58 FAIR TRADE THE FAIR-TRADE DEBATE 59

A coffee grower in Uganda

Fair trade is the subject of much discussion. Professor Ruerd Ruben has spent many years studying its effects on farmers and explains the most important aspects of the The debate for Vice Versa. ‘In practice, still no more than 25 percent of produce is sold under fair-trade conditions.’ long by Ruerd Ruben

ure coffee – 100% honest quality’ was forest Alliance (RFA) for tea production, and the farmers to devote more land or time to a crop, road the slogan that the Dutch ‘World Shops’ banana multinationals launched products certi- but this was often at the cost of other activities, (the Dutch equivalent of the Oxfam fied by Rainforest Alliance. Sustainable produc- such as growing food crops for domestic con- shops in the UK, Ed.) used at the begin- tion in the coffee sector was eventually unified sumption or off-farm wage labour. Net family ‘ ning of the 1970s to promote coffee under the 4C code: Common Code for the Coffee income hardly rose at all, even though income Pbeans imported directly from Guatemala. ‘Komi- Community. from the certified crops had risen. These ‘substi- tee S.O.S.’ (Steun Onderontwikkelde Streken, Towards the end of the 1990s, Solidaridad tution effects’ absorbed part of the potential to Support to Underdeveloped Areas) – established started to distance itself from Max Havelaar and fair-trade returns. by Paul Meijs and forerunner of what is now Fair launched a new initiative, UTZ Certified, under While farmers expected to be able to sell all Trade Original – set up its first central depot in which chain stakeholders made agreements on of their produce under the certified label, in Kerkrade, in the south of the Netherlands. About investments and training aimed at increasing practice only 25 percent at most was sold under 14 years later, in 1988, Nico Roozen of Solidari- productivity and improving product quality. The Fairtrade conditions. This is largely attributed to dad and Frans van der Hoff, a missionary working goal was to involve the big coffee roasting com- over-certification: supply consistently outstrips in Mexico, created the first Fairtrade certifica- panies as a way of up-scaling fair trade from a demand (except for organic produce). As a re- fair trade tion initiative ‘Max Havelaar’. The aim was to ‘niche’ to a ‘mainstream’ activity. UTZ offered sult, farmers have to sell a large portion of their guarantee a minimum price for coffee farmers by purely market-based prices, but farmers could certified produce to local traders at lower prices. eliminating middlemen and doing business di- earn more by meeting higher production Fairtrade producers of higher quality coffee then rectly with coffee importers and roasting compa- standards. So it was no longer higher prices that tended to go over to delivering coffee to private nies. Certified coffee became a familiar item on were the advantage, but increased productivity labels of better qualified market segments for supermarket shelves and in the period up to and quality led to better rewards. UTZ Certified Gourmet and Premium coffee, which paid 2,000, coffee farmers received over 26.3 million was quickly embraced by the food industry and between 20 and 30 percent more. That could be euros in extra premiums. supermarkets because it operated according to regarded as a success, but it also led to tensions market principles. However, the proliferation of between the holders of different certificates. New initiatives (quality) certificates resulted in confusion for In the next decade the Fairtrade product assort- consumers, whereas many cooperatives went Future oriented ment increased rapidly to include tea, cocoa, over to multi-certification. Another point emerged from field studies: al- bananas, rice, cotton, wine, honey, herbs, flow- though certified farmers’ incomes are hardly ers, peanut butter and clothing. Certification at Less optimistic higher, they do spend that income differently. the European level was subsumed under Fairtra- In its first years the fair-trade movement got by They invest substantially more in upkeep of their de Labelling Organizations (FLO Cert), which car- on the basis of its appealing stories about men house, their children’s education and improving ries out inspections and value-added and women farmers whose standard of living had their soil quality and cultivation systems. And administration. In 2005, Tony’s Chocolonely improved. But after a while the results of more because they have better access to credit (from launched the first ‘slavery-free’ chocolate bars. systematic measurement of the effects became banks and other sources), they are more willing Oxfam Novib’s ‘Green Saint Nicholas’ campaign available, especially for coffee, tea and cocoa. and able to make these investments. Income lev- in 2009, which called on the public to boycott These painted a less optimistic and more nuan- el is less important than the fact that certified non-Fairtrade chocolate letters (given as pre- ced picture. farmers enjoy income security – because of the sents in the Netherlands in December), boosted A number of field studies indicated that the assured outlet for their produce. This encourages flagging Fairtrade chocolate sales. income improvements of certified farmers were a more future-oriented pattern of expenditure. In the meantime, the big producers and quite limited; higher prices were mainly obtained Above all, investments in more sustainable forms supermarkets had not been idle. Coffee brands for organically produced crops. This was partly of production result in greater continuity guar- such as Starbucks and Nespresso developed their due to high world market prices, but also be- antees for farmers. own certification for sustainably produced cof- cause of the considerable costs involved in ob- By far the most important effect of certifica- fee. Unilever (Lipton) joined forces with Rain- taining a certificate. Certification encouraged tion has been the contractual guarantees to sell Jeroen van Loon © 60 FAIR TRADE THE FAIR-TRADE DEBATE 61

