Memorandum submitted by Traidcraft
A. EXECUTIVE
SUMMARY
1. Traidcraft is one of the leading Fair
Trade brands in the UK, which fights poverty through trade through
a combination of direct trading, capacity building, policy analysis
and campaigning. Since its establishment in 1979 Traidcraft has
developed a broad understanding of the development and commercial
challenges which poor producers face in accessing sustainable
markets. As a business as well as an NGO, it has extensive experience
of the challenges for companies in marrying commercial imperatives
with social objectives. Traidcraft has regularly engaged with
DFID in this work, both through funding relationships and through
policy dialogue.
2. Donor support—including from DFID—has
been particularly important in the early stages of Fair Trade
in two key areas: support to producers in developing countries
and support for awareness raising in consumer markets. However,
this funding has been ad hoc and has lacked a long-term strategy
for engaging the private sector, including Fair Trade, in poverty
reduction. The implications of this lack of strategic vision are
twofold: firstly, the missed opportunity of using the fast growth
of Fair Trade as a catalyst for change and secondly, the missed
opportunity of multiplying the results of past investments.
3. Traidcraft therefore calls on HMG to
develop an ambitious strategy for the private sector, with key
performance indicators, and which has as its objective the improvement
of the impact that trade has on poverty. Such a strategy should
include an ongoing analysis of trends in mainstream international
trade, in order to develop a baseline understanding, together
with a detailed strategy for donor intervention and, finally,
a commitment to policy coherence.
4. In developed countries donors should
help strengthen consumer markets through grassroots engagement
and increasing awareness of the Fair Trade concept. In developing
countries, donors should foster the creation of in-country Fair
Trade initiatives.
5. From the producer perspective, there
are three priority areas for attention: the creation of new, credible
standards, the facilitation of market access to new producers
and the strengthening of existing standards and producer bases.
There is a particular need to strengthen local and regional producer
networks and expand the range of services they offer.
6. Support to Fair Trade, whilst invaluable
in providing direct impact to millions of people, is necessarily
only part of the picture. A truly enabling environment is required
in which poor producer groups are supported in accessing markets
on a sustainable basis. EU trade policy generally works against
the interests of poor producers in developing countries, as can
be seen in the current EPA negotiations, for example.
7. The entrance of supermarkets and retailers
into Fair Trade has been very useful in delivering volumes and
mainstreaming the concept in the UK. These moves are commendable
and make a significant difference to the livelihoods of many people
in developing countries. However commitment is varied, which is
a source of controversy, and some retailers continue to seek to
pass risk down the supply chain.
8. The proliferation of schemes and Fair
Trade labels across the market has clearly created confusion in
the minds of consumers. Improved public awareness of the pros
and cons of different schemes is needed. Equally, government should
be incentivising corporate practice that goes beyond the minimum,
and not rewarding companies simply for doing no harm.
B. INTRODUCTORY
REMARKS
9. Traidcraft welcomes this inquiry by the
International Development Select Committee. It is well-timed,
as there is a rapidly increasing interest on the part of consumers,
business and producers in Fair Trade. There are now over 2,500
certified Fairtrade product and sales have been growing 40-50%
annually for the last few years: in 2006 the estimated UK retail
sales of Fair Trade products was £196 million. This makes
the UK the largest market for Fair Trade in Europe.
10. Traidcraft is one of the UK's leading
Fair Trade organisations, with a mission to fight poverty through
trade. Traidcraft trades with and supports small producers around
the world where their circumstances effectively exclude or marginalise
them from mainstream trade. Traidcraft also seeks to influence
the wider trading environment through research, analysis and advocacy.
Our work is conducted through an innovative partnership of a trading
company (Traidcraft plc) and a registered charity (Traidcraft
Exchange). This joint perspective enables Traidcraft to square
the often competing demands of commercial opportunity and sustainable
development.
11. Traidcraft PLC is one of the UK's pioneering
Fair Trade companies, with a turnover of over £19 million.
It provides a route to market for marginalised producers, offering
them terms of trade that promote security and facilitate longer
term planning. Traidcraft PLC distributes more than 450 products
fairly traded products to a highly aware customer base in the
UK, with mainstream supermarkets occupying a fast growing niche
in its distribution system.
