Fair trade certification

A fair trade certification is a product certification within the market-based movement fair trade. The most widely used fair trade certification is FLO International's, the International Fairtrade Certification Mark, used in Europe, Africa, Asia, Australia and New Zealand. Fair Trade Certified Mark is the North American equivalent of the International Fairtrade Certification Mark. As of January 2011, there were over 1000 companies certified to the FLO International's certification and a further 1000 or so certified to other ethical and fairtrade certification schemes around the world.[1]

This article is about general fair trade certifications. For FLO International's fair trade certification (known as Fair Trade Certified in the United States and Canada), see Fairtrade certification.

The Fairtrade International certification system covers a wide range of products, including banana, coffee, cocoa, cotton, cane sugar, flowers and plants, honey, dried fruit, fruit juices, herbs, spices, tea, nuts and vegetables.[2] These commodities have different locations of production and number of farmers and workers covered for production and distribution.

How it works

Fair trade is a strategy for poverty alleviation and sustainable development, aiming at creating greater equity in the international trading system. Through trading partnerships with marginalised farmers and craftspeople in developing countries, social and economic opportunities are created for these producers in a way that more customers are accessible to their products and a better deal is issued.[3] In return, the producers have to comply with all the standards laid down by Fairtrade International.

In reality, packers in developed countries pay a fee to the Fairtrade organisation for the right to use the Fairtrade certification logo. Importers of fairtrade certified products are required to pay exporters a price higher than the market price of non-fairtrade certified products, so as to cover the additional costs used by Fairtrade certified firms in marketing and inspection. Any surplus after paying these costs must be used for local social, environmental and economic projects [4]

Fairtrade Standards
A T-shirt made from Fairtrade certified cotton.

Fairtrade Standards are designed to aid the sustainable development of some smaller producers and agricultural workers in third world countries. In order to become certified Fairtrade producers, the cooperatives and their fellow farmers have to strictly comply with the standards laid down by Fairtrade International.[5] FLO-CERT, the for-profit side, is responsible for inspecting and certifying producer organizations in more than 70 countries in Europe, Asia, Africa and Latin America.

The general standards set for different stakeholders are listed as follows:

Small Producer Organizations
  • The majority of the members of the organization must be small-scale producers who do not highly depend on hired workers, but run their farm mainly by their own effort.[6]
  • Any profits earned must be equally distributed among the producers.
  • Every member in the organisation should have the right to vote in the decision-making process.

Hired Labour
  • Workers possess the right to join an independent union to collectively bargain their working conditions.[7]
  • No forced or child labour
  • Working conditions have to be equitable for all workers. Salaries must be at least equal or higher than the minimum wage in effect.
  • Safety and health measures must be implemented properly so as to avoid unwanted injuries at work.

Trade Standards
  • Pay a price higher than the Fairtrade Minimum Price in order to cover the costs of sustainable production.
  • Pay an additional amount of money that allows producers to invest in development : the Fairtrade Premium.
  • Sign contracts that assist long-term planning and sustainable production practices.

Fairtrade Pricing

The Fairtrade system mainly consists of two types of pricing, which are the Minimum Price and the Premium. These are paid to the exporters according to the proportion of output companies are able to sell with the brand ‘Fairtrade Certified’, typically ranging from 17% to up to 60% of their turnover in some cases.

  • The Fairtrade Minimum Price is a guaranteed price, as well as the minimum price, that must be paid by buyers to Fairtrade Certified producers. It is a floor price that covers producers’ average cost of production, aiming at protecting producers from selling their products underpriced.[8]
  • The Fairtrade Premium is a sum of money which is paid on top of the payment for the products. Its use is restricted to investment in the producers’ business, livelihood, and the socio-economic development of the workers. The producers have the largest power deciding how these funds are to be spent.[9]

How fairtrade measures its impact

The Fairtrade system has committed to a programme of Monitoring, Evaluation and Learning (MEL), which aims at generating recommendations and analysis in support of greater effectiveness and impact. Ongoing market progress is monitored by market-facing organizations present in countries where Fairtrade certified products are sold; market data is consolidated by Fairtrade International on an annual basis. These data are gathered to form a core basis for the understanding of the dynamics of how certification is developing, and how the impacts of Fairtrade are being distributed between producer organizations, geographies and products.[10][11]

Fairtrade’s governance bodies also review key results and evaluate regularly in order to improve strategy and decision-making. These results are publicised within staff throughout the Fairtrade system and relevant stakeholders for further discussion of findings and recommendations.