Coffee growers still While raw coffee only receive 6 to 8 beans are exempted percent of the final from duty, roasted price coffee is subject to 7.5 to 9 percent import duty © Jeroen van Loon

A Rwandan woman on a tea plantation

the harvest at a reasonable price. These offer brand loyalty, as farmers tend to sell to other All labels are looking for ways to increase National Sustainability Curriculum (NSC). Sector- more easily. The validity of certificates should to new concepts such as ‘true price’ and ‘decent farmers a way out of the traditional pattern of buyers if they are offered a slightly higher price. their social-responsibility impact. Wages and la- wide agreements such as these help create a le- also be extended and might cover several produ- wage’ in an attempt to provide more clarity on having to sell their yield to local middlemen even Fairtrade continues to adhere to the system of bour conditions are an important point of atten- vel playing field for the private sector and make cers. But certification is a lucrative source of in- the effects of certification on welfare. The subor- before it has been harvested. Liquidity in par- paying a (now higher) minimum price and pre- tion. Labourers, male and female, have gained inspection simpler and cheaper. come for the agencies involved, so there is little dinate position of women is slowly but surely ticular is of vital importance to small farmers; miums. The FLO certification for cooperatives has little from certification. While the issues of child Other initiatives seek ways of opening up op- incentive for them to work towards these changes. being raised too, although little progress has they need cash for their family, for seeds and been simplified, but the costs remain relatively labour and protective clothing have been ad- portunities to process agricultural produce lo- While Fairtrade started with agricultural pro- been made so far on this front: few women own fertilizer and for paying day labourers. Tradition- high. The over-certification in the fair-trade sec- dressed, the regulation of working hours and cally. An increasing number of local companies ducts, there are now also promising initiatives land and few are members of cooperatives, as a ally farmers were obliged to use their yield as tor mentioned above is also a cause for concern. wage rates has been virtually ignored. Research are starting to roast coffee or ferment tea and for mobile telephones (Fairphone), tourism (Fair result of which most benefits of certification ac- collateral for loans, for which they were then Fairtrade farmers benefit most from increased done by the British School of Oriental and Afri- offer (vacuum) packed products for export. Travel) and transport (Faircar). All these ven- crue to men. charged usurious interest rates. Certification is income in the early stages, but this effect largely can Studies (SOAS) on wage labourers in Ethiopia Examples of successful initiatives include Coo- tures involve the responsible purchase of raw A hitherto unexplored area is that of promo- a way of avoiding this, especially when banks ac- disappears after a few years. and Uganda has highlighted the lack of job se- cafe in Costa Rica and Star Café in Uganda. Moy- materials, working with local suppliers and a ting ‘sustainable production’ and ‘fair trade’ via cept trade contracts as sufficient security against UTZ’s strategy focuses more on helping cof- curity and low wages that women face when ee has recently started to offer locally roasted more sustainable use of the environment. Some government legislation. Whereas the Dutch gov- loans at the market interest rate. fee, tea and cocoa farmers to make productivity working for fair-trade companies. The ISEAL Al- and packed FairChain coffee, where 50 percent of of these initiatives are still in their infancy, but ernment previously set an example by serving A vital part of the Fairtrade concept is neg- and quality improvements. Support is offered for liance has therefore initiated international dis- the added value stays in Ethiopia, the country of should be regarded sympathetically. only certified tea and coffee in public buildings ated, however, because there is virtually no com- introducing improved farming practices and cul- cussions on including a ‘decent wage level’ as a origin. These initiatives, however, run up against (including the House of Representatives), EU pliance with the obligation to provide upfront tivation methods, enabling farmers to supply criterion for certification. the higher import duties levied on processed Blind spots food-safety regulations mean that imported pro- funding. One of the basic principles of the Fair- market segments that require a higher level of One of the most important limitations of products by the European Union. While raw cof- While the – sometimes heated – arguments ducts have to comply with a wide range of quality trade contract is that the importer or coffee skills. They don’t receive more financial support nearly all certification systems is that little or no fee beans are exempted from import duty, roast- between certifying bodies continue, increasingly requirements. This hinders the processing of cof- roaster pays part of the price before delivery. for doing this; rather the expectation is that the change has occurred in the distribution of value ed coffee is subject to 7.5 to 9 percent import critical voices are being heard in the areas of the fee in the countries of origin. OECD agreements Many do not do this, and much of the current higher market prices will cover investments in added within chains. Coffee growers still only re- duty and all sorts of certificates are