12. Traidcraft Exchange is the UK's only
development charity specialising in making trade work for the
poor. Its work spans capacity building amongst producers in developing
countries, promoting market access for small producers (including
into the UK market), policy development and advocacy. Through
its Policy Unit, Traidcraft Exchange seeks to influence government
policy and business practice in the North and the South to the
benefit of the poor in the developing world.
13. Traidcraft believes that trade—if
organised and regulated properly—can contribute to poverty
reduction. Since its creation in 1979, Traidcraft has sought innovative
solutions to market access. For example, Traidcraft was one of
the four founders of Cafédirect;[36]
it established Shared Interest[37]
in order to enable producers to access pre-order financing; it
was also a founder member of the Fairtrade Foundation[38]
and of the Ethical Trading Initiative,[39]
both designed in different ways to encourage mainstream companies
to take steps to improve the impact of their supply chains in
developing countries.
14. Traidcraft is also a pioneer in social
accounting, by which companies seek to take account of their social
and environmental impacts as well as their economic performance.
Traidcraft PLC was the first public company to publish audited
social accounts. In 2006 Traidcraft won the ACCA award for the
Best Social Accounts. The commitment to the principles of transparency,
accountability and responsibility in trade underpin all aspects
of our business.
C. WHAT HAS
BEEN THE
IMPACT OF
DONOR FUNDING
FOR FAIR
TRADE?
15. There is no doubt that the Fair Trade
sector has seen extraordinary growth in recent years. Since 1998
sales of Fair Trade products in the UK have increased by 1,000%,
with the estimated retail value of sales of Fairtrade products
in 2006 being £196 million.[40]
More and more companies are developing Fair Trade lines, and recent
trends to whole category switches (where a retailer converts all
their products in a category to Fair Trade, as will happen with
Sainsbury's bananas in the course of 2007) are set to increase.
There has been an unprecedented uptake by the commercial sector
resulting in many new products and new product categories, and
major increases in market share in some of the well developed
categories. For instance, Fairtrade roast and ground coffee now
accounts for around 20% of the UK market. The early argument which
dismissed Fair Trade on the grounds that it would only ever be
a tiny niche seems without foundation in the current climate.
16. Donor support—including that of
the Department for International Development (DFID)—has
been particularly important in the early stages of Fair Trade,
in two key areas:
(i) Support to producers in developing countries
17. The increase in the size of the Fair
Trade market has translated into huge volume increases of sales
from producer groups in developing countries. More than one million
producers sell into the Fair Trade system internationally. Conservative
estimates put the number of people benefiting from the fair price,
social premiums and advantageous terms of trade which are inherent
in the Fair Trade model as in excess of five million. Collaborating
with producers—often on a very small scale, with limited
experience of selling into the demanding export market—is
a long-term and extremely resource-intensive activity. Strengthening
the "supply-side" capacity of Fair Trade has been a
priority from the beginning and remains so. Donor support for
capacity building initiatives with producers has been regular
and extremely valuable. However, it has remained project-based
and therefore rather ad hoc, responding to the applications which
have been made, rather than in a more strategic framework.
18. In this way, DFID has supported a range
of projects run by Traidcraft Exchange (the charity arm of Traidcraft),
focusing mostly on technical capacity building among producers
and the provision of business development services. These have
included a sustainable livelihoods project for Indian tea workers
which addresses the difficulties arising from the current crisis
in the tea industry. Additionally, DFID part-funded Advocates
of Philippine Fair Trade Inc. (APFTI), a project which focuses
on the delivery of business development services to small and
medium enterprises in the craft and food sectors and on advocating
Fair Trade in the Philippines. Since it was established in 1997,
APFTI has assisted more than 400 businesses with training and
business counselling courses, design and product development inputs,
market awareness tours and participation in trade fairs.
