Does Fair Trade work?

Yes! From a small beginning, Fair Trade has grown to bring multiple benefits to producers around the world. As of February 2007, UK FAIRTRADE-Marked product sales were running at over £300 million a year. And looking at the world picture, one estimate is that global Fairtrade product sales will hit £1 billion by 2007. ¹

The financial return to producers on these sales is far higher than it would be under conventional terms. According to a recent paper by Dr. Alex Nicholls, “in 2002, FLO [the Fairtrade Labelling Organisation] estimated the income benefit to Fairtrade coffee, tea, cocoa, sugar, rice, fruit, honey, and juice producers at £21m, of which £17m was attributable to sales of Fairtrade certified coffee.” This estimate is based on a comparison of Fairtrade “floor” prices (the Fairtrade minimum) with prevailing market prices. Nicholls adds “Cafédirect alone returned £2.8m in additional income to its coffee suppliers in 2003.”

In craft sales, too, producers receive higher prices. Julia Castro, president of CIAP, a Fair Trade organization of Peruvian artisans dedicated to production and export of handicrafts made by their members, estimated that Fair Trade prices were up to 1/3 higher than the norm. When asked what that meant in real terms, she responded that it gave producers like her hope for the future, as it allowed them to educate their children. ³

But the price difference is only part of the benefit of Fair Trade. Under Fairtrade standards, cooperatives and worker organisations also receive a social premium – money (up to 10% of the price of the goods sold) which they can invest in the community. The social premium has allowed producers around the world to improve their communities. The Igara Growers Tea Factory in Uganda, for example, were able to buy a tank supplying clean water, improve communication via mobile phones and a computer, purchase school materials for members’ children, and create a maternity clinic for their area, so that women no longer need to be carried up to 60km to give birth. ⁴ Villagers in Kasinthula, Malawi were able to create wells, so that women and children no longer lose their lives getting water from the crocodile-infested Shire river. ⁵ The banana farmers of the Valle de Chira cooperative in Peru created roads that enable them to bring produce to market the banana,⁶ and the farmers of the Juliana-Jaramillo cooperative in the Dominican Republic were able to repair the local water system, bring in sanitation systems and create a community canteen.⁷

Producers also receive further benefits from Fair Trade. Long-term contracts, access to market information, and access to credit allow them the psychological and financial benefit of being able to make long-term plans. They improve the producers’ ability to negotiate both Fairtrade and non-Fairtrade contracts. Oxfam’s Constantino Casasbuenas recently said that when he was working on the Oxfam coffee campaign, “most of our strongest allies, ready to talk by themselves and to get their voice [heard] (on coffee and many other social problems) were precisely the coops producing and selling coffee via the Fairtrade channels. . . . the international Fairtrade movement can be a real inspiration to so many talks and negotiations on international trade.” ⁸

Fair Trade can also help farmers to break out of the commodity trap. Many farmers would like to diversify out of single cash crops, but lack the funding and business expertise to do so. But to take one example, UCIRI, a coffee cooperative in the Oaxaca region of Mexico, has used some of the gains from its trade in Fair Trade coffee to diversify. Their website explains: “We are all aware that only coffee, even high quality organic coffee, is not going to be the solution for us. . . . For this reason, we are looking for alternative products.” With these aims, UCIRI has moved into the production of value-added goods for the local market, setting up small factories to manufacture organic jams and clothing.⁹

Footnotes and Finding Out More:

1 and 2 UK FAIRTRADE-Marked product sales taken from Fairtrade Fortnight 2007 press release. Other figures and quotes taken from Dr. Alex Nicholls’ paper “Thriving in a Hostile Environment: Fairtrade's Role as a Positive Mechanism for Disadvantaged Producers,” which can be read in its entirety on the Fairtrade Foundation website. Dr. Nicholls and Charlotte Opal’s Fair Trade contains the most comprehensive analysis available to date of the nature and impact of Fair Trade. The book is available from SAGE Publications at £21.99 or on loan from CCOW. Two other fine books are Miles Litvinoff and John Madeley's "50 Reasons to Buy Fair Trade" £7.99 in stores or on loan from CCOW and David Ransom’s "No-Nonsense Guide to Fair Trade" (ISBN 1859843344) £6.99 in stores or on loan from CCOW.

3 Julia Castro was interviewed by CCOW; CIAP’s website is www.ciap.org – there is an English-language version.

4 The story of the Igara Growers Tea Factory is told in the Fairtrade Foundation’s 2004 Church Action Guide, copies of which you can get from CCOW.

5 Kasinthula’s story was in the Summer 2004 edition of “Fair Comment,” the Fairtrade Foundation’s free quarterly newsletter. Download current and back issues of “Fair Comment” at the Fairtrade Foundation website page www.fairtrade.org.uk/resources_newsletter.htm. You can also subscribe at this site – or by calling the Fairtrade Foundation.

6 The story of the Valle de Chira cooperative is taken from Tearfund’s case study “Fairtrade bananas” available as part of Tearfund’s “Global Action” resources on Fairtrade. With thanks to Tearfund for permission to use this.

7 Juliana-Jaramillo’s story can be found at www.fairtrade.org.uk/about_benefits.htm.

8 Conversation with Constantino Casasbuenas

9 UCIRI’s website is www.uciri.org – there is an English-language version.