required. effectiveness of certification and the need for tie international companies to corporate social pre-funding comes from ethical banks and de- quality improvements. This focus on Good Agri- ceive 6 to 8 percent of the final price that consu- This ‘tariff escalation’ is an indication of the lack more collaboration with private companies. responsibility criteria, but these are mostly con- velopment organizations. There is thus absolu- cultural Practices (GAP) is in line with the trend mers pay for coffee. For cocoa and cotton, the of coherence between trade and development Organizations such as IDH and Solidaridad fined to a few basic requirements. And initiatives tely still no shared responsibility within the towards standardization among European super- percentage is even smaller. More than three- policies. have shifted to a ‘mainstreaming’ strategy, in within the European Parliament to subject im- chain, whereby trade and industry contribute to markets (EurepGAP). Recent research on the ef- quarters of net profits go to traders, processors Within the Dutch sustainable trade initiative which collaboration with market leaders within ports to ‘fairness’ criteria have so far made little financing primary production. fects of certification in East Africa has shown, and supermarkets. Certification labels have IDH, thoughts have turned to deepening activi- the chain (e.g. Unilever, Nestlé, Mondelez) is headway. NGOs are now placing emphasis on up- however, that it is fairly easy for non-certified brought about no change in this. ties in the direction of more structural market oriented toward sustainable production of raw scaling and sector-wide agreements on market Broadening or deepening coffee growers to adopt these improved cultiva- transformation within chains. In addition to pro- materials. Here the focus is on improved cultiva- transformation. The private sector is even ahead While various brands are doing their best to in- tion techniques, thus reducing the head start New paths to sustainable trade viding training and guidance on improving pro- tion methods, enhanced productivity and qual- of the public sector in some areas: McDonalds crease their market share, an underlying heated that UTZ certification provided. In recent years, several new initiatives aimed at duction methods, attention is also being paid to ity, and long-term security of supply. This and Starbucks serve only certified coffee, giving debate continues on the subject of whether cer- Private label activity is most noticeable in enhancing the effects of fair and sustainable new finance mechanisms that enable farmers to strategy certainly ensures that more farmers can their customers no choice in the matter. The tification actually provides sufficient benefits. the chains where there is a threatened scarcity in trade have arisen. These have taken different di- invest in fertilizer, improved seeds and tree re- be reached, but it is not always clear whether the market for sustainable and fairly produced pro- Improvement in the position of small farmers the short or middle term, such as for cocoa, rections. A number of countries (India, Brazil, newal. Local banks are still reticent here, but the use of public funding results in the achievement ducts can only really grow if businesses and gov- within international chains is limited and the where older trees necessitate investing in plant- Indonesia, Vietnam) are working on introducing introduction of blended finance – mixing loans of extra effects. Development assistance funding ernments join forces. Open trade and financial search is on for different forms of collaboration ing new trees. Cocoa farmers in Ghana and the national standards with minimum criteria for and gifts – and guarantees from public and inter- might of course not replace private investment, credit mechanisms must be simultaneously and between the stakeholders within these chains. Ivory Coast do not have sufficient capital to do sustainable production methods, environmental national financial institutions mean these risks and it should be the farmers who ultimately ben- coherently combined with substantive ways of Those working from the Fairtrade side espe- this, and an additional impediment is uncertain- care and labour conditions. One example is that can be hedged. efit from these projects. helping small farmers to achieve growth in pro- cially advocate strengthening farmers’ and work- ty surrounding land ownership rights. In the of Tata Global Beverages and Unilever; they Working towards international harmoniz- On the other hand, organizations such as ductivity and organizational development. ers’ organization at the grassroots level. Better meantime, chocolate manufacturers have under- jointly initiated the Indian ‘trustea code’, which ation and uniformity is helping to introduce Fair Trade Original, Max Havelaar and UTZ are functioning cooperatives and more powerful uni- taken joint initiatives to improve cocoa quality has been supported by the Dutch Sustainable structure in the multiplicity of labels and aware of pressure from the general public to in- Ruerd Ruben is the programme manager for food ons give farmers a stronger bargaining position. and productivity by providing planting material, Trade Initiative (IDH) and Solidaridad. In Viet- standards. Fairtrade-certified farmers would crease the meaningfulness of certification. In security, sustainable value chains and impact In addition, efforts are being made to increase fertilizer and training to farmers. nam and Brazil, similar work is being done on a then be able to obtain UTZ or RFA certification response to this, the organizations are resorting analysis at LEI-Wageningen UR