(ii) Support for awareness raising in consumer
markets
19. The remarkable growth of Fair Trade
has, in part, been the result of continuous awareness-raising
campaigns by a combination of Fair Trade organisations, faith
groups and non-governmental organisations, which saw Fair Trade
as a means through which individuals in developed countries could
understand and engage with efforts to reduce poverty on a day-to-day
basis. Now, of course, there is an increasingly enthusiastic response
from consumers, who clearly understand the principles behind Fair
Trade and have shown their readiness to support it. The fact that
more than half the adult population of the UK recognises the concept
of Fair Trade[41]
shows that this first phase of awareness-raising is proving to
be highly successful.
20. This work has been supported by substantial
grants from donors, including DFID. Donors have supported generic
awareness campaigns (for example initiatives by the Fairtrade
Foundation such as Fairtrade Fortnight or the Fairtrade Towns
scheme); they have also funded more specific materials such as
education packs for schools focusing on particular products. In
its early years Fair Trade was breaking new ground and reaching
out to new constituencies—at this stage in its development
private companies were not interested in risking an investment
in such generic messaging. DFID's involvement in this is to be
applauded.
21. Support for awareness-raising has not
been limited to the promotion of Fair Trade itself, of course.
Traidcraft PLC does not receive any donor funding, and funds its
own marketing and awareness raising activities through its own
resources. Traidcraft Exchange, however, has received funding
to link Traidcraft's Fair Trade work with broader trade policy
issues—for example support to raise awareness of the impact
of ACP-EU Economic Partnership Agreements on small-scale producers.
In addition, DFID is currently funding Traidcraft Exchange to
raise awareness of international development among purchasers
in mainstream companies, recognising the impact that highly competitive
UK sourcing can have on vulnerable producers. This has been invaluable
in helping to make the link between the impact of buying a Fair
Trade product and the wider movement to bring about fairer trade
rules and practices for all. More than 25% of Traidcraft's customers
now also campaign with Traidcraft Exchange, indicating that they
clearly see this connection.
22. Despite the clear benefits of past donor
support, Traidcraft believes that DFID funding has been characterised
by a lack of strategic commitment to Fair Trade. Funding has been
largely for one-off projects and there has been no overall strategy
to cross-refer between individual projects or to facilitate learning
in the sector. This lack of strategy for Fair Trade would be less
of a problem if there were a broader overarching strategy within
the UK government of engaging the private sector. Despite the
commitments in previous White Papers (see for instance, Chapter
5 of the 2005 White Paper "Making Governance Work for the
Poor"), DFID has yet to realise an action plan for harnessing
the private sector for development. This prevents DFID from adequately
understanding the role that the private sector is playing in alleviating
poverty and has meant that its engagement with business (and by
extension, with the Fair Trade movement) has been inconsistent.
An assumed shared responsibility on the private sector with the
Department for Trade and Industry (DTI) is not sufficiently effective
in the area of trade and poverty; DTI's efforts to link business
and development have delivered little of substance.
23. The implications of this lack of strategic
vision are twofold:
(i) The missed opportunity of using Fair Trade
as a catalyst for change
24. The experience of Traidcraft has been
that the mainstream private sector is often reluctant to invest
in poverty alleviation. However, Fair Trade makes this more conceivable—the
rapid increase in the Fair Trade market is a powerful business
case for engaging. Fair Trade provides businesses with an opportunity,
firstly, of getting involved in development and, secondly, of
understanding and perhaps changing some of their own business
practices. For example, Traidcraft has recently been working on
a Fair Trade initiative with a major UK high street retailer,
leading to the development of new Fair Trade products for the
UK market. The retailer has gone beyond this collaboration, however,
and has sought to develop a broad portfolio of ethical and Fair
Trade, including a corporate policy statement on Fair Trade signed
by the Chief Executive. Interestingly, the retailer regards this
project as a "development project" as well as a "commercial
project". This and other examples reflect a huge change in
attitude, with much potential. Yet much still remains to be done,
as many companies continue to disregard their social and environmental
impacts. More strategic support from DFID and other donors would
help Fair Trade organisations increase these kinds of collaborations.
