Challenges facing fair trade - Probe...

Challenges facing Fair Trade: which way now?

Paper for the DSA conference 2001, Different Poverties, Different Policies,

IDPM, Manchester 10-12 September 2001

Anne Tallontire

Natural Resources and Ethical Trade programme, [email protected]

AbstractApproaching maturity, Fair Trade faces challenges at both ends of the supply chain, reflecting the dual roles of Fair Trade as a business and development instrument. Who should supply the Fair Trade market, what support do producers require and what is the impact of the relationship between Fair Trade organisations and producers? How can Fair Trade continue to assert its unique selling point in the market place and what messages should it be transmitting to the consumer? What does the Fair Trade movement need to do to substantiate its claims regarding benefits to producers? The paper draws on research, consultancy and engagement with the Fair Trade movement to explore issues of producer development, accountability, and competition in the consumer market and to look forward to potential strategies for the movement, especially as other approaches to trading ethically are becoming more active in the market place.

Acknowledgements:Thanks to colleagues in the Natural Resources and Ethical Trade programme whose reports I have relied on considerably in this paper. But I take responsibility for interpretations made of their work. Thanks in particular to Peter Greenhalgh and Valerie Nelson for their helpful comments.

I welcome comments on this draft. Work in progress. Please do not cite without my permission.

Anne Tallontire, Natural Resources Institute 1

1. IntroductionHas Fair Trade come of age? The increasing number of Fair Trade products sitting on supermarket shelves and its increased credibility with international donors indicate that Fair Trade is not to be dismissed. However, Fair Trade faces challenges at both ends of the supply chain, in relation to producers and consumers. Many of the challenges are inherent in Fair Trade, reflecting its dual role as an instrument of both economic and social development. However, these challenges are becoming more acute with changes in the market place and the increased profile of Fair Trade as a potential development tool. Some challenges have been actively debated internally within the Fair Trade movement for some time but others are now being raised by others as interest in Fair Trade increases within donor circles and commercial organisations are taking on the challenge of operating in a more socially responsible way.

Fair Trade is an approach to trade that has a strong development rationale, based on introducing previously excluded producers to potentially lucrative markets, building up the capacity of producers to trade effectively in the market and offering them a good price. Fundamentally Fair Trade aims to benefit primary producers and attempts to sell their produce to a niche market of consumers that are willing to buy goods that are identified as ‘Fair Trade’ and for the benefit of the producer, often at a premium price1.

In this paper I explore challenges facing Fair Trade and review current activity by Fair Trade organisations and research on Fair Trade, focusing on impact assessment at the producer level, accountability and the inroads of Fair Trade into the mainstream market. The overall impact of Fair Trade –i.e. the extent to which it can meet its objectives – is inherently linked to impact at the producer level and the influence of Fair Trade on the market (both in relation to consumers and other traders). To put it simply, overall impact is related to the number of people involved multiplied by the magnitude of the change (Zadek et al 1998). Translating this into what this means for Fair Trade, the overall impact of Fair Trade can be conceived as the volume of sales and multiplied by the benefit to individual producers and groups. This is expressed in Figure 1. In addition to producer impact and the market, a third key theme--accountability --has emerged. There is an increasing need for Fair Trade to be accountable to key stakeholders and to able to substantiate its claims, especially in the market place where there are an increasing number of ethical claims being made. The key challenges for Fair Trade are set out in Figure 2.

Figure 1: Overall impact of Fair Trade

OVERALL

IMPACT

(GENERAL)

= NUMBER OF PEOPLE INVOLVED

X MAGNITUDE OF CHANGE

OVERALL

IMPACT

(FAIR TRADE)

= SALES X BENEFIT TO INDIVIDUAL PRODUCERS & GROUPS

This paper explores how Fair Trade is addressing these challenges. The paper draws on research and consultancy by the author and colleagues in the Natural Resources and Ethical Trade programme at

1 A Fair Trade premium is an extra payment that is to contribute to development, and its use is usually democratically determined by the producer organisation.


NRI, as well as work by others. It also draws on a continuing dialogue with key actors in the Fair Trade movement and organisations involved in different initiatives that seek to include ethical dimensions in business practice and trade. Concentrating on the ‘nuts and bolts’ of Fair Trade practice, the paper highlights progress to date on understanding how Fair Trade operates and the impact it is having. It indicates where more work is needed.

Following a brief introduction to Fair Trade organisations and practices, the paper discusses producers supplying the Fair Trade market and the relationship that they have with Fair Trade organisations. This section considers progress to date in understanding the impact of Fair Trade relationships. It then moves on to issues of accountability, especially in relation to consumers in the market, before exploring the market for Fair Trade products and consumer awareness. It closes by drawing conclusions regarding Fair Trade strategy.

1.1 BackgroundFair Trade is just one of a number of approaches to responsible business practice in trade between developed and developing countries.2 The approach that is most often compared to Fair Trade is ethical trade, also known as ethical sourcing

Ethical trade is an approach to supply chain management, most usually undertaken by multinational brands or retailers, that involves the use of codes of conduct to ensure that suppliers meet ‘minimum standards of employment, worker welfare and aspects of human rights standards’ (Barrientos and Blowfield 2001). In the UK this approach is most well known through the activities of the Ethical Trading Initiative (ETI) which is working to ‘identify and promote good practice in the implementation of codes of labour practice, including the monitoring and independent verification of the observance of code provisions’ (ETI website).3 There are important differences between ethical trade and Fair Trade as currently practised, not least the work place focus of ethical trade compared to Fair Trade’s emphasis on trading terms and small producers. Furthermore there are important differences in the objectives of fair and ethical trade in that Fair Trade seeks to change unequal relationships between producers and consumers, to empower producers, whereas ethical trade to date is largely focused on the welfare of producers. Nevertheless in the eyes of some observers, the significance in terms of poverty reduction of other approaches to being socially responsible may well exceed the impact of Fair Trade (NRET 1998) and consumers may regard the ethical labels of conventional companies just as convincing as those of Fair Trade.

2 Using the term ethical trade to describe ‘the trade in goods produced under conditions that are socially and/or environmentally as well as economically responsible’, the Natural Resources and Ethical Trade programme (NRET) has included Fair Trade as well as other initiatives such as organic production, environmental codes, forest certification, and the ethical sourcing initiatives of major Western retailers. But here for simplicity ethical trade will be used to describe the ethical sourcing initiatives.3 Stakeholders from industry, NGOs and trade unions form the ETI which is partly funded by the UK Department for International Development. It aims to develop appropriate monitoring and verification systems for a base code of conduct with a view to increasing the social responsibility of firms sourcing from developing countries.


