Fairtrade or ‘Fairer Trade’? Who knew that the use of a comparative could cause so much fuss? What with Sainsbury’s dropping the Fairtrade label from its own-brand teabags in favour of a ‘Fairer Trade’ label, that’s exactly what has happened. Ignoring the fact that Sainsbury’s actually announced this move back in May, certain commentators (including some Labour MPs such as Andy McDonald and Stella Creasy) have only just now cottoned on to it, and (for some reason) have decided that this is ‘a bad thing’.
It’s just a shame, however, that those people damning Sainsbury’s for making this change hold a very naïve view about the impact of Fairtrade. Put simply, they seem to believe that the fact that consumers in the UK pay higher prices for Fairtrade products here means that farmers in developing countries receive higher prices for crops they’re already growing. They then use this very simple view to try to support their claim that Fairtrade benefits people in developing countries (and who among us wouldn’t want that?).
Unfortunately, this simplistic view fails to consider fully the impact of the Fairtrade scheme on farmers – in particular, their naïve reasoning does not take into account the impact of higher crop prices on farmers’ incentives. For example, if certain crops receive a higher price than do others, it would encourage farmers in developing countries that were previously growing other crops to switch to the Fairtrade crop (tea in this case). This decreases the supply and, hence, availability of other crops such as rice, maize etc. in those developing countries, thereby increasing the prices of those crops. Since Fairtrade crops tend to be ‘cash crops’ or commodity crops that are exported rather than used domestically, whereas the crops that those farmers grew previously would have been consumed domestically, this means that the crops that are used as foodstuffs in the developing nations experience an increase in price. Rather obviously, this is detrimental to other people in those developing countries since they have to pay higher prices for their food.
It gets worse: Fairtrade could actually decrease the income of farmers in developing countries. Fairtrade’s own website states that the cost of obtaining a Fairtrade certification can be as much as 1.7 per cent of a farm’s sales, and that percentage actually decreases for larger farms (so much for Fairtrade being designed in favour of small farms!). According to Fairtrade itself, prior to certification, farms in developing countries can have profit margins as low as 1 per cent – as such, the costs of obtaining Fairtrade certification can make a serious dent in the profitability of such a farm.
And that’s assuming all of the higher price that is paid by UK consumers of Fairtrade products goes to the farmers themselves. It is plausible that the wholesalers, processors, and other firms in the supply chain siphon off a substantial proportion of the increased price. Indeed, given the long chain of supply between the tea you find on a supermarket shelf and the farm in India, Kenya, China (or elsewhere) on which the original tea leaf grew, it is possible that the farmers do not see much more than an extra penny or two despite the substantial difference in price between Fairtrade and non-Fairtrade products over here.
As such, either the farmers receive a higher price, with the aforementioned detrimental effects, or the higher price people pay goes straight into the pockets of the (usually rather large and already profitable) wholesalers and distributors. Either way, Fairtrade isn’t doing what it was intended to do. For example, a survey of Fairtrade Nicaraguan coffee farmers indicated that conditions for workers on Fairtrade farms were no better than those on farms without the Fairtrade certification, and this is supported by other studies showing that Fairtrade actually can worsen inequalities between farm owners and farm workers (as well as between farmers with Fairtrade certification and those without it). Another study of Fairtrade farmers in Peru indicated that obtaining the certification resulted in a decrease in farmers’ income (due to a decrease in crop yield associated with using the farming methods required for the certification outweighing any increase in price obtained for the crop).
Hence, the outcry over Sainsbury’s deciding not to use Fairtrade producers for their own-brand tea really is a load of fuss over nothing. In fact, Sainsbury’s should be applauded for abandoning Fairtrade’s flawed (albeit noble) attempt at improving the lives of farmers in developing countries.
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