How Fair is Fairtrade?

A 227 gramme packet of Tesco Original roast coffee beans costs £2.29 today. An identically sized pack of Tesco Fairtrade roast coffee beans costs £2.99, or 31% more. The average cost of 227 grammes of coffee beans landing in the EU in 2012 was 54 pence.

Why the differences?

The difference that screams out loudest is the one between the imported cost of coffee (fairtrade or plain vanilla) and the cost on the Tesco shelf. Practically all that is the cost of processing, packaging or marketing: Tesco probably takes around 40% of the retail price (or 92 pence in the case of the Tesco Original), but processing and other costs in Europe account for 83 pence.

Now there’s a myth widespread in the Fairtrade community that rich countries impose a huge import duty on processed coffee, so “the system” is somehow unfairly stacked against   producer countries, forcing them to provide just coffee beans. This is simply untrue: some processing (like making instant coffee)  in theory attracts 7.5%  duty, but this reduces to 2.6% (or 1.4 pence on that 227 gramme pack) for most countries hot enough to grow coffee (like Vietnam or Brazil), or 0% for many (like Peru, where Tesco’s Fairtrade comes from) .

It’s also often argued that it’s impractical to process coffee in hot countries. Somehow, it’s claimed, you can sew (and steam-press) garments in hot countries, but you can’t roast coffee. Which is just silly.

The reason for the high costs incurred in Europe for coffee is that the Fairtrade movement has made no attempt to create jobs in poor countries. Its preoccupation is with how the income from growing basic commodities (like cotton, tea or coffee) is split between small farmers and their employees on the one hand and big buyers on the other. There’s no debating the fact that the Fairtrade movement has been successful in this. But, unlike the much-maligned garment industry, there isn’t a global network of manufacturing plants doing to coffee in Vietnam or Peru the processing that used to be done in Europe or the US.

Fairtrade has switched some of the income in coffee growing from rich to poor in poor countries. But it hasn’t created jobs in poor countries, as garment and textile making, toy making or shoemaking have. The only jobs the movement has created are pleasant office jobs in rich countries for the socially conscious middle class.

Some may think such jobs are morally superior to buying T-shirts. But when politicians smugly assert (as Britain’s Shirley Williams disgracefully asserted on May 2) that Fairtrade is the answer to factory disasters, they can only mean one of two things:

-          We ought to follow the Fairtrade movement and stop using workers in poor countries altogether, or

-          They’ve simply never looked at where the money paid for Fairtrade goods goes

Neither are stances any purportedly “ethical” person should adopt

POSTSCRIPT:
This article was written from a UK perspective: allegedly "Fairtrade" garments sold in the UK are merely made from Fairtrade cotton, and the Fairtrade Foundation makes no attempt to control the circumstances under which an allegedly "Fairtrade" garment is spun, woven, knitted, assembled or got into a consumer's home. The premium for "fairness" is justified only by the tiny proportion of the garment's cost that the raw cotton accounts for.  

Fairtrade organisations do not take such an absurdly blinkered view of their job everywhere. Fair Trade USA (a quite separate organisation from Britain's Fairtrade Foundation) has been attempting for some years to create and sell garments assembled under circumstances in sympathy with the overall aims of the Fairtrade movement.  Its success has been limited, and a fair review of FTUSA's pilot programme would have to conclude that the reasons for its disappointing progress are complex.

The facts in the FTUSA report certainly do not support any one-dimensional conclusion (like "big retailers won't support it" or "Activists are a great deal more interested in pointless whingeing and in squabbling with each other than in creating jobs in poor countries, which they prefer to leave to grownup businesses they can then whinge about"), though there is support for both views between the lines of FTUSA's carefully drafted report.

What the report does show is how extremely difficult it is to apply fully audited Fairtrade principles, in the context of today's obsession with "multistakeholder initiatives", to the garment industry. Similar problems apply to most other manufactured products.

There are lessons from the Fair Trade USA garment pilot. A forthcoming Blog will review them