(ii) The missed opportunity of seeing multiple
returns on previous investment
25. The absence of a vision for Fair Trade
means that donors are not capitalising on the results of past
investments. There is enormous potential for the introduction
of new Fair Trade product lines and for the improvement and expansion
of existing ones. For instance, strong mainstream interest has
been expressed in the supply of Fair Trade handicrafts. This is
unlikely to develop, however, without substantial investment to
overcome capacity issues related to producing goods of consistent
quality, to the volumes required for the UK market. While companies
are showing themselves increasingly to be prepared to invest in
Fair Trade supply chains, the facilitation of new groups—and
new products—into the market is a long-term, complex and
resource-intensive process, and represents too much of a risk
still for many mainstream companies. Typically, it is the Fair
Trade brands such as Traidcraft, which take on these risks.
26. Traidcraft therefore calls on HMG to
develop a clear strategy on the private sector, with clear performance
indicators, and which has as its objective the improvement of
the impact that trade has on poverty. Such a strategy would include
the following elements:
(i) An analysis of trends in mainstream international
trade, with the purpose of assessing the impact of international
trade on producers in developing countries. This would ideally
be high-profile and seeking substantial stakeholder participation
(private sector, producer groups and civil society). Without this
baseline understanding, a strategic engagement will not be possible.
(ii) A detailed strategy for donor intervention,
with clear targets (in terms of products, sectors or producer
groups) for intervention. This will help build a broad understanding
within HMG, with business and throughout the development sector
of what the problems are and what is possible. It would make sense
of what is currently project-based funding. There is no stated
link between, for instance, government support to Fair Trade,
to the Ethical Trading Initiative (ETI) or to the Extractives
Industry Transparency Initiative (EITI). Critically, this would
also facilitate shared learning between stakeholders and between
initiatives. At present, government plays little part in supporting
such learning.
(iii) A commitment to policy coherence. This
would not only seek to advocate for development needs across the
range of government policy (both domestically and internationally)
but would also assess the impact that new UK legislation would
have on international development goals. For example, it was not
evident that DFID was engaged at all in the recent UK Companies
Bill, which was the largest review of company law in recent times.
This, again, suggests a lack of vision or commitment to improve
the impact of trade on poverty. Many civil society groups, including
Traidcraft, were engaged in the company law review process since
it began in 1997, and were advocating for the inclusion of requirements
for UK companies to report on their social and environmental impacts.
Throughout the process attempts were made to engage DFID in the
debate, seeking a champion for poverty reduction at a government
level, without success.
D. HOW BEST
CAN DONORS
HELP TO
DEVELOP FAIR
TRADE CONSUMER
MARKETS IN
BOTH DEVELOPED
AND DEVELOPING
COUNTRIES?
27. In developed countries donors should
continue to support grassroots engagement and efforts to increase
awareness of the Fair Trade concept and of wider trade justice
issues. In particular, this would include a focus on enabling
consumers to see the benefits that Fair Trade brings to producers.
There is also a role for donors in improving public understanding
about the full costs of products. This is a debate which is long
overdue—UK consumers continue to be encouraged by mainstream
retailers (especially supermarkets) that cheapest very often equals
best. There are development questions to be raised when products
such as jeans retail at as little as £3 per unit and it is
right that consumers should have the information they need to
ask such questions.
28. In developing countries, donors should
foster where possible the creation of in-country Fair Trade initiatives.
Not only would this help to engage domestic consumers, but it
would also potentially help facilitate regional trade, as opposed
to export trade—a key trade policy priority. There is a
particular opportunity to mobilise higher-earning groups in rapidly
growing middle-income countries. For instance, Traidcraft is involved
in an initiative funded by the EU, which is developing an Indian
Fair Trade scheme, piloting the Fair Trade concept in a small
number of wealthy cities. Similar potential exists in South Africa
and Brazil.
E. HOW CAN
AID BE
MORE EFFECTIVELY
MOBILISED TO
HELP PRODUCERS
IMPROVE THE
QUALITY OF
THEIR PRODUCE
IN ORDER
TO ACCESS
FAIR TRADE
MARKETS?
29. From the producer perspective, there
are a number of priorities for Fair Trade if the concept is to
evolve and improve its impact, all of which would benefit enormously
from donor support:
(i) Creation of new, credible standards.
There is a great demand from producers and retailers to develop
standards for new product categories. Aside from satisfying consumer
demand, there are obvious benefits in helping new producers enter
the market and existing producers diversify. Experience shows
that this process requires substantial investment. Standards developed
quickly have rarely been effective in delivering lasting improvements
to producers.