BENEFIT TO INDIVIDUAL PRODUCERS & GROUPS

IMPACT ASSESSMENTS

SALES

THE MARKET

ACCOUNTABILITY

FAIR TRADE RELATIONSHIP

Figure 2: Key Challenges

1.2 Fair Trade approachesWithin Fair Trade two different types of FT organisation have emerged, namely alternative trade organisations (ATO) followed by Fair Trade labelling organisations. The first ATOs began to operate in the 1950s and 1960s purchasing goods from disempowered producers with a view to promoting their development as part of goodwill selling and later solidarity trade (Tallontire 2000). Prominent examples of ATOs include Traidcraft in the UK and Fair Trade Organisatie (FTO, formerly SOS Wereldhandel) in the Netherlands. More recently Fair Trade labelling organisations have emerged, the first and probably best known is Max Havelaar. Max Havelaar Netherlands is now one of seventeen National Initiatives making up FLO, Fair Trade Labelling Organizations International, which was formed in 1997 to co-ordinate the growing number of labelling organisations.4

Fair Trade labelling organisations are not involved in trade exchanges themselves but issue Fair Trade marks or labels to manufacturers or importers to verify that the production and supply of a particular product has met specified Fair Trade standards. Fair Trade labels are issued to a limited range of commodities for which an international Fair Trade standard has been developed (coffee, tea, banana, sugar, orange juice and chocolate/cocoa).5 The label can be used by buyers (conventional companies or ATOs) registered with one of the National Initiatives and shows that the product has been produced and traded according to pre-defined social, contractual and sometimes environmental standards, including the payment of the agreed minimum price as determined by FLO. This price is not only intended to provide a better return to the producer, but includes a ‘social premium’ to be used by producer groups for social development activities.

The format and content of the current criteria differ according to the needs of the market and industry and also according to when they were written. Whereas coffee criteria only has a cursory mention of environmental sustainability, the more recent banana criteria details integrated crop management techniques that are required as minimum entry criteria as well as minimum measures to ensure environmental protection. Throughout the banana code there is a clear separation of minimum requirements and process requirements. Minimum requirements must be met within a specified period after joining the register whereas process criteria are to be met according to a schedule mutually agreed by FLO and the producer organisation. This approach is likely to be adopted across all labelled products within the FLO system. 6

To ensure that producer groups are delivering benefits to members, FLO – the custodian of the standard – certifies both buyers and producers. Whilst there are guiding principles that govern the selection of producers and overall objectives for trading relationships, ATOs do not undertake formal certification against set criteria for most of their products. Fair Trade is expressed through the practices of the Fair Trade organisations and their partners and not through performance targets, rather the ATO sets objectives for its trading relationships which may be customised for different groups or situations, but usually building on a generic model. The ATO then relies on its reputation and brand name to convey to the consumer that the product has been traded according to Fair Trade principles. So, an organisation such as the Oxfam Fair Trade Company could trade in any commodity provided that it is produced by small producers in developing countries (fitting certain development-oriented criteria), for which they can identify a market. Although this may seem less rigorous or transparent, supporters claim that this approach makes it easier to target the poor and respond to jointly identified needs, and increases the returns to the producers by cutting out the cost of independent monitoring by labelling organisations.

2 Fair Trade producers and impact on development

The practice of Fair Trade involves many challenges in the relationship between producers and the Fair Trade organisation, not least who should supply the Fair Trade market and provide appropriate support to producers. More recently questions have been raised about the impacts of Fair Trade. This section explores who Fair Trade producers are and then provides an overview of what is known about the impact of Fair Trade on producers and other stakeholders. It largely relates to the left hand side of the diagram in Figure 2, the benefits to individual producers and groups.

4 These are based largely in Western Europe, but also in North America and Japan.5 Criteria are also being developed for cotton.6 In 2000 FLO began to explore harmonisation of the standards and two draft standards, one for smallholders and one for waged labourers, were produced for discussion within the movement early in 2001.


2.1 Fair Trade producersBefore considering impacts on producers, it is important to understand who Fair Trade producers are. The simplest way to categorise Fair Trade producers is according to the products they produce and the way in which they are organised. The main categorisation is between food and non-food products. Within the food category one can distinguish between primary commodities and processed products made by the producer groups, e.g. between coffee and chutneys (however processed goods such as chocolate and museli bars tend to be manufactured in Europe by others). In the non-food category there is considerable diversity of products --hence kinds of producer --which are largely hand-made crafts but can also include textiles and garments. The marketing co-operative tends to be the most common form of organisation amongst both food and non-food Fair Trade producers. But a co-operative can take a baffling array of forms from a formally registered hierarchical structure with over 50,000 members (like East Africa coffee co-operatives) to a loosely structured group of women coming together to market embroidered cloth. Some Fair Trade producers however are organised as companies, such as the plantations supplying Fair Trade bananas in Ghana and socially-aware businesses selling to Traidcraft, such as Agrocel in India and Dezign Inc in Zimbabwe. Privately owned companies producing for the Fair Trade movement tend to have explicit social missions and Fair Trade buyers generally insist on special arrangements for worker participation especially in relations to decisions over the Fair Trade premium.7 Overall however, most Fair Trade organisations tend to work with groups rather than private individuals.

It could be argued that in many cases, serendipity has as much to do with who produces for the Fair Trade market as strategy. Whilst Fair Trade aims to target disadvantaged producers in accessing the market, there are evidently many deserving cases of producers that could be linked to Fair Trade but are not as they have not heard of Fair Trade, are too remote from organisations linked to Fair Trade buyers or are producing something for which there does not appear to be a Fair Trade market. Moreover, some have pointed out that Fair Trade producers are not necessarily the poorest in a country or region, e.g. cocoa producers in Ghana or Kilimanjaro coffee farmers selling to the Fair Trade market may be considered relatively resource-rich in a country or regional context, the decline in commodity prices notwithstanding (Oxford Policy Management 2000). Some Fair Trade links have evolved from the efforts of a group of people who wish to earn a living through production for the market and who, with the assistance of a Fair Trade organisation, explore the most appropriate products to produce taking account of the capital assets of the people and an understanding of the markets. However, whilst social development theories advocate such a people-centred approach, many Fair Trade relationships start with a commodity or product and an understanding of the market and then attempts are made to find appropriate producers. 8

There are ‘creative tensions’ between product and producer led Fair Trade, commercial viability and development impact. Humphrey (2000) makes a contrast between producer and market led trade. She argues that in reality Fair Trade does both, but in the past Fair Trade was largely about finding an outlet for what the producer could supply. Now Fair Trade tends to make a more difficult balance between trading success and targeting groups based on the need for social benefits which is where ‘creative tensions’ come in. For example, the need for quality and reliability may conflict with the desire to benefit the poorest or the skills and resources available to poor communities may not necessarily correlate with market opportunities (Millard 1996). The risk of making producers dependent on the Fair Trade linkage conflicts with the wish to develop a good long-term relationship with a reliable supplier. A recent study for Oxfam highlighted the extent to which many producers are dependent on the Oxfam Fair Trade Company orders: 44% of the groups studied sold at least half of their produce to Oxfam Fair Trade Company and where groups had become less dependent on Oxfam they tended to diversify sales to other Fair Trade buyers (Hopkins 2000: 23). Only a limited number of Fair Trade producers, especially in crafts, appear to ‘graduate’ from the Fair Trade market to the conventional market; graduation is probably never feasible for some producers. The creation of dependency appears to be a real problem in Fair Trade, which Oxfam has decided to tackle by helping some producers focus on domestic marketing opportunities (pers com). However, for other producers, there may well be opportunities in the mainstream market. Traidcraft is exploring ways in which marginalised producers can operate in the mainstream export market, (Humphrey 2000).

