Western consumers opting in to a purchase when the alternative is cheaper has the potential to change the status quo in any real sense.

      1. What the report doesn’t say is that cotton prices soared in 2011, way beyond any FT floor prices. I worked in Tanzania with cotton producers, and nobody there could be bothered with FT and for a good reason. I am sure the FT system can be improved. You say that a system relying on Western consumers opting in to a purchase is not going to change the status quo. Fine. But what would then? Whether you call it FT or something else, I don’t see any alternative to behaving responsibly and being aware of the value chains associated with the things you buy everyday. FT standards not stringent enough for you? Then don’t buy FT goods. But raving about undetermined “systemic change” or “fundamental shift” does not, in my view, absolve you from taking responsibility for the stuff you buy, nor will it help anyone in West Africa or anywhere else.

  9. I thought you might be interested to see what Fairtrade International has to say about the FAIR report: http://bit.ly/TEAEmi

    The response agrees with some of the issues in the FAIR report regarding challenges working in cocoa in West Africa, but also says the report contains various factual errors and little or no empirical data.

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