International Fair Trade and Fairtrade International Part II

By Theresa

Welcome back! This post explains why the product certification route is heavily criticised among fair trade-minded people. It illustrates the general criticism by focusing on a study conducted 2014. If you missed out the first part, you can catch up here. This study found that Fairtrade certified farms were neither paying nor generally treating their workers better than conventional farms in the same area. 

Why is the ‘Product Certification Route’ Heavily criticized?

Fairtrade has come under severe scrutiny since 2014. In April 2014 a study was published which heavily criticised Fairtrade International for making “no positive difference – relative to other forms of employment in the production of the same crops – to wage workers” (page 120 of the study). This aspect was widely taken up by media and applied to the Fairtrade system in general, often also with spelling it “fair trade” thus generalising the criticism to the idea of alternative trade with its many different notions.

There are always people criticizing initiatives which offer alternatives to how the world is right now. I’ll leave out the motivation of these people. Though I continue wondering about what moves them: are they working for corporations which profit from the unjust state of affairs? Or: simply extremely fearful of any change? And/or: Pessimists not wanting to be proven wrong?

Anyways, the media hype against Fairtrade was gladly taken up by some people. They felt re-affirmed: there must be people who produce and people who buy – and this system cannot be changed. If somebody wants to throw out the baby with the bath water and slash the whole idea of fair trade, there is little what you can do. For everyone who is more skeptical and willing to dig deeper: a closer look at the study is worth your while.

Digging Deeper: What Was The Study About?

The study was the result of a four-year research undertaken by the Fair Trade, Employment and Poverty Reduction Project (FTEPRP) at the School of Oriental and African Studies (SOAS) at the University of London and financed by the UK Department for International Development.

Based on field work undertaken in Ethiopia (cut flowers and coffee) and Uganda (tea and coffee), the researchers tried to answer the following question:

“is a poor rural person dependent on access to wage employment for their (and their family’s) survival better served by employment opportunities on certified farms or on non-certified farms?” (page 5 and 120 of the study).

In other words: does working as a hired labour at a Fairtrade certified flower, coffee and tea farm pay off?

It is important to know that people who must work as hired labour in rural areas in these parts of Ethiopia and Uganda are all the way down at the lowest end of the economic ladder: they do not even have their own land to feed themselves.

The SOAS study clearly voices that researchers had to invest a lot in methodology to ascertain scientific information during their field work. In a nutshell, at the grassroots things are far from clear-cut: people are not orderly registered as workers; wages are not paid all in the same manner for a pre-defined and transparent amount of labour, but in kind or mixed (cash and kind) and corruption often requires to bribe in order to secure and/or maintain a job.

These economic systems are structured very differently from the idea Westerners are likely to have about business operations. It is important to acknowledge the cultural differences between African and European companies since the key researchers were Western European and their local assistance and interviewees African. Equally important is recognising that we deal with a truly global issue: if there is sufficient absence of public scrutiny and monitoring by an authority over a company, a conscience-free zone develops in which extremely vulnerable employees like migrant workers  are exploited.

The research team employs well-recognised statistical methods (pages 76-78) to ensure the data collected from the chaotic instead of neatly comparable sites would not skew findings. Discussing the results regarding Fairtrade (pages 120-124), the research team comes to the conclusion on page 120 that they

“cannot make direct causal claims from its findings, such as that ‘Fairtrade causes low wages’ (…)”.

But the researchers

“reject the hypothesis that there is a positive causal chain between Fairtrade certification and working conditions.”

The criticism bluntly states (on page 121) that Fairtrade or better said FLOCERT failed to ensure that the companies which were certified treated their subcontractors and hired labour in accordance with the Fairtrade standards.

In theory, hired labour operating on Fairtrade organizations is bound to be treated in accordance with these standards. According to the study, certification processes worked according to a pre-set idea. Thus they ignored specific local idiosyncrasies – how is employment informally organised? How is power structured among the people living there?. The study concludes that, yes, Fairtrade led to decreasing rural poverty. It includes a very heavy however: the decrease was “an unintended consequence of its promotion of a class of emerging rural capitalists” (page 121).

What Does The Study Recommend Fairtrade?

In broad terms, the research teams recommends Fairtrade to change its policy in two key points: firstly, the researchers give concrete advice on how to modify the methods so that Fairtrade wages are at least equal to wages at non-certified farms (page 122). Secondly, they suggest Fairtrade to invest more of its resources “in effective, regular and properly independent monitoring to ensure that producers do meet the standards” (page 123). Thereby, the research team points out that producers paid for the certification.