7 A discussion on mechanisms for worker participation in decisions on premium use at the Volta River Estates Limited, a plantation that supplies Fair Trade bananas can be found in Blowfield and Gallat (1998).8 Twin Trading identifies three ‘starting points’, but it is not clear which has historically been most important (i) based on existing expertise in particular product areas and contacts within Twin; (ii) a response to the challenges in a particular situation, especially where they are approached by a producer; (iii) as part of an overall strategy to assist producers within a particular commodity sector (cited by Praeger, 1995).


A Fair Trade organisation’s decision on producer strategy is ultimately bound up with the extent to which Fair Trade is seen as an approach to development, or a way of introducing ethics into the market. Should it be development through trade or trade development? A Fair Trade organisation could do both, but needs to be clear about the different kind of partnership with producers, the kind of producer involved and kinds of impact that may result.

2.2 Fair Trade and development impactUntil recently there had been very little analysis of the actual benefits that accrued to primary producers as a result of Fair Trade than one might have believed from the claims of its practitioners. A study by IIED set out to review assessments undertaken by Fair Trade organisations to see ‘who benefits?’ The researchers were surprised to find out that very few impact studies actually existed and most evidence has been ‘anecdotal, without rigorous baseline information or downstream data that demonstrate how this leads to development benefits at the local level’ (Robins et al 1999:2) . This is not to say that the anecdotal evidence of positive benefits has not reflected reality, rather to stress its lack of rigour and the lost opportunity to learn from past experience.

In the last couple of years there has been increased activity in impact assessment, partly because of the increased spotlight on Fair Trade, with the rise of the Ethical Trading Initiative in the UK and the efforts of commercial companies to demonstrate that they are socially responsible. There are three main reasons why Fair Trade organisations are being encouraged to pursue impact assessment. They must be accountable to donors that fund Fair Trade-related projects. They are also interested in developing systems to assess and demonstrate their impact to develop both for their own and partners’ learning and to improve the effectiveness of their business. Finally, certification for Fair Trade labelling involves the development of monitoring systems (Robins et al 1999: 52).

2.3 Impacts measuredAttempts by Fair Trade organisation to develop impact assessments include a study commissioned by Oxfam on the impact of its Fair Trade programme on the standard of living of handicraft producers and their families that aimed to pilot qualitative and quantitative impact assessment methodologies (Hopkins 2000); an evaluation of the FLO model focusing on coffee commissioned by FLO and a study by the large German Fair Trade organisation GEPA to inform decisions about support for Fair Trade partners.9 Donors such as DFID are interested in Fair Trade and following an initial study to scope Fair Trade in food commodities, specifically cocoa and coffee (Oxford Policy Management 2000), it has commissioned an assessment of Kuapa Kokoo in Ghana (supplier of cocoa for the Day Chocolate Company, in which it has shares) and the development of a methodology for assessing the impact of Fair Trade (Mayoux 2001).

The most comprehensive study by a Fair Trade organisation is that commissioned by Oxfam which recognised the need to monitor progress in relation to the standard of living of producers and explore methods for collecting relevant information in an effective way. The study was therefore conducted on a pilot basis and covered eighteen producer groups in seven countries and examined income and livelihoods, capacity building, gender and the environment. Overall impact was positive for producers, especially in terms of income and skills development, but noted that some categories of producer benefited more than others. Key issues that emerged from the study were the extent of dependency and vulnerability of producers and the need for Oxfam to develop a strategy for how the Fair Trade relationship should evolve (Hopkins 2000).

Some studies on Fair Trade suggest that the financial impact of Fair Trade is less than might be expected from Fair Trade publicity material, especially where Fair Trade sales only make up a small proportion of total marketed output (Tallontire 1999, Oxford Policy Management 2000). Nevertheless when international commodity prices are low, payment of the Fair Trade minimum and premium may mean that significant sums accrue to producers10. In general, the main contribution of Fair Trade to many of the groups studied is the development of capacity (Robins et al, 1999; Oxford Policy Management 2000). Oxford Policy Management’s case studies of Kuapa Kokoo and KNCU in exporting cocoa from Ghana and coffee from Tanzania respectively, highlight the importance of

9 The latter two were cited at a Workshop organised by Oxfam, in Oxford, UK, 21st June 2000.10 Whilst the financial impact of Fair Trade sales for the KNCU and KCU was relatively small in 1996 when the world coffee price was relatively high (Tallontire 1999), by 2001 when coffee prices had plummeted the difference between Fair Trade and world prices meant that far greater sums were received by the co-operatives from Fair Trade partners (pers com, 2001).


the link with Fair Trade organisations for the development of business and technical skills, especially for enabling these co-operatives to provide transparent market information (ibid: 29).11

Indeed many of the benefits from Fair Trade that have been recorded have been indirect in nature, or in terms of positive externalities. Twin Trading which works closely with the coffee co-operatives in northern Tanzania argues strongly that Fair Trade helps ensure the continued existence of co-operatives and that farmers are likely to benefit from co-operatives in a variety of ways, whether they are members and sell to societies or not (Tallontire, Greenhalgh et al 2001). More specifically, the action of the Tanzanian co-operative union export offices in the auction is argued to have an effect on the general level of auction prices, which ultimately benefit all farmers. This is seen by some as a powerful argument for continued and increased support of the co-operatives in East Africa, especially the larger organisations that have the capacity and experience to operate effectively in the auction. In addition, some qualitative benefits such as increased confidence of the export managers, as a result of their experience in the auction have been noted. Even advocates of the free market agree that the existence of co-operatives can act as an important ‘countervailing power to other private sector enterprises and thereby safeguard farmers against unfair trading practices' (Hussi et al 1993: 31).

Similarly, the improved prices offered to cocoa producers in Ecuador by MCCH which sells to the Fair Trade market has meant that other traders are offering higher prices, to the extent that the premium offered by MCCH is no longer as significant as it once was (Nelson and Galvez 2000). The extent of these indirect benefits and conditions under which they may extend to the wider farming community are worthy of more detailed study. In addition, some producer groups that started with Fair Trade have gone on to compete successfully in the conventional market, not least because supply exceeded demand from the Fair Trade buyer. MCCH has made this transition whilst still operating according to Fair Trade principles (Collinson and Leon 2000).