(ii) Facilitating access to new producers.
The number of producers involved in Fair Trade—though
growing fast—remains tiny in global terms. As new product
standards emerge and volumes in existing products increase, there
are real opportunities to work with more producers, including
those most marginalised from mainstream trade. This is not without
risk, and again investment over a long period is necessary.
(iii) Strengthening of existing standards
and producer bases. The rapid increase in Fair Trade volumes,
together with the launch of other ethical schemes, inevitably
puts pressure on existing Fair Trade producers and standards.
With the largest players in the market now not dedicated Fair
Trade organisations but mainstream commercial businesses, producers
need more than ever to be able to guarantee delivery and quality.
Some Fair Trade producers have already successfully exploited
high-value niches, especially in quality tea, coffee and cocoa.
Others, especially small-scale producer groups, have to compete
with the economies of scale of plantation production. Support
to producers to make the most of these opportunities, and understand
the challenges posed by volumes and quality standards, is critical.
30. There are several priority areas for
donor involvement:
(i) Regional and local producer support networks
must be strengthened, as they hold the key to the future success
of Fair Trade. Even with the low level of funding currently available,
these networks perform a range of essential functions, including
market information, business linkages, organisational development,
standards compliance, support on product strategy, financial services
and many others necessary to strengthen businesses and to empower
producers. In Traidcraft's own monitoring activities, this sort
of capacity building is repeatedly cited by producers as being
of most value.
(ii) More provision should be made for participatory
impact assessment, which would involve producers at every stage.
There is a growing body of impact analysis in the Fair Trade sector,
and with its popularity among academics and consultants there
is a justifiable concern among some producers that they are being
audited out of existence. Even so, the diversity of Fair Trade
means that a proven model in one product area may not be as effective
in another, where the supply chain may be organised quite differently,
and so robust analysis will continue to be needed. This should
be respectful of producers needs and interests, however, and seek
to improve understanding of what works, rather than merely audit
performance. For instance, Traidcraft is currently supporting
an impact study of its work in Bangladesh which is analysing the
ways in which both the social and economic benefits of Fair Trade
are affecting the lives and opportunities for the producers.
(iii) Donors could facilitate the exchange
of experience to create new partnerships between Fair Trade organisations
and the mainstream private sector. Traidcraft has recently been
involved in one such project, which was a collaboration with the
Shanto Maryam University of Creative Technology in Bangladesh
to provide valuable product development training and mentoring
to local businesses. The courses were extremely successful and
taught producers about meeting the product specifications, quality,
packaging, deadline and pricing requirements for exportable products.
(iv) Finally, outside traditional funding,
there should also be more scrutiny of the fast increasing industry
around standards and codes of conduct, to ensure that they do
not become additional barriers to market entry for poor producers.
The extent to which producers themselves are involved in setting
standards, monitoring and reviewing their implementation is central
here.
F. HOW DOES
THE INTERNATIONAL
TRADE SYSTEM
IMPACT ON
ETHICAL AND
FAIR TRADE
PRODUCTION (FOR
EXAMPLE, THE
IMPACT OF
CHANGES IN
THE EU TARIFF
REGIME FOR
BANANAS ON
SMALL DEVELOPING
COUNTRY PRODUCERS)?
31. EU trade policy generally works against
the interests of poor producers in developing countries, as it
is designed to protect either the interests of European manufacturers
or of powerful interest groups such as large-scale EU farmers.
Support to Fair Trade, whilst invaluable in providing direct impact
to millions of people, is necessarily only part of the picture.
More generally, a truly enabling environment is required in which
poor producer groups are supported in accessing markets on a sustainable
basis. The current trade system very often disables producers,
as the following examples from within the EU demonstrate:
— The EU maintains a complex system
of escalating quotas and tariffs which effectively frustrate efforts
by developing country producers to access European markets, or
to add value in-country (eg instant coffee, chocolate).
