 Does fair trade really work? The Fair Trade Certification System was created to support and empower marginalized small-scale producers and workers in low-income regions of the world. Fair trade enables farmers and workers to tackle poverty and improve their own financial sustainability by creating a trade model with fair prices and working conditions. But to what degree does it work in practice? How does fair trade overcome limitations of its system for greater impact? Within the fair trade model, certified buyers and traders must pay the fair trade price on any goods they purchase from fair trade cooperatives. The fair trade price is comprised of the minimum price, or market price, whichever is higher, plus a fair trade premium. To support small-scale farmers who often already struggle with poverty, the minimum price acts as a safety net for farmers against volatile market prices that could result in losses. And the premiums are additional funds for cooperatives and workers to reinvest into their communities, like building roads or funding education. Do producers really benefit from fair trade? It's important to point out that benefits for fair trade producers will vary depending on product and region. Different studies, which focus on coffee producers, have demonstrated that fair trade system does indeed improve the lives of producers and their surrounding community. They have higher bargaining power in trade negotiations, they receive higher shares of revenue because of the minimum price model, and the fair trade premium has had a significant impact on the social welfare of the community as a whole. However, other studies have raised questions about the long-term impacts of the fair trade model. Here are four ways in which the fair trade system may be limited in its benefits for small-scale producers. Not enough fair trade sales. Producers only receive the fair trade price if fair trade certified buyers purchase their products. If farmers can't find a fair trade buyer, they will have to sell their crop under normal terms, which means no minimum price and no fair trade premium, and this can lead to lower revenue. So even if the producers abide by fair trade standards, there is no guarantee that they will always sell at fair trade prices. Some products sell better under the fair trade label, while others may not. For example, according to a review by the state of sustainable initiatives, only 6% of total fair trade produced tea was sold to fair trade buyers in 2014. On the other hand, two-thirds of fair trade produced bananas were sold to fair trade buyers in 2018. But what's worth remembering here is that the number of fair trade sales is growing. Fair trade tea sales had more than doubled after UK retailers like Sainsbury's and Coop switched all their tea brands to fair trade, and fair trade banana sales have grown by 114% in the last 10 years. So the more retailers switch to fair trade products and consumer demand increases, the more producers receive the fair trade price. Another point to remember is that while it may not seem like much to us, farmers can at least rely on a portion of their products selling at a fair trade price. A stable income that farmers under conventional trade standards may not always get to enjoy. They also benefit from other non-monetary aspects of fair trade standards, like protection of workers' rights in large plantations. Some have raised the concern that fair trade's auditing and licensing fees may detract from producers' benefits. To be clear, while cooperatives are responsible for auditing fees, licensing fees are paid by companies near the end of the fair trade chain, who want to show that their product is fair trade certified with a label. Like all certification systems, these fees are necessary for operation costs. As fair trade certification is built on ethical standards, auditing is integral to maintain the integrity of the certification. The auditing fees are necessary to ensure that fair trade producers and traders are moving towards better, fairer standards. In my interview with FloCert, the third-party auditing body for fair trade, they explain how auditing fees are determined. The fee depends on the size and setup of the cooperative or company. For example, is it a cooperative with 20 members or with 2,000? And of the number of products it wants to certify. For fair trade cooperatives or organizations that cannot afford to pay their fees due to circumstances, FloCert applies fee adjustments. For example, in the face of the global COVID-19 pandemic, FloCert had offered its customers who got into financial troubles to pay their fees in installments or defer payments. Long-term financial sustainability While fair trade focuses on the long-term financial sustainability of its producers and workers, one potential issue lies in its fundamental philosophy of an open-door system. Fair trade always welcomes producers who want to join the fair trade chain. But what happens when you have a growing number of farmers focused on producing one specific crop? You potentially end up with an oversupply, as a supply exceeds demand. This ultimately impacts the number of products that end up being sold under fair trade terms, meaning farmers may need to sell their products under conventional trade. Nicholas Lambert, who at the time of this interview was CEO of Fair Trade Belgium, and he shared the difficulty in balancing this challenge with their philosophy. What we've done last year is we've put temporary rules to limit the entry of new producer organizations in the system so that we can keep our promises and that people are not disappointed from becoming fair trade certified but end up not selling anything under fair trade terms. Because there are so many people joining the system and while the fair trade demand is growing, it's not as fast. Another aspect Lambert mentions is the impact of this growth on the limited number of fair trade staff who become stretched thin and cannot provide the usual quality guidance and support to farmer cooperatives. Lambert is still hopeful that this limited entry rule will be released in accordance with fair trade's open-door policy. Environmental challenges Growing clusters of monocultures also present an issue from an environmental perspective and this represents another problem. Long-term financial sustainability cannot be achieved without considering environmental sustainability. Fair trade international says it themselves on their website. Farmers are on the front line of climate change, facing higher temperatures, droughts, floods, extreme weather, crop failure and more. Fair trade is now exploring the concept of climate risk insurance for its small-scale producers and is working with small holder farms to increasingly diversify their land. However, while fair trade standards encourage sustainable agricultural practices like responsible water use and waste management, enhanced biodiversity and soil fertility, it is not mandatory. Though it's important to consider that sustainable agricultural practices like organic farming can also have higher costs. The benefit of being part of the fair trade system though is