2.3 Livelihoods and Fair TradeFew studies have looked beyond the members of the producer organisation to undertake a stakeholder analysis. Exceptions include a series of studies undertaken by NRET which explored the ethical trade, including Fair Trade in cotton, bananas and dried fruit using the sustainable livelihoods framework (summarised in NRET 1998) and the more detailed social impact assessments of Fair Trade in cocoa and brazil nuts in Ecuador and Peru respectively, also undertaken by NRET (Nelson and Galvez 2000a and b).

It could be argued that it is beyond the scope of Fair Trade organisations to undertake stakeholder analysis and consider the impact of the relationship on groups beyond the producer group with which it is developing a partnership. This may diminish the partnership; some Fair Trade practitioners are wary of over-loading their relationship with additional concerns. Some also argue that conventional trade is not expected to consider stakeholders beyond the primary stakeholder and that to expect Fair Trade and its producer partners to do so is not a fair comparison. However, it is not necessarily the case that business ignores other stakeholders, as some businesses that are aiming to adopt a more responsible approach, acknowledge their impact on society beyond primary stakeholders. It is probably true that these businesses are few and far between, but greater consideration of a wider group of stakeholders beyond the membership of the producer group may well be a useful risk-minimising strategy that enables the trading relationship to be more sustainable.

Moreover, many Fair Trade practitioners do aspire to contribute to a developmental impact. Using the sustainable livelihoods framework one can explore more clearly those aspects of Fair Trade that contribute to sustainable livelihoods and those that may actually limit the developmental impact.

Investigations by NRI using a livelihoods perspective (including NRET 1998, Nelson and Galvez 2000 a and b) suggest that benefits tend to be restricted to members of the producer organisations and are not spread to the wider community, see Box 1.

11 However, this study does question whether the capacity built was necessarily as a result of the Fair Trade relationship or whether other kinds of development input would have yielded similar results.


Box 1: Fair Trade and Sustainable LivelihoodsVulnerability contextAims to reduce vulnerability largely in relation to the export market, but the fact that Fair Trade is based on accessing export markets may in fact make producers more vulnerable

Institutional analysis (structures and processes)

Limited analysis of local institutional set up, with exception of favouring democratically organised producers. Some producer organisations may be exclusive. Scheme promoters rarely undertake stakeholder analysis.

Capital assetsSocial – Fair Trade has strengthened some co-operatives, offered them a lifeline, but there is potential for greater capacity building

Natural –limited consideration of environmental sustainability

Financial – main outcome

Human –technical training is often offered including marketing skills and post-harvest techniques

Physical – Fair Trade premiums and links to donor funding (honey pot syndrome) may lead to investment in physical capital

Poverty focusTends to focus on one stakeholder, the primary producer, and not other stakeholders. While the focus may be on small scale producers, they are often not the poorest; for Fair Trade in cash crops such as coffee and cocoa, the members are owners of land – often males, household heads; Fair Trade criteria for coffee do not consider the conditions of seasonally hired labour

Source: Adapted from analysis in NRET 1998

The sustainable livelihoods lens helps one suggest additional inputs, as well as building up export capacity of specified groups of producers, that may ensure that the development impact is maximised. For example, in the Brazil nut case one could take steps to ensure that the shellers as well as the Brazil nut concession-holders benefit from Fair Trade (Nelson and Galvez 2000b).

Thus it may be ‘more accurate to say that successful Fair Trade benefits small producers in poor countries’ as opposed to saying that Fair Trade benefits the poor per se (NRET 2000). Some successful Fair Trade projects have benefited some (normally wealthier, male) producers rather than achieving equitable distribution of benefits throughout the community. More critically, there are actual and potential negative impacts, particularly for those unable or unwilling to participate, and initiatives are weak in targeting certain disadvantaged groups. The single-commodity focus of Fair Trade does not encourage sustainable natural resource management practices, where for the producer household that commodity may be just one part of a diverse production system (Nelson and Galvez 2000 b).

However, when making judgements about the limited ability of Fair Trade to spread benefits more widely, one should bear in mind that other approaches to linking producers to the market, such as contract farming are likely to have even more benefits that are even more geographically concentrated and focused on very specific skill areas (Baumann 2000). Moreover, the focus of Fair Trade criteria is the contractual trade terms rather than production relations and is it therefore fair to criticise Fair Trade for things that it does not explicitly seek to change? For example, Fair Trade criteria for cash crops such as coffee do not consider labour relations within the smallholder household, and do not explicitly aim to delve into the gender division of labour at the household level. However, this seems a weak defence and one could criticise Fair Trade for such a socially blind and gender blind attitude and failing to engage with the potential for social injustice based on gender inequality or poor working conditions for non-family wage labour. Moreover, there appears to be increasing pressure within the Fair Trade movement for gender issues to be addressed more thoroughly12. To date Fair Trade in commodities tends to leave it to the democratic procedures of the organisation to ensure that the needs of all producers are taken into consideration. The partnership

12 It has been an item for debate at recent conferences of the International Federation for Alternative Trade (IFAT).


approach and importance of ensuring the autonomy of producer groups means that it can be difficult for ATOs to impose particular social practices on producer groups.

Fair Trade has also been associated with some significant achievements, and has been a catalyst that can bring ‘together diverse stakeholders in developing and developed countries, many of whom may not have previously considered themselves to have had a development function’ (NRET 2000). Perhaps one of the biggest impacts of Fair Trade is the influence that it has had on commercial behaviour, leading commercial operators to rethink their trading practices and who they buy from. Whilst the more empowering elements of the Fair Trade approach are not always taken on board, the different needs of smallholders in terms of meeting ethical standards is increasingly being considered. For example the latest revision of the COLEACP Harmonised Framework for codes of conduct in the horticulture sector has included a section on relations with outgrowers that takes into account not only the production conditions on the smallholder farm but the balance of responsibilities, including trading relations between the commercial buyer or exporter and the smallholder farmer.

2.4 Frameworks for impact assessmentThe Mayoux study (for the Department for International Development) emphasises the importance of seeing impact assessment as part of the process of strategic development of the relationship between the producer and Fair Trade buyers – strong participatory element. This is contrasted with some assessments of Fair Trade which have largely been undertaken from the point of view of the donor who is assessing whether its investment has been put to good use (e.g. DFID-commissioned studies of Traidcraft partners which have largely been output to purpose reviews, e.g. James 1999) rather than a key element of strategic planning in which the producer organisation is actively involved. Mayoux proposes a framework for assessing the impact of Fair Trade that is very broad, including a range of economic, social, political and environmental criteria that are embedded in a clear understanding of the context and which stresses the need for participatory approaches (which may be different at different points in the impact assessment process). However, she also recognises the need to be clear on the type of intervention that is being assessed. Overall she argues that impact assessment should be linked to ‘building up of a sustainable participatory monitoring and evaluation system’ and include ‘capacity building of producers themselves and also where feasible communities’ (Mayoux 2001).