Criticisms

Little money reaches the farmers

The Fairtrade Foundation does not monitor how much of the extra amount of money paid to exporters reaches the farmers. As the cooperatives incur relatively heavy fees on inspection, certification and marketing, only a small amount of money is retained for the farmers.[12] In general, Fairtrade producers are only able to sell 18% to 37% of their output as Fairtrade certified over years, while the rest are sold as uncertified at the market prices.

Fairtrade helps the rich to a larger extent

Fair Trade is profitable for traders in rich countries rather than that in poor countries. In order to qualify as Fairtrade producers, cooperatives must meet the strict standards set by Fairtrade International, implying that their fellow farmers must be quite skilful and educated. However, it is criticised that these farmers are predominantly from poorest countries, thus lacking the power to bargain with the cooperatives. Corruption even occurs in some cases.[13]

Inefficient marketing system

There have been complaints that Fairtrade certified products should not be sold through a monopsonist cooperative because it may be inefficient and corruption easily takes place. Fairtrade farmers should have the right to choose the buyer who offers the best price, or switch when their cooperatives are going bankrupt [14] Having a monopsonist cooperative be in charge of Fairtrade certification leads to that cooperative trying to grow the fair trade industry for profit and not so much for the lives of all the small farmers. At this point they are trying to increase the supply of fair trade when the supply is already far beyond the demand. [15]

Other certification and product labelings

References
  1. List of Companies certified to FLO International's fairtrade certification
  2. Elliot, K. (2012). Is my Fair Trade coffee really fair? Trends and Challenges in Fair Trade certification. Center for Global Development, Policy Paper, pp.17.
  3. Fairtradefederation.org, (2014). Fair Trade Federation : What is Fair Trade?. [online] Available at: https://www.fairtradefederation.org/what-is-fair-trade/ [Accessed 19 Oct. 2014].
  4. Info.fairtrade.net, (2014). Fairtrade Info / Home / What is Fairtrade? / How Fairtrade Works. [online] Available at: http://info.fairtrade.net/info-how-fairtrade-works.0.html Archived 2014-10-31 at the Wayback Machine [Accessed 24 Oct. 2014].
  5. Fairtrade.net, (2014). Fairtrade International / Standards / Aims of Fairtrade standards. [online] Available at: http://www.fairtrade.net/aims-of-fairtrade-standards.html [Accessed 25 Oct. 2014].)
  6. Fairtrade Standard for Small Producer Organizations. (2005). Bonn, Germany: Fairtrade International, pp.7.
  7. Strong Producers, Strong Future. (2014). Bonn, Germany: Fairtrade International, pp.8.
  8. Fairtrade.net, (2014). Fairtrade International / About / What is Fairtrade?. [online] Available at: http://www.fairtrade.net/what-is-fairtrade.html [Accessed 26 Oct. 2014].
  9. Fairtrade Minimum Price And Fairtrade Premium Table. (2014). Bonn, Germany: Fairtrade International, pp.3.
  10. Fairtrade.org.uk, (2014). How Fairtrade monitors and measures impact. [online] Available at: http://www.fairtrade.org.uk/en/what-is-fairtrade/the-impact-of-our-work/how-fairtrade-monitors-and-measures-impact [Accessed 24 Oct. 2014].
  11. Fairtrade.org.uk, (2014). How Fairtrade monitors and measures impact. [online] Available at: http://www.fairtrade.org.uk/en/what-is-fairtrade/the-impact-of-our-work/how-fairtrade-monitors-and-measures-impact [Accessed 25 Oct. 2014].
  12. The Globe and Mail, (2014). Fairtrade coffee fails to help the poor, British report finds. [online] Available at: https://www.theglobeandmail.com/report-on-business/international-business/fairtrade-coffee-fails-to-help-the-poor-british-report-finds/article18852585/ [Accessed 27 Oct. 2014].
  13. Sylla, N. (2014). Fairtrade is an unjust movement that serves the rich | Ndongo Samba Sylla. [online] the Guardian. Available at: https://www.theguardian.com/global-development/2014/sep/05/fairtrade-unjust-movement-serves-rich [Accessed 26 Oct. 2014].
  14. Mendoza, R., & J. Bastiaensen, J. (2003). Fair Trade and the Coffee Crisis in the Nicaraguan Segovias. Small Enterprise Development, 14(2), pp. 42)
  15. Cole, N. L., & Brown, K. (2014). The Problem with Fair Trade Coffee. Contexts, 13(1), 50–55. https://doi.org/10.1177/1536504214522009
  16. Conroy, Michael (2007). Branded! p252
  17. Fair's Fair at Whole Foods The Motley Fool, April 2, 2007.
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