The Bigger Picture: General Criticism Of Fairtrade

The second recommendation links to a widely held argument against Fairtrade which already existed before the 2014 study: in contrast to the ‘integrated supply chain route’, producers at this channel pay the organization to receive the certification. It is argued that FLOCERT has an incentive not to be too strict and frequent with its auditing and Fairtrade International not to be too ambitious when setting its standards. If they are too demanding, they may deter organizations from applying. Thus, they may lose money. Underlying is the argument that Fairtrade and its certification company developed into a pro-profit company which will rate money higher than the well-being of the workers along the supply-chain.

Interrelated is the criticism that Fairtrade markets its products over supermarkets: consumers are willing to pay there a higher price for fairtrade products – not knowing that supermarkets pocket most of this money as their profit margin. Retailers are not obliged by Fairtrade to adhere to a producer-friendly code of conduct. This leaves producers at the lower end of the distribution chain just like in conventional trade. The SOAS researchers hint at this instrumentalisation of Fairtrade stating:

“it may well be that it proves too costly for Fairtrade organizations, and the producer and retail organizations who trumpet their Fairtrade certification, to implement these recommendations in such a way that a substantive positive difference can be made to the welfare of manual agricultural wage workers.” (page 124).

Thus, the 2014 study underlines several of the core problems of the product certification route by examining Fairtrade:

  • Only organisations which can afford to pay for the certification can choose to participate (page 15)
  • Certification companies have financial incentives to certify also organizations which may not uphold high standards of conduct,
  • Standard setting organisations have financial incentives to formulate lower, less ambitious standards in order to increase the number of companies eligible for certification
  • Effective monitoring of adherence to good standards is difficult and expensive to implement if it is supposed to also include migrant and seasonal workers i.e. meant to indeed cover the complete supply chain
  • There is a great danger that retailers utilise the label to make more money off well-meaning customers and to give themselves a better image

How Did Fairtrade React?

In May 2014 Fairtrade took position to the study generally discrediting their scientific standards to which the researchers replied reiterating their study’s content. The reply is a good summary of their key findings and very short. Most interestingly, the researchers claim to have presented Fairtrade company with their findings already in 2013 and with the full draft of their report in January 2014.

From the outsider’s perspective, one thing is clear: communication between the two parties has failed – for what reason whatsoever. Since the media took up the study’s finding widely, Fairtrade has been pushed to react. The currently available compliance standards clearly state that Fairtrade standards must apply to hired labour.

Why The Study Is Not The End Of The World For Fairtrade – and the Product Certification Route

As uncomfortable as the 2014 study has made the representatives of Fairtrade and FLOCERT, and everyone else who supports them, I do not think it demands despair. Fairtrade and FLOCERT have pushed for fair trade progress in multiple ways:

Firstly, underlying and too often taken for granted: thanks to the growth of Fairtrade there is a degree of traceability – of transparency in international supply chains – which has never existed before. Conventional companies get away with not being able to tell you how and why their products were “Made in China”. However, Fairtrade International is said to have lowered its demands on traceability for giving its label to licencees following pressure by big industry. A comprehensive debate of this will follow in a future post, so stay tuned in.

Secondly, it is safe to assume that public scrutiny has provided more incentives to Fairtrade to follow-up on its promises to provide an alternative way of trading. After all, Fairtrade and FLOCERT market their services based on credibility. What better way to ensure credibility than having an interested public and media testing the claims?

A Bitter Aftertaste for Fair Trade In General

My core problem with the criticism against Fairtrade is different: the Fairtrade label has become a widely recognised trade-mark. Many people associate this trade-mark with fair trade in general. This may be because, just based on spoken words, it is impossible to distinguish whether somebody is talking about the fair-trade certification system or about the idea of fair trade in general. Moreover, journalists are frequently very liberal with the fair trade terminology even when they specifically talk about Fairtrade.

This post has explained the product certification route by using the example of the Fairtrade company and the certification company FLOCERT. That should not let us forget that the WFTO also sets standards and works with different certifiers! Our next post will show that there are more alternatives – one of them being the integrated supply-chain route.

What Can You Do?

If you have the time and energy, ask questions to conventional retailers and producers: where exactly are their products made? Why there? Who makes these products? To what kind of standards do they adhere? Or check out organizations which have prepared questions for you.

For a deeper dive, look at this interesting article which explains how to obtain a Fairtrade licence in the US. If you want to dig even deeper, read The Fair Trade Scandal by the economist Ndongo Sylla who once worked for Fairtrade.

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