Mainstreaming Fair Trade

1
Mainstreaming Fair Trade

• Fair trade brands the problem of ownership
• Dr. Anna Hutchens
• Director, Fair Trade Program,
• Centre for Governance of Knowledge Development,
  Australian National University.

2
Overview

• Mainstreaming fair trade in product and
  principle?
• Evolution in global food industry commodity-
  to brand- based markets
• Fair trade consumer markets a typology
• Analysing certification brands
• - empowering producers?
• - influence on conventional markets?
• Lessons

3
Evolution in global food industry commodity- to
brand- based markets

• Agriculture vital for development
• Causing poverty for small-scale primary commodity
  producers
• Buyer-driven supply chains control global markets
• Profit power located in ownership of
  intangible assets

4
Global value-chain analysis

• Level of competition at any stage of production
  indirectly proportional to value return
• Upgrading offers market actors a way to improve
  their position by moving into less
  competitive/higher value units of production
• Most lucrative is own-brand manufacturing (OBM)
  (a form of functional upgrading). Trade mark
  rights underpinning brand offer ongoing
  protection from competition

5
Mainstreaming Fairtrade product certification

• 1989 - Max Havelaar established, adopted
  across Europe
• 1997 - Fairtrade Labelling Organisations
  International (FLO)
• Product certification enables any trader to
  sell Fairtrade provided they meet trader criteria
  (eg. sympathetic and traditional corporate
  buyers)
• Rapid market success (US1.4b, 25 growth p.a
  over 5 yrs)
• Trader Criteria
• A price covering the cost of production
• A social premium for development purposes
• Advance payments to assist farmers during
  pre-harvest periods
• Long-term contracts with producers to enable
  long-term production planning
• Long-term trading relations to allow stable
  sustainable production planning

6
Fair Trade Organisations the principles of fair
trade

• FTOs are first-movers in FT markets, share
  broader vision of FT advocated by International
  fair Trade Association (IFAT)
• 1. Creating opportunities for economically
  disadvantaged producers
• 2. Transparency and accountability
• 3. Capacity building
• 4. Promoting Fair Trade
• 5. Payment of a fair price
• 6. Gender Equity
• 7. Working Conditions
• 8. Child Labour
• 9. The Environment

7
Mainstreaming fair trade principles FTO brand
companies

• Distinctive breed of FTO fair trade brand
  companies (eg. Divine Chocolate, Cafédirect,
  Agrofair)
• For-profit FTOs operating in highly concentrated
  commercial markets

8
Typology of fair trade consumer markets
eg. The Coop, Green Mountain Coffee Roasters
eg. Divine Chocolate, Cafédirect, Agrofair
eg. Ten Thousand Villages, GEPA,
eg. Nestle, Starbucks
Sympathetic Corporate-buyer Model /
FTO Brand Companies //
Corporate-buyer Model /
Standard FTO /
Expansionist FT
Reductionist FT
FLO label FTO standards Corporate
buyer-owned brand Producer co-ownership in
specialised-product brand
9
FT certification

• Producer remuneration status still tied to
  commodity production (low-value unit in
  value-chain)
• the dollar value of cocoa in a bar of chocolate
  that costs 1 dollar is about eight cents. So you
  can be paying a cocoa grower a fair wage with
  respect to the local market, but the producer
  is not actually able to capture the value that
  their labour has directly and indirectly
  generated because all the value happens further
  down in the supply chain - its in the brand.

10
FT certification (contd)

• FLOs funding growth model reinforces market
  inequalities of economic power and scale
• one of the major problems with the
  greenwashing question is that FLO and Transfair
  USA refuse to address it publicly.
  Theirreasoning is obvious these companies doing
  the damage provide most of the cash for their
  operating budgets

11
FT certification (contd)

• Diminishing emphasis in trader requirements on
• Market access for small-scale producers, direct
  trader-producer relations, investment in
  capacity-building, long-term business
  partnerships, political advocacy for trade
  justice
• Supermarket retailers can use label without
  becoming licensees since they outsource packing
  labelling. This potentially exposes producers to
  conventional-market cost-cutting pressures
  practices.
• FLO offers no incentive for more highly
  committed retailers (or traders)
• its not all about volume and signing up more
  MNCsSigning up more companies doesnt address
  ideological issuesFLO needs to push companies
  not just to address the price issue, but
  fundamental issues of inequality in the supply
  chainthats tough because its easy to ask a
  company to write a cheque, but to hand over
  power, I think thats where the challenge lies

12
Fair Trade Brands

• - Producers receive fair trade price premium
• - Producers co-own the brand (company
  shareholders, receive brand equity)
• - Producers active in all (esp. value-added)
  parts of business (sales, marketing, corporate
  governance etc.)
• 
  
  
  
• - Producers benefit from FTO commitment to FT
  partnerships
• - Compete strategically through market-specific
  brands

13
Resistance and Game-playing

• Different approaches to democratising market
  governance resistance game-playing
• Each causes different effect on markets, with
  implications for realising genuine change
• Resistance causing symbolic imitation
  (subversion of Fairtrade logo into no more than a
  subsidiary brand for corporate actors who want to
  use the label and profit from it)
• Game-playing forces conventional firms to
  compete on broader FT principles and practices
  for survival

14
Lessons

• FT certification system needs strengthening to
  effectively manage and challenge corporate buyers
• Fair Trade Brands represent ideal model for
  mainstreaming fair trade both in terms of
  producer-empowerment and changing
  business-as-usual
• Very few fair trade brand companies exist (esp.
  outside Europe)
• Power and significance of FTO brands poorly
  acknowledged in FT consumer education, advocacy,
  research
• FTs entrepreneurial pioneers are crucial to FTs
  survival in mainstream markets