Fair trade, not just Fairtrade | World Development Movement

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Fair trade, not just Fairtrade

By Guest, 28 February 2011

Catherine Negus, used to be Campaigns Assistant

Today marks the launch of Fairtrade Fortnight 2011, a celebration of the most widely-recognised ethical label. Fairtrade sales broke the £1 billion mark last year, showing that even during a recession, many consumers still consider the impact of their buying decisions.

However, there’s a very long way to go before all trade is fair, and it’s unlikely that schemes like Fairtrade can bring this about by themselves. Part of their strength is that by using market solutions and focusing on changing public attitudes, they do not alienate anyone. But this approach is also a weakness. The need for Fairtrade schemes is a clear sign that the current global economic system only makes the rich richer.

Commercial giants

The monopolies of huge companies like Cargill, ConAgra and Unilever and of the supermarkets keep selling prices low at the expense of producers. This keeps farmers in the global south working for survival, with little chance of building up their own economies. Often small farmers, who can be very efficient at producing food and protecting the environment, cannot survive.

Fairtrade supports the income of its producers in the global south, and, says Deborah Doane, WDM’s director, “should be congratulated for showing that co-operative based production and small-holder production can be integrated into global supply chains, while benefitting local communities”. Some of these cooperatives, such as the Kuapa Kokoo farmers’ trust in Ghana which owns Divine Chocolate, have even taken control of their brands. However, even Fairtrade has had to open up to giants like Kit Kat and Dairy Milk in order to increase its market share. It’s debatable how far change ‘from within’ can go in such a system.

Gambling on food

Commercial monopolies are not the only threat to the welfare of small farmers. Financial speculation in derivatives markets has increased food prices, with disastrous results not only for poor consumers but for vulnerable producers as well. This can sound contradictory at first: if Fairtrade schemes are good because they increase the income of southern producers, how can rising food prices be bad for farmers? Here’s how.

Many farmers in the global south are not able to grow sufficient food to feed themselves and their families, but rely on buying food. For example, in Kenya and Mozambique around 60% of rural households are net buyers of maize. The Fairtrade Foundation says of its producers, “most smallholders are net food buyers and as such only a minority have gained from increased commodity prices.”

Fairtrade schemes aim to give farmers a fair share of the price for their produce, paying them a ‘Fairtrade premium’ and shortening the supply chain through which they sell their goods to rich markets. Speculation is different. Often it does not increase selling prices for farmers in the global south, but for big companies that are able to trade internationally. Price rises caused by speculation can affect the staple foods being bought by the poorest people in the world, but not always the food being sold by them. The flow of wealth is going in the wrong direction.

Speculation causes not only huge increases in the prices of foods, but also volatility – this is where the prices take extreme hikes and dips. Farmers invest in growing more of a crop whose price is booming, but the price may have plummeted by the time harvest comes around. All the precious resources invested in the crop are lost for good. Fairtrade offers farmers a guaranteed minimum price, so that they are less vulnerable to price volatility, but this protection is available to only a small minority of farmers worldwide.

Buying Fairtrade produce does help thousands of people each year, and we should continue to do it. However, there is only so much this can do when the global economic system is structured to make the rich richer. Deregulation of markets and corporations, unfair trade rules, and unrestrained speculation by financiers have created havoc. Markets need to be re-regulated to stop gambling on food and help to ensure that all trade is fair. The Fairtrade Foundation is proud that its work “offers producers in the developing world breathing space to make it through these tough times”, but a comprehensive, long-term solution is needed to put an end to poverty.

For information on local events being held by WDM groups during Fairtrade Fortnight, see http://www.wdm.org.uk/local-groups-activists-and-supporters/local-groups-activists-and-supporters.

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