that producers can earn more and reinvest some of their higher revenue into sustainable practices. Are farm workers really protected from exploitation? Perhaps one of the biggest critiques the fair trade system faces is its unapparent impact on farm workers. It's important to distinguish here that farm workers are usually found on larger fair trade-certified farms, plantations or estates, not as much on small-scale farms as they are typically family-owned and worked by family members. Here are two ways in which the fair trade system may be limited in its benefits for workers. Limited wages for workers. One study in the Costa Rican coffee sector showed that fair trade certification successfully increased the income for coffee millers and had benefited their local community overall. But pointed out that unskilled workers, like coffee pickers and farm laborers, saw no increase on their wages. Under fair trade, all laborers are guaranteed the legal minimum wage of their region. However, there's often a gap between minimum wage and living wage. Meaning the cost of having a decent home, decent food, medical care, etc. How does paying a minimum wage then line up with fair trade's aim to empower the most vulnerable actors of the trade chain? Nicholas Lambert again shed light on the complexity of the situation. It's very delicate from an ethical standpoint because the farmer himself is already poor. With a big plantation, it's easy to go to the big boss and say, hey, you have to pay a decent wage to your workers. When you have these very small farms where maybe a few weeks a year they will hire someone to help them and who are already poor, it's difficult to go and tell them you have to pay them a wage that you yourself are not receiving. First, you have to make sure that a small farmer is getting enough pay so that he can then afford to pay his workers correctly. Otherwise, you'll chase the farmer into poverty. But it's a very difficult issue and that's something we have and are trying to regulate and check. So what has been done to improve conditions for workers? On fair trade certified plantations and estates, fair trade premiums are 100% reserved for laborers. The workers manage a joint committee that receives the premiums and there they can collectively agree to use part of the money as supplemental wages, additional to their minimum wage. However, other times as Lambert shared, they have decided to use premiums on buying coats, distributing milk to families, or paying for tuition fees for their kids. The most important aspect of the fair trade system is that it leaves the decision solely up to the workers, allowing them to invest these additional funds in what they feel best fits their needs. Fair trade's auditing system has also come under fire as child labor was allegedly found on a fair trade cocoa plantation in the Ivory Coast by an investigative journalist team from Danwatch in 2020. It's unclear whether the lack of auditing is due to travel restrictions under COVID-19 or systematic flaws. But whenever you hear one case, it makes you wonder how many more cases like this exist, especially considering many other non-fair trade cocoa farmers in West Africa have been discovered to have a widespread use of child labor. How does fair trade truly ensure that its producers are not using illegal forms of labor? Fair trade audits are usually announced in advance, as auditing often takes time to prepare. For example, cooperatives prepare paperwork for review and they also have to arrange time with farmers so the auditors can visit their fields or organize meetings for interviews. But by announcing their audit schedule, how can we be sure that there are no opportunities for cover-ups? Fair trade has criteria to identify high-risk situations and in areas that have shown to have a higher risk of illegal labor, certifiers do conduct unannounced audits. The general spirit of auditing is one of trust, explains Lambert. Sometimes the western point of view is to say, we are going to check these bad guys, because they are the bad guys. But they're not necessarily the bad guys, they're just people like you and me. That's why Lambert stressed that auditing is only a part of the certification process, that it's only a means to an end. Auditing can help improve situations and prevent milk practice from happening, but it doesn't solve the root issue. Lambert further elaborated, take the painful example of child labor. You can say child labor is forbidden, that's it, that's the rule and I'm going to check it. But at the same time, if you don't do anything to make sure that these people are paid better prices, you're not going to tackle the root cause of child labor. Because these people don't want their children to work on farms. They would rather send them to school, but they often can't afford it. Sometimes farmers feel compelled to have their children work on their farms, because they can't afford to hire someone for a few weeks to help them harvest their crops. That's why it doesn't work to just create rules and check that they are followed. Lambert concluded, it helps to have rules because at least things are clear. And it creates a little bit of pressure. But if you're not working on the cause of the issue, then you're not going to solve anything. Fairtrade's approach is one of balance between strictness and encouraging development. Of course, if major certification requirements have been breached, then certifiers will suspend or decertify a producer organization or trader. But Fairtrade's overall focus is to give their producers the opportunity to address problems and improve over time. But what do Fairtrade producers and workers think? It's clear that Fairtrade is not a perfect system, but it's a good start. In 2021, Fairtrade counted 1.7 million farmers and workers in 72 different countries and territories, as well as 35,000 certified products. It might seem like a lot, but Fairtrade producers actually account for less than 1% of the 570 million smallholder farms worldwide. This means that more than 99% of smallholder farms do not work under a trade model that can guarantee fair prices or the respect of basic working rights. However, the number of Fairtrade producers is enough to put criticisms in perspective. While the studies we referred to were conducted to assess the real impact of Fairtrade's model, they're also inevitably limited in their scope and voice. While they study specific product chains and specific cooperatives, they cannot represent the voice and felt impact of all the people in the Fairtrade system. That's why it's important to hear directly from farmers and workers when asking, Did Fairtrade really work for you? Thank you for listening to this episode of our Food Unfolded audio articles. Has listening to this article given you a new perspective on Fairtrade? Let us know on social media linked in the description box. This article was written and read by me, Jane Alice Lu, originally posted on foodunfolded.com. Food Unfolded explores the stories behind the food on our plate, reconnecting us to the origins and sustainability of our food. Co-funded by the EU and powered by EIT Food.