— Seemingly innocuous EU soft regulation
also has potentially huge impacts on poor producers. An example
is in honey, which is a valuable income generator to many of the
poorest farmers, particularly in Africa and which is additionally
an important Fair Trade product. Recent amendments to EU Sanitary
and Phytosanitary regulation required changes to the certification
process which made it impossible, at a stroke, for African honey
to enter the EU. Producers actually had consignments of honey
returned, which caused significant problems. A simple process
of dialogue before the EU implemented such measures would have
saved much time and money.
32. Elsewhere, the European Union's trade
policy remains disconnected from the real circumstances of poor
producers in developing countries. A fully participatory process
of impact assessment is absolutely essential before new policy
initiatives are developed. To date, attempts at impact assessment
in this area have been particularly poor, with no engagement at
all from the most vulnerable groups in international supply chains.
In particular:
— The recent changes to the EU's market
access regime, notably revision of preferences in sugar and bananas,
were developed substantially as a top-down process, whereby the
European Commission announced the changes and spent some time
thereafter assuring ACP countries (most affected) that they would
be supported through the adjustment process. Whilst this might
be an easier strategy for the EC, in terms of harmonising its
trade policy, it does not help poor countries plan alternative
strategies, diversify out of sectors which might be rendered less
competitive as a result, or secure sufficient financing for the
time needed to cover the adjustments.
— The current negotiations between
the EU and ACP countries for Economic Partnership Agreements (EPAs)
further highlight the vulnerability of poor producers to changes
in trade policy. Most Fair Trade products derive from ACP countries,
and it is a matter of real concern to the international Fair Trade
movement that EPAs are being negotiated in such an aggressive
manner by the European Commission, despite the concerns which
have been raised time and again by ACP governments. The EC is
pushing for "substantial" liberalisation of ACP markets
to a very fast and arbitrary timetable, which even now is being
talked of as being as little as 12 years.[42]
While this may work for some aspects of some ACP economies, there
are vast differences between the ACP members and huge complexities
to overcome, even before liberalisation within ACP regions (as
opposed to with the EU) can take place. The EC is still insisting
on a one-size fits all approach, which is likely to be hugely
damaging. The fact that it is now expecting SADC countries to
join with South Africa in a free market with the EU demonstrates
again that EC trade policy is strong on theory and absolutely
weak on pragmatic understanding of what is taking place on the
ground. The gains made by Fair Trade, whereby poor producers have
been able to sustain access to international markets, risks being
seriously undermined by this approach.
33. It is not the unlimited liberalisation
of trade, but the quality of trade that will make a difference
to poor producers. If the EU is serious about its commitment to
develop sustainable trade that benefits everyone in the supply
chain, this should be made the basis of its policies. The UK government
must step up its scrutiny of EU trade policy, and advocate more
effectively for pro-poor trade policy at a European level. Its
track record on this is weak.
G. IN AN
INCREASINGLY CROWDED
ETHICAL MARKETPLACE
HOW CAN
CONSUMERS BE
SUPPORTED TO
DISTINGUISH BETWEEN
DIFFERENT FAIR
TRADE BRANDS,
LABELS AND
CODES?
34. The proliferation of ethical schemes
and fair labels across the market is a significant challenge.
It has clearly created confusion in the minds of consumers and
more public information is needed so that companies making false
claims can be exposed. Fair Trade organisations are responding
to the challenge by seeking to improve the transparency and accountability
of their own standards.
35. In the same way, the government should
be incentivising corporate practice that goes beyond the minimum,
and not rewarding companies for doing no harm. This should particularly
be taken into account when it comes to funding. For instance,
DFID is providing around 40% of the running costs of the Ethical
Trading Initiative, an alliance of companies, trade unions and
non-governmental organisations working together to promote the
implementation of minimum labour standards. In 2006, a five-year
Partnership Programme Agreement (PPA) was agreed between ETI and
DFID, which will provide ETI with guaranteed strategic funding
of £875,000 for the first two years.
36. Although the work that the ETI is doing
is valuable—Traidcraft is a founder member—its funding
by DFID raises two concerns. Firstly, the primary beneficiaries
are arguably the companies themselves, as the ETI enables them
to manage risk in their supply chain, and they should not need
this kind of subsidy for their social responsibility work. Secondly,
the results of the impact assessment of the first 10 years of
the ETI identified many shortcomings and limited impacts on poor
people in developing countries, which are DFID's main constituency.