Mayoux has set a huge challenge for impact assessment. Whilst the framework proposed aims to make a link between learning in Fair Trade organisations and building capacity in producer organisations, it is mainly aimed at donors so that they can assess the development impact of their inputs into Fair Trade relationships and perhaps compare this with outcomes from other interventions. It is important to distinguish between frameworks that can be used by Fair Trade organisations themselves as a tool for learning and capacity building and those frameworks employed by observers. However the ‘observer’ frameworks may also highlight important issues for Fair Trade organisations such as the potential limitations of Fair Trade and ways of maximising benefits for all relevant stakeholders.

Assessing the impact of Fair Trade is proving difficult because of the multiple objectives of Fair Trade, identifying the stakeholders to be included and the problems of ascribing causality, and finally developing a framework that is both comprehensive enough and efficient. Few Fair Trade organisations have had the resources to undertake such assessments without outside financial assistance.

An important next step in the development of impact assessment methodologies is to explore the way in which benefits from Fair Trade differ from or are the same as other kinds of linkages between smallholders and the market. To date there has been no attempt to assess whether Fair Trade is a more cost-effective means than other trade links (or indeed other developmental approaches) for delivering benefits to smallholders. Evidence that Fair Trade offers greater developmental benefits would potentially enable donors to channel more resources to supporting Fair Trade linkages. The actual benefits from Fair Trade relationships however, are now becoming clearer and there is greater understanding of the major outcomes from Fair Trade relationships and for which producers.


3 Accountability, Certification and Labelling

Donors, development practitioners and the needs of strategic planning are calling for impact assessment of Fair Trade. In contrast, the general public, consumers, competitors and in some cases producer partners are more interested in accountability. Do Fair Trade organisations do what they say they do? Can the Fair Trade organisation justify the Fair Trade premium?

3.1 Accountability in Fair TradeIn the early days of Fair Trade when Fair Trade goods were sold largely to a small number of supporters of Fair Trade organisations (in the ‘helping by selling’ and ‘solidarity’ models) accountability was largely a non-issue: consumers were willing to accept the word of Fair Trade organisations and indeed the Fair Trade purchase was largely a symbolic act. However Fair Trade has moved beyond this with an expanding number of consumers and greater interest in the practice of Fair Trade. Moreover, as NGOs and campaigners demand stakeholder accountability of conventional companies, and systems for reporting performance against codes of conduct along the supply chain (e.g. ETI and SA8000) and on company operations (e.g.AA1000) are being developed and implemented, the need for Fair Trade to be accountable has been heightened. If companies such as the Co-op and B&Q are willing to accept independent third party auditing13 of their responsible sourcing practices, it is perhaps not unreasonable to expect Fair Trade organisations also be able to demonstrate compliance with their mission statements?

Accountability is more important for Fair Trade organisations as they begin to engage in a mainstream market where companies are promoting an ethical stance and adopting ethical labels. Millard notes that ‘when a concept moves from a niche into the mainstream then its added value decreases, because it is no longer special’. He further argues that in this context ‘credible’ labelling and certification become more important to ‘challenge any spurious claims of community benefit’ (1996: 15). Fair Trade organisations are increasingly selling products in a market where their consumers do not necessarily know much about Fair Trade, but who want to know where their money is going. Fair Trade brands may therefore need to explore how they promote themselves in this market and how their claims can be verified.

Fair Trade labels emerged as a way of demonstrating to consumers that certain principles were being followed. Early discussion of the Fairtrade Mark in the UK aimed to ensure that the Fair Trade label maintained greater credibility than the myriad of environmental labels that had appeared in the late 1980s and then faded, as consumers grew sceptical of their unproven claims.

3.2 Fair Trade labelling in contextThe Fair Trade labelling system has sets of criteria for both buyers and producers unlike the current ethical sourcing codes of conduct that only place responsibilities primarily on the producer; the only responsibility of the buyer being to ensure that they buy from sites that meet certain minimum standards. Under the FLO labelling system, producers are assessed according to pre-set criteria and then registered as Fair Trade producers. Buyers can label their products as fairly traded only if they buy from these registered producers at a price agreed by FLO, the international certification body. This price is not only intended to provide a better return to the producer, but includes a ‘social premium’ to be used by producer groups for social development activities. To ensure that producer groups are delivering benefits to members, FLO monitors producers regularly against the relevant Fair Trade criteria and ensures that the quantity of Fair Trade goods sold by producers under Fair Trade conditions matches the amount sold to consumers under a Fair Trade label. The national initiatives (e.g. Max Havelaar, Fairtrade Foundation, Transfair) monitor the licensees of their label.

There are important differences between Fair Trade monitoring and certification systems and those adopted by other ethical standards bodies such as the Forest Stewardship Council and the organic standards (such as IFOAM) and Social Accountability International’s ethical sourcing code, SA 8000. The key elements of certification are (a) a standard –set of principles, criteria and indicators which represent ‘good’ or ‘acceptable’ practice (that is locally relevant but have international compatibility and credibility); (b) a custodian of the standard; (c) auditors or monitors; and (d) an award to a producer or trader acknowledging that they have achieved the standard (there may also be a label to

13 An audit can be first party (by the employer themselves against their own code), second party (by a representative of a purchasing company against a code selected by the purchasing company) or third party (by an independent auditor against an independently recognised code).


inform the consumers). In the FSC, IFOAM and SA 8000 systems the role of custodian and certifier of the standard is kept separate. For example in the FSC system, the FSC secretariat accredits other organisations to audit against the FSC Principles and Criteria through which the FSC maintains a certain distance from the auditing process and thereby a greater credibility. 14 However, for Fair Trade labelling, the custodian of the Fair Trade standard is also the certifier of the standard, i.e. it is FLO that develops the sets of criteria for each of the products sold with a Fair Trade label, and it is a representative of FLO that monitors producers and buyers against the standard. In contrast to the FSC, SAI and IFOAM systems, FLO is intimately involved with decisions on who should be admitted to the producer registers, the corrective actions required and planned remedial measures.

One reason for this close involvement in the certification process and interaction with the producer organisations is the development remit of Fair Trade. As many producers would not be able to reach the market, even the Fair Trade market, without the assistance of Fair Trade organisations, it is deemed important that FLO be in a position to assist producers. It is argued that producers that require assistance to reach the Fair Trade market should not necessarily be denied access to Fair Trade registers and many producer organisations face difficulties in weathering increasingly volatile commodity markets without some assistance.15 Fair Trade organisations are very much aware that labelling alone is rarely enough to derive positive benefits for producers. Fair Trade is not alone in this dilemma. Moreover, forest certification has largely taken place in developed countries and there are many obstacles to smaller producers participating (Lewis and Ngubane 2001).

The need for development inputs, as well as continuity, is one of the reasons that producer monitoring tends to be undertaken by the same people, rather than by different people each cycle, which is common in other certification systems with the aim of ensuring objective certification. Another difference between the FLO system and that of sustainable forest management or organic certification is that the producer does not pay for certification; this is paid for by the consumer (Courville 1999).

