New Internationalist

Fair trade for sale

Issue 377

David Ransom thinks not.

The fair trade movement has grown a good deal faster and further than some of us anticipated, and for at least two reasons. The first is the global justice movement, which has given the international trading system a critical presence in the public mind that was once hard to envisage. The second is the improved range, quality and availability of labelled ‘fairtrade’ products, which appear to offer a very scarce commodity indeed: something practical that almost anyone can do to counteract the current system’s injustices.

Together they have managed to create a small but growing space ‘in and against the market’, where unorthodox experiments can operate despite an increasingly unjust and fundamentalist mainstream. They have given each other strength. Separately, however, they pull in opposite directions, the one towards changing the system, the other towards a niche within it. And there are some worrying signs, in Britain and elsewhere, that they might be pulling apart altogether.

‘We aspire to grow and therefore we want more funds,’ said Penny Newman, the Managing Director of Britain’s biggest fair trade coffee company, Cafédirect, announcing its flotation on financial markets last year. ‘We are a commercial venture, not a charity,’ added Sylvie Barr, Cafédirect’s Head of Strategic Development, as if to reassure potential investors, who were being offered control of the company.1

Then came an announcement from the Fairtrade Foundation, which authenticates Britain’s ‘fairtrade’ label. It was being awarded to Tesco, Britain’s biggest retailer (and the third-largest in the world), for a new line of flowers from Kenya. ‘Tesco is renowned for understanding its customers,’ according to Ian Bretman, Commercial Director of the Fairtrade Foundation, in a Tesco press release. ‘This is good news for producers, who will benefit from the additional sales, and good news for consumers, who will see a much greater choice of quality fairtrade products in stores.’2

Good news all round then. Well, maybe. Floating on financial markets is a hazardous business not renowned for its fairness, and Tesco is renowned for a good deal more than ‘understanding its customers’ – screwing down producers and running everyone else out of town, for instance. Perhaps, then, the mainstream – duly prompted by the fair trade movement – has changed course? A degree of hubris is required to believe this, and the evidence is not encouraging. In 2003 some supermarkets in Britain were accused of overcharging for fair trade products. They were, it was claimed, retaining much of the premium on the price for themselves. Tesco was among the stores reportedly marking up fair trade bananas by as much as one US dollar per kilogram – more than double the premium going to producers.3

These events in Britain were, as ever, foreshadowed in the US. In 2000 TransFair USA provided fair trade certification for Starbucks, saying: ‘With every cup of Starbucks Fair Trade coffee, consumers are supporting and empowering farmers and their families.’4 So what, precisely, would they be doing with every other cup of non-fair-trade coffee bought from this very profitable icon of corporate globalization?

This is a very slippery slope indeed. If ‘fairtrade’ certification can be given to the likes of Tesco and Starbucks, why not also to the likes of, say, Nestlé? This Swiss-based transnational corporation is, among other things – including the persistent marketing of babymilk to mothers who neither need it nor have the means to use it safely – the world’s largest single coffee-manufacturing company. So surely, using the same logic as with Tesco or Starbucks, a ‘fairtrade’ Nestlé coffee brand would be even better news all round.

Well, probably not. You have to know something about how ‘free’ markets work in order to figure out why. The price of commodities like coffee that corporations buy from producers in the South has been in long-term decline. The reasons for this relate more closely than is generally known to the debt mechanism, which forces bankrupt Southern countries to export whatever basic commodities they can, all at the same time. This creates a glut on world markets, causes prices to fall – and is, incidentally, a major factor in controlling inflation in the North. The retail prices paid by consumers in the North have not, however, fallen in parallel – a theoretical impossibility in a ‘free’ market and a sure sign of monopolistic forces at work. So where does the difference go? Where else but into the ample coffers of the likes of Nestlé? The amounts of money routinely stolen from producers in this fashion are so huge as to dwarf the relatively meagre recompense fair trade provides.

Besides, the Tescos, Starbucks and Nestlés of this world are by their nature more interested in the premium on the price than in the principles of fair trade. The premium is not, however, one of the principles. These are primarily about changing the relationship between producers and consumers, rather than increased corporate profitability. If big business really were interested in changing this relationship, why would it not stop stealing from producers, restore to them some of the retail price differential it currently pockets – and charge consumers no premium for fair trade at all? That would, at a stroke, open up ‘fairtrade’ to customers who can’t pay more for it. But it would also remove the price advantage of exploitative trade, threatening corporate profitability and the system itself – which is, of course, why it is never proposed.

fair trade is not a brand with passive consumers but a movement with active supporters – a relationship of trust between people

For their part, customers in the North may readily assume – as with charity – that the fair trade premium goes straight to producers in the ‘Third World’. A simple appeal, but not always or even entirely true. For example, in the rare and usually brief event of the coffee price rising sharply – a frost cuts production in Brazil, say – most ‘fairtrade’ contracts actually pay less to producers than the market price, in exchange for a guarantee always to buy above the cost of production. This cost is set by local subsistence levels and has nothing remotely to do with prosperity. Relatively arcane considerations, perhaps. But the fact that fairness is relative and complex militates against the ‘unique selling point’ required by a label and leaves the brand image of fair trade extremely vulnerable. Questions of trust and intent are involved here. And if people can trust the intent of Tesco, Starbucks, Nestlé and financial markets, why bother with fair trade?

