Fairtrade spices standards – a reprise

Steenbergs is a commercial enterprise.  We operate in an economy based upon free market economics and that is something that we are completely comfortable with.

Per Adam Smith, what gets made and sold and the prices that transactions are closed at is determined through a bargain struck between 2 willing parties.  However, we also believe – like Adam Smith – that this free market may need moderating at times.  He believed that this would be done through the established church and people’s own conscience, however in those days the church was stronger and peoples’ consciences were far more restricting.

That’s where Fairtrade can come in.  In a similar way to the way mutuals ought to moderate in the personal financial market (they didn’t because they simply tried to emulate the incorporated retail banks), Fairtrade offers consumers a choice to pay more for a product that carries with it certain social and ethical features.

Our interest in Fairtrade stems from the fact it offers a simple, understandable and transparent mechanism for providing a fairer price in some tradeable commodities.

It is based upon an elegantly simple process, a virtuous circle:

steebergs

(i) Find, audit and approve groups of farmers that are willing to operate with a higher level of social responsibility

(ii) Find, audit and approve businesses that are willing to pay a higher price to groups of farmers that operate at a higher level of social responsibility

(iii) Impose a pricing mechanism for the sale of goods, whereby the buyer is willing to pay the higher of the market price and a minimum price for the commodities, where this minimum price incorporates the costs of a living wage for the farmers and an element of profit to enable them to invest in their business to improve product quality, as well as meet minimum social, ethical and environmental factors

(iv) A system of tithes that (a) enables the farmers and/or workers to invest in social projects for the benefit of their communities and (b) for the concept of Fairtrade to be promoted to consumers

For me, (i) and (iii) are the fundamental factors.  They are basically responses to the fact that a belief that the free market can push prices below a price whereby the weaker party in the sales transaction can earn sufficent cash to live and invest in his/her business.

I believe that the new standard takes away one of these fundamental principals of Fairtrade for the sake of expediency, a breach of one of basic underlying social factors that underpins the Fairtrade brand.

To me, it says that, in certain circumstances, the free market price is fair for Fairtrade, so long as you assuage your conscience through the payment of a tithe.  It’s okay: you can trade with anyone, anywhere so long as you pay a smidgeon more to a social fund; that’s what all major corporates already do – it’s called charitable giving or corporate social responsibility.



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5 Responses to “Fairtrade spices standards – a reprise”

  1. Dan says:

    Hi Sophie,
    I have been reading your thoughts on the new FLO standards for herbs and spices with great interest.

    I hope this issue gets discussed at the FLO Board meeting in Nairobi on the 15th Sept and that people’s concerns are registered. It would be a shame if these big changes to the fundamentals of Fairtrade are not noticed by the grassroots Fairtrade campaigners. I notice that new standards for melons and sweet potatoes have been treated the same way to speed up Fairtrade certification. I can see both sides of the argument and I understand that minimum prices are very tricky to calculate across different countries but that just leaves the social premium and good practice standards and that’s not what has made the Fairtrade system unique.

    Good luck with getting your voice heard!

  2. axel says:

    Yes, Fairtrade appear to have created a new concept of Fairtrade Lite, by which you can be approved in a fast-track procedure called “Easy Entrance procedure” and commodities may have no minimum price, while being required still to meet the requirements for pre-financing and Fairtrade premium. Sweet potatoes and melons being the first commodities to benefit from this process.

    Also, I anticipate that over time there will come pressure to bear on the pre-financing idea as money, especially trade credit, remains tight in the developed world and may become relatively easier in the developing world over the next 5 – 10 years compared to the EC and USA. The idea of pre-financing is based on the obverse, i.e. the developing world with high interest rates and small credit markets can gain access to the “more efficient” Western capital markets – this still holds water but it is getting a weaker argument day-by-day and year-by-year.

    The justification for this speedier process is commercial. Farmers get the benefit of increased access to markets through the use of the Fairtrade brand. Similarly, it is less onerous on the Fairtrade network in terms of monitoring and oversight. These new Easy Entrance standards come with the slightly lame “Meanwhile producers and traders are also explicitly asked to ensure that any negotiated price covers the costs of sustainable production of the processor”, which seems highly subjective. Fairtrade starts to read more like some of the other fair-trading systems competing for the same social dollars/pounds.

    For me, it’s like an analogy from the UK labour markets. After many years of campaigning, the minimum wage was introduced into the UK in 1 April 1999. However, Britain is now in a recession with unemployment now standing at 7.8% or 2.44 million. Now, classical market theory would suggest that as unemployment rises the supply of available labour increases for the number of jobs in the economy, so the wage level must necessarily fall and then the labour market can clear. In Britain, however, we have the minimum wage and this prevents such a collapse in wage rates (in fact they went up in June – July), but classical economics argues that this impediment prevents the labour markets working efficiently and so may be keeping wage levels artificially high. I don’t hear anybody arguing very loudly for the removal of the minimum wage to ease the problems within the UK labour market, even if it could widen the commercial prospects for the UK economy and improve the job possibilities for those out of work.

    Whenever there are media-driven articles against Fairtrade, the grumbles seem to come from Fairtrade farmers who have not reaped the anticipated benefits available from the Fairtrade system. This is because Fairtrade is not a sugar daddy; it’s a commercial system and you have still got to sell what you have grown via the Fairtrade system. Many commodities have more Fairtrade supply than there is available demand for Fairtrade products – tea, pepper and vanilla being examples – which may mean that some of your crops may not get Fairtrade prices and need to be sold in the normal open market. However, the theory is that your overall sales price will be higher and that as the market grows you will be able to sell more.

    If, however, you increase the number of suppliers into the market, you increase competition for the available demand and so either more crops fail to be sold through the Fairtrade network or there is pricing pressure downwards. If there is no minimum price and it is a negotiated price, prices will drift below the theoretical sustainable price; why because that’s the way markets work and no-one really can expect commercial enterprises to sit down and calculate a “negotiated price that covers the costs of sustainable production of the producer” except perhaps after the event to justify oneself.

    That’s what some of the Fairtrade premium is meant to pay for, paying people to have the time and inclination (as I imagine it is a fairly boring task) to work these things out and to monitor them.

  3. Scott says:

    Love your description of the system of fair trade as it currently exists…it seems that we who believe in a fair, just and ethical trading system have become very dependent on the actions of FLO and FLO cert…Aren’t we just kidding ourselves in not recognizing that FLO and FLO cert really do “own” fair trade as we now know it??

  4. axel says:

    The simple, if lazy, option is to accept directives given down from on high by FLO, governments and other agencies. However, they are not always right and at times it is worth acting as the “fool” and to try and change the views of those who make the rules, even if we might be kidding ourselves about our ability to make those changes.

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