Questions have been raised about the same umbrella organisations being responsible for Fair Trade standards setting, auditing and producer support (NRET 1998). Greater transparency and separation of roles would be welcomed by Fair Trade sympathisers in conventional companies, some of whom have expressed frustration with Fair Trade which at times may appear like a secret society with links between various organisations. For example, in Fair Trade bananas one of the producer organisations is partly owned by an NGO in the Netherlands, which also owns shares in an importer and has close links with Max Havelaar -- the Fair Trade monitor --which it was involved in establishing (Blowfield and Gallat 1998). Such close networks and relationships are inevitable in the early stages of innovation, but now that Fair Trade is maturing and wishes to encourage conventional traders to participate in its labelling system, it is important that clear separation of roles is maintained.

Nevertheless, the different roles played by the FLO monitors and the Fair Trade buyers can also be confusing for the producer organisations, especially if conflicting recommendations are made. A recent study on Fair Trade coffee in East Africa raised the issue of the lack of co-ordination between players in the FT movement, the problem of conflicting messages being received by producer partners and the duplication of effort (Tallontire, Greenhalgh et al 2001).16 FLO is considering the separation of auditing and producer support functions and there are proposals under discussion for restructuring of the organisation to provide for producer representation in the board.

The differences between Fair Trade labelling systems and other ethical monitoring and certification systems are related to the developmental role of Fair Trade and also the main area of focus. Fair Trade is concerned not only with the site of production, but also power relations in trade, which is largely neglected by other certification systems. Moreover, other kinds of ethical system, including forest certification, organic production and ethical sourcing tend to put the onus for improvement on the producer. There are no ethical criteria relating to other actors along the supply chain, other than

14 However, a recent study of forest certification indicated that stakeholders are confused about the roles of, and relationships between, standard setters and certifiers (IIED 2000).15 FLO’s Producer Support Network was conceived to contribute to bridging the gap between ‘social development and business in an increasingly complex global economy …..by co-ordinating access to these skills and resources in co-operation with NGO and government donors and with businesses and finance/credit organisations involved in Fair Trade’ (Producer Support Network flyer, 1999).16 One Fair Trade organisation required that a co-operative set up a separate committee to determine the distribution of the premium from its Fair Trade purchases, by-passing the democratic structures of the co-operative. Other Fair Trade organisations did not agree with the idea, but felt compelled to use the system as well. However, many are now calling for it to be reviewed.


using the label – if there is one -in a responsible manner and maintaining separate records and processing lines for certified and non-certified produce.

3.3 Co-operation between certifiersTo a certain degree FLO has been encouraged to rethink its approach to certification as a result of dialogue with other certification organisations with similar sustainable development goals. Recognising that they shared similar objectives and challenges, such as the possibility of ‘label fatigue’ developing among consumers and a desire to explore whether the costs of certification could be reduced, the major international environmental and social organisations involved in standards setting, accreditation and labelling agreed to co-operate on a more formal basis. They established ISEAL – the International Social and Environmental Labelling and Accreditation Alliance (ISEAL) in December 1999.17. Whilst the members of ISEAL18 aim to share experience and best practice, the main aim of their collaboration is to work towards recognition as Conformity Assessment Bodies – the official term for a body engaged in the performance of procedures for determining whether the relevant requirements in technical regulations or standards are fulfilled. The members of ISEAL decided that this goal was best achieved by creating an independent body that could defend their common, unique interests and provide a neutral forum of transparent and objective peer review (ISEAL 2001). Closer co-operation between the ISEAL members is reflected in a planned project to develop guidelines and tools for social auditing across a range of products and production systems covered by the schemes.19

3.4 Accountable OrganisationsCertification is at the centre of the labelling model, whereas ATOs have largely relied on their brand reputation to communicate their values. This approach is similar to way in which NGOs approach accountability to donors, i.e. you know and trust Oxfam to work with communities to alleviate poverty through development programmes and similarly you know and trust the Oxfam Fair Trade Company brand. ATO brands have a relatively high marketing value, but this recognition does not make them accountable.

Some actors, including Fair Trade organisations (most prominently Traidcraft) have questioned whether this assurance is sufficient. Accountability is just as important in the values-based sector as in profit-oriented companies (Zadek and Gatward 1995). Traidcraft has been at the forefront of the development of social accounting techniques (also known as social auditing) which aim to produce a publicly available annual report of performance against indicators developed in consultation with key stakeholders, and which social auditors then verify. Companies such as Shell, British Telecom and the Co-operative Bank have taken up the challenge of social reporting, although the implementation of social reporting is still in its adolescence and has been criticised as being largely window-dressing (Doane 2000). Nevertheless social reporting offers a way of measuring how an organisation has performed in relation to its key stakeholders, and for these claims to be verified by auditors. Traidcraft and the Body Shop are the two main Fair Trade organisations that produce social reports. In many ways it is not surprising that few Fair Trade organisations have produced social reports as they are incredibly resource intensive and have largely been undertaken by larger organisations. The tools that are being developed to guide social auditing practice such as AA 1000 are largely aimed at larger organisations with complex management systems. Exploring ways in which the process approach of Fair Trade organisations can be made more accountable to primary stakeholders (both consumers and producers) is an area ripe for research.

An element of accountability that we have not covered in this section is accountability to producers. Fair Trade labelling and monitoring systems are largely designed to meet the needs of actors further up the supply chain, but as we have noted above, Fair Trade practitioners and auditors also wish to respond to the needs of producers that arise in the monitoring process. For Fair Trade labelling this is largely about in situ advice or communicating producers’ problems to ATOs or NGOs that may be able to assist, which may become more formalised through the Producer Support Network. However,

17 The aim is for ISEAL to have its own organisational structure, but at present its secretariat is hosted at the Falls Brook Centre in Canada, a non-profit organisation that also co-ordinates the FSC working group on non-timber forest products.18 The ISEAL participants are: Conservation Agriculture Network (CAN), Fairtrade Labelling Organizations (FLO), Forest Stewardship Council (FSC), International Federation of Organic Agriculture Movements (IFOAM), International Organic Accreditation Service (IOAS), Marine Stewardship Council (MSC), Social Accountability International (SAI).19 This is to be implemented by NovoTRADE Consult b.v. (led by Sasha Courville and Bert Beekman).


it is also important for Fair Trade organisations to be accountable to their producer partners, especially in terms of how they represent them in the market or advocacy. Moreover, it is important that the demands of accountability systems do not over burden producers, or maintaining their co-operation may be a problem.

Accountability is becoming increasingly important. It is no longer enough to claim that you are socially or environmentally responsible, you also have to be able to demonstrate this. However the development of accountability systems, whether labelling, codes of conduct or social and environmental reporting, are all expensive. Whilst maintaining confidence of consumers is inevitably a critical element of Fair Trade, developing monitoring systems merely for the sake of keeping the consumer happy neglects opportunities for maximising benefits for producers. A key challenge for Fair Trade as well as other approaches to being socially responsible is the development of systems of accountability that do not add to the burden borne by producers, particularly vulnerable producers.

