The Complexity Around Fair Trade

The rise of fair trade can stem all the way back to the age of colonization when traders exploited countries in Asia, South America, and Asia of their commodities. While traders profited off commodities such as cocoa, coffee, bananas, and cotton in those countries, the farmers there were poor, their working conditions were harsh, and child labor was frequently practiced.

It was not until the mid-1900s that religious groups and non-governmental organizations (NGOs) formed to push for a more equitable supply chain (1). As countries began to recognize this grassroots movement, international initiatives began as a way to ensure that marginalized producers can participate in the global economy with clear ethical standards free of exploitations. Today, many products in supermarkets have various labels stamped on its packaging to assure consumers that what they buy is ethically or sustainably produced.

Fairtrade and How It Works

Fairtrade International came on the scene in 1997 as a united front to improve the working conditions of farmers and workers (2). Fairtrade guarantees to pay an ethical, “fair trade” price to farmers and workers to ensure that they receive a guaranteed minimum price regardless of market circumstances. On top of the fair trade price, farmers and workers receive a Fairtrade Premium, which is an additional sum of money paid to them to invest in economic, social, and environmental projects that can help them improve their community. In order to be Fairtrade-certified, producers, traders, and companies have to be audited in a certification process to ensure that they comply with Fairtrade’s economic, social, and environmental standards (3). In return, Fairtrade-certified products will cost more and have a label on its packaging so that consumers can shop consciously.

Alternatives To Fairtrade

Today, there are 1,707 Fairtrade certified producers in 73 countries, and 1.7 million farmers and workers benefit from Fairtrade’s initiatives (4). However, critics of Fairtrade question its effectiveness and efficiency, and in recent years, companies are abandoning Fairtrade and setting up their own in-house certification programs. Companies believe that they can have more flexibility by implementing their own label and adhering to their own ethics and definition of fairness (5).

However, some companies can abuse in-house certification programs for marketing purposes as studies show that over 70 percent of consumers would pay a premium for brands that are sustainable and environmentally responsible (6). In addition, purchasing sustainable products can soothe consumers’ guilty conscience. But the increase of in-house certification programs dilute the weight and value of an ethical label. With more than 460 different sustainability logos for food and beverage packages, consumers can experience label fatigue (7).

In other instances, some companies are proponents of direct trade, which is a method which distributors buy directly from producers. Direct trade eliminates the fees and certification process that comes with fair trade initiatives but the process depends heavily on the ethics and transparency of the distributor (8).  

William MacAskill, the co-founder of Center for Effective Altruism, offers another perspective by urging people in his book Doing Good Better to consider the effectiveness of abandoning Fairtrade products altogether, buying cheaper goods, and donating the money saved to more cost-effective charities (9).

Conclusion

In-house certification programs are on the rise, and they go against the homogenous and unified standards that Fairtrade was founded upon. In addition to in-house programs, new alternatives, like direct trade, are being explored to improve on the current fair trade system with the end goal of ensuring that marginalized producers can participate in the global economy in a leveled playing field. Despite the complexity around Fairtrade and its alternatives, it is important for general consumers to be educated when making everyday decisions.

Works Cited

1. Davide Banis, “The Rise and Fall of Fair Trade,” Kinder World, August 8, 2018, https://kinder.world/news/the-rise-and-fall-of-fair-trade-18978
2. Samanth Subramanian, “Is Fair Trade Finished?,” The Guardian (Guardian News and Media, July 23, 2019), https://www.theguardian.com/business/2019/jul/23/fairtrade-ethical-certification-supermarkets-sainsburys
3. “How Fairtrade Works,” Fairtrade International, accessed May 20, 2021, https://www.fairtrade.net/about/how-fairtrade-works
4. “Facts and Figures about Fairtrade,” Fairtrade Foundation, January 7, 2021, https://www.fairtrade.org.uk/what-is-fairtrade/facts-and-figures-about-fairtrade/
5. Samanth Subramanian, “Is Fair Trade Finished?,” The Guardian (Guardian News and Media, July 23, 2019), https://www.theguardian.com/business/2019/jul/23/fairtrade-ethical-certification-supermarkets-sainsburys
6. Karl Haller, Jim Lee, and Jane Cheung, “2020 Consumers Driving Change,” IBM, 2020, https://www.ibm.com/thought-leadership/institute-business-value/report/consumer-2020
7. Samanth Subramanian, “Is Fair Trade Finished?,” The Guardian (Guardian News and Media, July 23, 2019), https://www.theguardian.com/business/2019/jul/23/fairtrade-ethical-certification-supermarkets-sainsburys
8. “Fair Trade vs Direct Trade Coffee: The Jargon of Sustainability,” Roasty Coffee, June 16, 2020, https://www.roastycoffee.com/fair-trade-vs-direct-trade-coffee/
9. Davide Banis, “The Rise and Fall of Fair Trade,” Kinder World, August 8, 2018, https://kinder.world/news/the-rise-and-fall-of-fair-trade-18978