In its essence, fair trade is not a brand with passive consumers but a movement with active supporters – a relationship of trust between people. These people show what is possible and make an informed statement about the mainstream. They defy the imperative to buy cheap and ignore the consequences. They offer a trace of respect to just a few of the many millions of producers whom unfair trade routinely humiliates. They do not think of fair trade as a complete and final solution. They express an important truth: no-one is ever exclusively a producer looking for the highest possible price for what they produce, or a consumer looking for the lowest possible price for what they consume. Everyone is always both at the same time, with a common interest in mutual justice.

Fair trade is, in any event, inescapably linked to wider issues, like debt. So it depends on wider movements, too, such as the continuing campaign to dismantle the odious debt mechanism that has such a direct impact on the way trade works. There are clear links to other pressing issues as well, such as the environment. For example, the global food trade hasn’t just poisoned, displaced or impoverished many millions of producers in hungry countries; it has also adulterated the food chain and created a series of environmental disasters. There is every reason why ‘fair’ must also mean ‘green’ – be it food, clothing, computers, energy, anything you care to name.

So a persistent search for imaginative alternatives remains as critical to the future of the fair trade movement as it has been to its history so far. Not for nothing has the closest commercial ally of fair trade in Britain been the Co-op. This consumer co-operative, whose members are its customers, was the very first national retail chain and has deep roots reaching back to the 19th century. For all its subsequent failings, the Co-op is still answerable to its members, not to financial markets. Indeed, if the principles of fair trade frequently require producers to work in co-operatives, why should not the same apply at the consumer end and to fair trade organizations themselves?

Farmers’ markets, alternative trading and public service networks, the internet – the potential of these and many more outlets has yet to be fully realized. In the wider world, people who actively support allied issues like human rights or peace are more likely to buy fair trade. The movement must be active in this wider world as well, outside the territory occupied by orthodox marketing. So, for example, if a Tobin Tax on currency speculation has a movement to go with it, why should not the fair trade movement campaign for a Fair Trade Tax on commodity speculation?

Get impatient, give away the ‘fairtrade’ label to Tesco and Starbucks or hand over control to financial markets, and who is to say what they will do with it? Who is to decide, come to that, what is fair and what is not? That is, of course, a political issue. In recent decades, politically weakened peoples have been subjected to unrestrained ‘free’ trade by rampant corporate interests which, at the same time, profit quite unashamedly from protectionism – its theoretical antithesis. Witness the infamous trading policies of the European Union or the corporate welfare provided by governments to powerful vested interests of all kinds in the US, Japan and the North in general. Though both the free trade thesis and protectionist antithesis are false, one can get a good deal closer to justice – and common sense – by turning them on their head. Truly democratic governments would reflect and protect the interests of their citizens while setting corporate interests adrift in a world as free of government as they claim to wish it were.

What that might mean for democracy or the state, the public or the private, regulation or deregulation, social movements or political programmes remains, precisely, debatable. There are some who argue that if ‘free’ trade were to practise its principles and abandon protectionism in the North, then the South would be a big winner.5 There are others, like myself, who doubt whether ‘free’ trade has any principles at all. The current Doha round of trade negotiations – run by a World Trade Organization that has yet to defy a single significant corporate interest – offers few reasons to believe otherwise.

Either way, the allure of the mainstream is largely illusory. Tributaries do not change its course; they disappear into it. While the struggle for global justice will continue with or without the ‘fairtrade’ label, the reverse is very much harder to envisage. Meanwhile, and for the time being at least, the fair trade movement continues as very much more than a niche filled with free-market nostrums. Short cuts tend to produce short circuits – and trust, once lost, can never be regained.

David Ransom is a Co-Editor of New Internationalist, and also the author of The No-Nonsense Guide to Fair Trade (New Internationalist, 2006).

  1. The Guardian, 2 February 2004.
  2. Tesco press release, 1 March 2004.
  3. The Sunday Times, 29 June 2003.
  4. Press release, 5 September 2000, www.transfairusa.org
  5. For example, Oxfam’s notorious report on trade, Rigged Rules and Double Standards.

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