4 Competition in the ethical market

We now move to the issue of Fair Trade in the market, particularly the volume of goods sold as Fair Trade and the attitudes of consumers towards Fair Trade products, which are the clearest demonstration of the impact of Fair Trade in the market. But can Fair Trade influence the market in other ways?

An increasing number of products are being traded on the basis of Fair Trade relationships and Fair Trade foods are now found in supermarkets. The concept is starting to creep into the mainstream. Some Fair Trade products such as Cafédirect are sold in mainstream markets but declare themselves quite deliberately a Fair Trade product. An alternative approach to the conventional market adopted by some Fair Trade organisations is to explore ways in which small scale producers can sell to mainstream companies, as conventionally traded or Fair Traded products. Some producers that learned about export under the tutelage of Fair Trade partners are now able to enter conventional export markets, for example MCCH in Ecuador (Collinson and Leon 2000). As Fair Trade products begin to compete in the market place, often with products that also claim some ethical credentials, one question that emerges is whether Fair Trade is an end in itself or whether it is a means to other objectives. Can and should Fair Trade take on the mainstream market or should it explore other ways of maximising its overall impact?

4.1 The market for Fair Trade goodsThe volume of consumer goods sold as ‘Fair Trade’ is increasing, though it is still a very small proportion of international trade. The fair-trade market accounts for US$ 400 million in retail sales each year in Europe and the USA, or 0.01% of global trade (Littrell and Dickson 1999: 17). In Europe sales of Fair Trade products through alternative channels and supermarkets is calculated to be at least $228 million (EFTA 2001). Coffee is by far the largest traded Fair Trade product, nevertheless, the volume and value of Fair Trade coffee production and trade is minute in comparison with global data (Tallontire, Greenhalgh et al 2001). Thus, while annual production of coffee beans exceeds 6 million tonnes only some 20,000 tonnes are used in the production of Fair Trade products. At an individual country level, the market share for Fair Trade coffee is at most 2.7%, whilst the Fair Trade product with the highest market share is for bananas in Switzerland, which has achieved 15%. In contrast the market share for Fair Trade tea is less than 1% in most countries in Europe with the exception of Denmark (1.8%), Germany (2.5%) and Switzerland (4%) (EFTA 2001: 15).

However, as regards coffee, three countries account for almost 70% of European Fair Trade coffee consumption, namely Germany (5,600 tonnes), the Netherlands (4,000 tonnes) and the UK (2,300 tonnes). Outside Western Europe the only other major market for Fair Trade coffee is North America, especially the USA. Whilst the Fair Trade market in general is showing steady growth, some of the larger markets are stable or declining, e.g. Germany and the Netherlands (Tallontire, Greenhalgh et al 2001). There remains a large gap between the number of people who claim to prefer goods with ethical characteristics and the actual sales figures for Fair Trade products, or indeed any product that claimed ethical characteristics (Tallontire et al 2001).

The reasons for this apparent stagnation and even decline appears may well be applicable beyond Fair Trade coffee to the relationship between Fair Trade and the mainstream market in general. Key


issues are (a) the number of consumers willing to pay more for Fair Trade produce (b) the relationship between Fair Trade and the ‘ethical market place’ and the appeal of the Fair Trade label to conventional companies.

4.2 Fair Trade and the mainstream marketFair Trade is engaged in the mainstream market both in terms of actively marketing products through mainstream outlets and encouraging conventional companies to use the Fair Trade label and thereby adopt Fair Trade practices. Whilst this is becoming an increasingly important strategy for Fair Trade in some markets, it should be recognised that not all Fair Trade products are appropriate for the mainstream market. To date, Fair Trade products in the mainstream have largely been commodity-based food products such as tea and coffee. This is largely because of the supermarket demand for large volumes and guarantee year-round availability, which can only be accommodated by sourcing from a relatively large number of producers that are well organised. Crafts have faced many difficulties in accessing the mainstream home-ware and interiors market, partly because of the short life-span of products (due to changing fashions) and the high up-front costs of professional design (Humphrey 2000). Many products are likely to remain in a Fair Trade niche.

There is a complex inter-relationship between the positive influence of Fair Trade on the behaviour of conventional companies on the one hand, and the impact of the new ethical approaches on the profile of Fair Trade itself. It is frequently argued that a major contribution of Fair Trade has been to influence the behaviour of mainstream companies (e.g. Ethical Trading Initiative, adoption of “responsible business” practices and codes of conduct). Whilst the more empowering elements of the Fair Trade approach are not always taken on board, the different needs of smallholders in terms of meeting ethical standards is increasingly being considered.20

However, the increasing trend for conventional companies to espouse ethical principles --from ethical sourcing of supermarkets to cause-related marketing whereby companies donate a percentage of the consumer price to a charity or environmental group -- has also created increased competition for Fair Trade products. The increasing number of ethical claims in the market place may cloud the Fair Trade message to consumers.

At the same time, many mainstream brands have been reluctant (and even hostile) to support Fair Trade values and activities – it is invariably smaller scale companies that have a Fair Trade labelled product as part of a wider product range. An independently verified label offers smaller manufacturers a relatively easy way of demonstrating responsible practice which may be less attractive to a larger company that has invested more in its own brand profile and consumer message (Zadek et al 1998).

Some argue that competition between an increasing number of Fair Trade brands and the adoption of more ethical practices on the part of conventional companies can only be a good thing. The competitive process may encourage more firms to adopt ethical practices, or even Fair Trade practices. However, as we noted above, the complex decision-making processes that lead to ethical consumption and the influence that this has on the sourcing strategies of companies is as yet incompletely understood. Moreover, it is not clear if there is in practice a competitive process between ethical and conventional lines, which would drive non-Fair Trade companies to consider ethical approaches. Supermarkets tend not to stock more than one or two ‘ethical lines’ so that the whole range of Fair Trade brands are not necessarily on offer in particular chains or localities. This can make it less easy for the consumer to consistently choose a Fair Trade product.

4.3 Fair Trade and ethical consumerFair Trade has reached a niche market and achieved some public recognition. A certain type of discriminating consumer is keen to buy Fair Trade products. Some Fair Trade practitioners dispute that the Fair Trade market is necessarily small, but Fair Trade is still a very small part of international trade, notwithstanding one or two brands that have penetrated into the mainstream market. Regular Fair Trade buyers are untypical of the population as a whole: they are better-educated, wealthier, mostly female, over thirty and tend to work in the public sector or ‘caring professions’ (Tallontire et al 2001). Fair Trade largely does not penetrate much beyond a middle class consumer base (Jenkins 2001).