Given the large amount of funding provided by DFID and the valuable
information that the member companies receive about their supply
chain (information which ultimately enables them further to consolidate
their power base) there is a strong case for government to be,
at the very least, more demanding with regard to the impacts of
the ETI and to holding them more to account.
37. In contrast to the ETI, DFID has told
the Fairtrade Foundation, which seeks to go beyond minimum labour
standards, that it expects it to be self-sufficient in future.
This is most unlikely and even undesirable, as to be dependent
solely on its licensees could undermine the Fairtrade Foundation's
independence. More importantly, it highlights the uneven nature
of DFID's commitment to the sector.
H. WHAT IS
THE ROLE
OF SUPERMARKETS,
RETAILERS AND
BUSINESSES IN
SUPPORTING ETHICAL
AND FAIR
TRADE PRODUCTION?
38. The entrance of supermarkets and retailers
into Fair Trade has been very useful in delivering significant
volumes and has been responsible for the mainstreaming of major
Fair Trade products in the UK market in recent years. Supermarket
sales started to take off in the late 1990s with the sale of single
Fair Trade branded products and now include a wide range of own-label
Fair Trade products. Whole category switches are beginning to
take place:[43]
a development led by the Co-op, followed by Marks and Spencer,
Sainsbury's and Waitrose.
39. These moves are commendable and make
a significant difference to the livelihoods of many people in
developing countries, as they show a commitment to incorporating
Fair Trade principles into current business practices, which go
beyond mere tokenism. Those multinationals that have made a substantial
commitment to Fair Trade should be seen as a challenge to the
activities of many other powerful retailers and brands, who continue
to disregard those at the bottom of global supply chains. In many
sectors market concentration is increasing the vulnerability of
poor producers, with more and more suppliers seeking to sell to
fewer corporate buying desks.
40. Supermarket commitment in relation to
Fair Trade is varied, however. For example, a supermarket does
not need to be a licensee of the Fairtrade Foundation—and
therefore bound by its standards—if its packaging and labelling
is outsourced.[44]
In these circumstances, they need make no explicit commitment
to a stable purchasing arrangement, they could switch between
registered producers at will or could abandon the trading relationship
in the event of a market decline at short notice.[45]45
There is also the risk that supermarkets and brand manufacturers
will engage in a race to the bottom to buy the cheapest Fair Trade
products.
41. Ironically, Fair Trade began as a challenge
to the dominance of global brands and retailers, including supermarkets.
That many of these companies are now involved in selling Fair
Trade is a matter of concern to some. It is too early to know
whether the Fair Trade model will influence corporate practice
beyond individual Fair Trade supply chains. Certainly, recent
announcements by some major retailers suggest that they are taking
this very seriously.
42. What is needed from supermarkets and
retailers is not only a greater commitment in terms of bigger
volumes, range of products or more equitable terms of trade, but
also profound changes in the way they conduct their wider business.
In addition to voluntary initiatives such as Fair Trade, there
is a need for more robust regulation to correct the imbalance
of power between multinational retailers and their suppliers,
which would set out companies' responsibilities for their social
and environmental impacts and offer workers, farmers or suppliers
harmed by a UK registered company the opportunity to seek redress.
February 2007
36 www.cafedirect.co.uk Back
37
www.shared-interest.co.uk Back
38
www.fairtrade.org.uk Back
39
www.ethicaltrade.org Back
40
All figures from Fairtrade Foundation. Back
41
"Attitudes to Ethical Foods in the UK", MINTEL 2006. Back
42
Commissioner Peter Mandelson in evidence to the IDC, January
2007. Back
43
Forthcoming. Stephanie Barrientos and Sally Smith Mainstreaming
Fair Trade in Global Production Networks: Own Brand Fruit and
Chocolate in UK Supermarkets in Fair Trade: The Challenges
of Transforming Globalization, Routledge Press. Back
44
Stephanie Barrientos and Catherine Dolan Transformation of
Global Food: Opportunities and Challenges for Fair and Ethical
Trade, p 18 in Ethical Sourcing in the Global Food System,
Earthscan, 2006. Back
45
Ibid. Back
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