20 The COLEACP Harmonised Framework for codes of conduct in the horticulture sector was mentioned earlier and recent research has focused on the implications of codes of conduct for smaller producers in the horticulture sector (Chan 2001).


Beyond this, current knowledge on the ethical consumer, including the Fair Trade consumer is patchy and largely dependent on commercial opinion polls. Trends over time suggest an increased awareness of ethical issues in trade and consumption, but awareness and concern are not directly translated into ethical purchase behaviour.

Recent qualitative research that has attempted to explore the ethical consumer in more detail indicates that there are a variety of ethical consumers. Newholm (1999) for example differentiates between integrators, rationalisers and distancers. He analyses his cases in terms of ‘coping strategies’ whereby people attempt to maintain their self-image as ethical consumers in the context of their daily lives. Another study (Shaw and Clarke 1999) explored issues of major concern to a particular group of ethical consumers – primarily Fair Trade --and argues that there is a need to explore belief formation in more depth if consumer behaviour were to be better understood. These studies indicate that consumer decision making can be very complex and dependent upon the context in which these decisions are made and that different consumers respond to different messages, partly according to habit and also their lifestyle.

One of the main implications for marketing ethical products is that not all ethical consumers are the same and may respond differently to the messages that are sent out by those marketing products with ethical attributes. This has been highlighted by Langland (1998) who indicated that consumers with a high awareness of Fair Trade respond positively to messages highlighting the problems that the product and trading relationship seek to address (‘sick baby messages’) whereas those who are less aware of Fair Trade respond better to messages highlighting the positive impact of their purchase (‘well-baby messages’). The volume of information that is communicated to consumers is also important, as it is attention that is deficient, not information (Zadek et al 1998).

Having analysed the potential market limits for certain kinds of ethical products as they are currently proposed to consumers, Cowe and Williams (2000) argue that the potential for growth in ethical consumerism appears to be in making ethical consumerism ‘easy’. Targeting a niche may be a good way to establish a market for an ethical product, but further growth in sales of products that embody good practice are more likely to be in mainstreaming products with ethical characteristics. One way of doing this they suggest is to legislate changed consumption patterns, as happened with unleaded petrol in the UK, but there may be many more ways in which companies can be encouraged to offer more ethical consumption choices to the mainstream market.

This prognosis may not offer much hope for Fair Trade, the main aim of which is to transform trading relations. However, it seems to indicate that there may be more mileage for Fair Trade organisations to maximise their impact on the conventional market through means other than competition for the ethical consumer pound. This is not to say that Fair Trade organisations should dispense with mobilising consumers, but to do so in a more strategic fashion – is getting Fair Trade products onto the shelves of supermarket really the main purpose of Fair Trade consumer campaigns? Tiffen (1999) remarks that ‘a notion of destination’ is distinctly lacking in many Fair Trade campaigns.

There is much to be learned about ethical consumers in general and Fair Trade consumers in particular, particularly about consumer awareness of ethical issues and the role that different stakeholders play in creating this awareness. This is something that Fair Trade organisations are unlikely to be able to do on their own, it requires co-operation with other players in the ethical market place. For example opportunities for broad-based coalitions of socially-minded traders to work towards educating consumers about the implications of their choices in the market place should be explored. Consumer education is important not only so consumers buy ethical products but also so that consumers understand what companies mean when they say a product is ethically produced and to make the case for consumer support for long-term goals rather than immediate achievements. 21

4.4 Influencing the Ethical MarketThere may be some way to go before Fair Trade reaches a natural limit to its market growth, especially in products that are new to the mainstream. Much of the growth in the total volume of Fair Trade sales has been due to the introduction of new lines marketed as Fair Trade rather than growth in the sales of particular products and there is room for more Fair Trade products. However,

21 The need for a long term approach and greater consumer awareness is best illustrated in the knee-jerk consumer response to allegations of child labour. The short-term response of companies fearful of losing custom is to sack child workers, who may end up even more vulnerable (King and Marcus 2000).


recognising the potential limits to Fair Trade purchases and considering alternative strategies to maximise the influence of Fair Trade organisations in the market place would appear to be important for the future.

The impact of Fair Trade in the market place is likely to be greater than the sales of goods that are differentiated to the consumer as ‘Fair Trade’. The formula for the overall impact of Fair Trade in Figure 2 should be altered to include the influence of Fair Trade on other traders, see Figure 3. A new challenge is to understand more about the influence of Fair Trade on the behaviour of other companies and to explore how this can be maximised.

Figure 3

OVERALL

IMPACT

= SALES AND INFLUENCE ON OTHER TRADERS

X BENEFIT TO INDIVIDUAL PRODUCERS & GROUPS

5 Which way now?

This paper has highlighted the major challenges for Fair Trade under three main headings of benefits to producers, accountability and influence in the mainstream market, and indicated where progress is being made in terms of research and the development of workable models. There are a myriad of contradictions and challenges inherent in Fair Trade. The movement is against the unfairness of the market, but aims to enable producers to compete in that market – it is ‘both in and against the market’ (Tiffen 1999). It has to deal with multiple stakeholders, in particular balance the needs of producer with the demands of the consumer. It is increasingly under the spotlight, partly because so many people have faith in Fair Trade and want it to work.

There is a Fair Trade difference. Unlike other approaches to being ethical in the market place, Fair Trade is about changing the unequal relationship between primary producers and the market, particularly the ethical market. But the practical differences between Fair Trade and other approaches are not appreciated by many observers – whether donors, consumers or other traders.

One of the important things for the future is for this difference to be demonstrated in the outcomes for producers. A key area for research is to compare the different kinds of trading relationship offered by Fair Trade and conventional companies in terms of the benefit to producers, particularly in terms of the capacity built up. The demonstration of greater development benefits from a Fair Trade approach would open doors to greater public funding to assist producers to work in Fair Trade.

From the point of view of most consumers, there are very few differences between different ethical offers. Consumer attitudes to Fair Trade and indeed ethical trade are ripe for further investigation, especially using qualitative techniques that explore attitude formation and the drivers for action. But credibility in the market place is dependent upon Fair Trade organisations being able to demonstrate that they continue to do what they say they do, offering accountability and transparency.

The main challenge for Fair Trade is to retain its distinctiveness in offering improved livelihoods for disadvantaged producers excluded from the export market, but also to use this to influence the approach of others in the market. It is frequently asserted that one of the biggest impacts of Fair Trade thus far has been to catalyse other traders to improve their social performance. We need to know more about whether this has taken place and how Fair Trade can maximise this influence. However, it is unlikely that even ‘altruistic’ companies will adopt all aspects of the Fair Trade approach, but Fair Trade must not alienate these companies for not being ‘Fair Trade’ but continue to demonstrate how benefits to producers can be increased in an efficient and effective approach to trading. The key role for Fair Trade appears to be as an innovator and catalyst rather than as a major trader in the market. Networking and coalitions may well offer opportunities to scale up Fair Trade ideas.


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