The cost of doing things differently

Most people in the Fair Trade movement are aware of the difference between the Alternative Trading Organisations like Divine, Cafe Direct, Traidcraft and Liberation Nuts, and the other Fairtrade certified products e.g. supermarket own brand goods,* although having said this, increasing this awareness to the general public is a different matter! However, in the same way, there can also a big difference in the type of producer groups who are part of the Fair Trade system. Just as there are those at the retail end who do the minimum in order to get the badge and cash in on markets,  you can also find the same situation at the producer end. And just as Divine’s market is threatened by Cadbury’s Fairtrade chocolate or Cafe Direct’s by Tesco own brand Fairtrade coffee, so too are Fair Trade Alliance Kerala (and others like them) threatened by those certified producer companies who can offer products at a lower price, basically because they don’t have the high costs associated with doing business in a truly different way.

 

Despite what the Adam Smith Institute and others think, Fair Trade is part of the market driven competitive world and all must fight to stay in it. Fair Trade retailers must convince the public to buy their product above the other Fairtrade certified goods, and Fair Trade producers must convince the Fair Trade retailers to buy theirs! The producer groups and Fair Trade Organisations who do being a ‘Fair Trade producer group’ or being a ‘Fair Trade Organisation’ the best will necessarily be more expensive and both have challenges ahead about how to fight their corner in the ethical market place. The Fairtrade label’s greatest achievement- to communicate at a glance an ethical seal of approval of a product- is also the main obstacle for those who want to say “yes we are all this but also so much more!”

There has been talk for a long time in the Fair Trade movement about how to differentiate those organisations set up with the sole aim of fair trading, to those who have the main aim of creating wealth for shareholders (at the core these are very different motivations!). And we are getting to a stage where we need to have the same conversations about the producer groups, so that Fair Trade buyers who for so long have asked the public not to fall into the trap of joining the race to the bottom, don’t make the same mistake themselves.

* I’m just using supermarket own brand products as an example but it isn’t a rule that they do only  the minimum. Sainsbury’s, for example, were trailblazers in bringing the first Fairtrade certified coffee over from the war torn Democratic of Congo to market and the Co-operative have been key in growing the Fair Trade market.

Roll up roll up for the world market rollercoaster

When she was good she was very very good, but when she was bad she was horrid.

Such are the highs and lows of the rollercoaster ride that is the world market. Producers climb on with trepidation and along the journey will feel a mixture of elation, despair, fear, gratitude, anger and surprise. 

Right now the commodity price situation in Kerala (and globally) is good, very good. Prices are soaring almost across the board; rubber especially is at an all time high and only shows signs of going up and up. Just to give you an example of how much of a rollercoaster it is, 5 years ago the price of rubber was 67 rupees  per kg and now it is more than triple the price at 220 rupees per kg weeeeeeeeee! Alongside this coffee, spices and cashews are all healthy. 

The farmers of Fair Trade Alliance Kerala (FTAK) are educated about ‘the system,’ organized and will all be able to tell you the world market price. However many other disadvantaged small farmers , who are not part of a farmer organisation, have no means of finding out what the world market price is and instead will have to accept the price given to them by the middlemen who come and collect their crops. Farmers need a democratic organisation, such as FTAK, to act as a mediator between them and the external forces of the world market. Otherwise,  unfortunately, even when times are good for many in agriculture, this doesn’t extend to those right at the bottom.

The high world market prices lie in stark contrast to the situation 6 years ago when prices were devastatingly low, lower than the cost of production ,which meant many farmers were deep in a debt that they couldn’t pay off. Father Joy, a local priest and one of the founding members of FTAK explained:

“Kerala farmers are good honest people and when they found they couldn’t pay back their debt they were very unhappy and some were pushed to suicide. This was the same problem in other areas of India, for example with the cotton farmers. This was the reason why we began to mobilize and eventually formed FTAK.”

In contrast now, within the FTAK membership, the problem of farmer debt no longer exists to anywhere near the same extent. And there have been other initiatives by FTAK to set up sustainable sources of micro-credit so that farmers don’t have to rely on unscrupulous money lenders and high interest loans.  Also by guaranteeing a minimum prices FTAK is giving its members some sort of security and a means to budget and make investments for the future.

Lots and lots of rubber trees in Kerala!

However the problems don’t just lie in the low prices. There are also problems with very high prices too. As you drive around the Northern parts of Kerala you will start to see a familiar picture of rows and rows of tall straight trees with a white spiral curling around them. Then also many thin spindly newly planted trees as farmers uproot other crops and plant rubber, rubber and more rubber ca-ching! But in doing so the natural biodiversity of the land is eroded. FTAK seek to do something about this and although many of their membership produce rubber, monoculture plantations are not granted membership as FTAK see preserving biodiversity* as integral to their philosophy (and indeed all our futures).

High prices also bring along problems to the 100% Fair Trade Organisations (FTO’s)who already struggle with small margins and fierce competition from regular commercial enterprises, as the Fairtrade mark standards mean they have to pay above the world market price. Regular commercial companies are able to balance the risk of buying fairly traded commodities by simultaneously selling ‘unfair’ commodities. FTO’s  can not do this but to survive, they  must walk a fine line between ensuring that farmers are given a fair deal, whilst also selling things at an acceptable price to Western consumers.  If they drop away unable to compete with the mainstream businesses then producers will lose the companies who are set up precisely to support and grow their organisations.

Similarly the Fair Trade producer organisations, such as FTAK, have invested a lot to build and strengthen their association and membership base. High prices mean that it’s simpler for producers to sell directly to local traders without having the extra burdens that come with meeting the Fair Trade standards. A local trader can undermine the years of good work by the producer organisation in recruiting members away from the Fair Trade co-op.  In this way the partnership element of Fair Trade, which is a two way process, will need to be strong for the relationship to continue.

High prices have to paid by someone and so at some point this will be passed on to the consumer (wherever they are). When the high prices are for staple food crops then the effects are disastrous, we’ve all seen the footage of food riots across the world. And of course the poorest people, including small farmers who grow the crops, will be the worst effected as they have to spend the largest proportion of their income on feeding themselves and their family. To read about an FTAK project which seeks to make disadvantaged farmers more self sufficient click here.

We all know that on a rollercoaster it’s the uncertainty of when we will tip over the top and come soaring down that causes the knot in the pit of our stomach. Fair Trade is the only system that has some sort of security, a safety net, but in return and for it to continue, it needs commitment from all parties, including and most importantly from the producers.

*  Please note that sustaining biodiversity is a Fair Trade Alliance Kerala pre-requisite rather than one from the Fairtrade Labelling Organisation

How Fair Trade can make people first policies competitive

Some FTAK farmers that I met in Waynaud enjoying life

Kerala is a unique state in India. It has lots of things to boast about including a minimum wage, politically active and trade unionized citizens, high literacy etc etc (click here for lots more info). These achievements manifest themselves very visually to the visitor, I have been here for a month and a half and I have seen one beggar and no slums (I went to Mumbai and within the first 3 minutes I had seen 4 beggars, 2 of them beneath the age of 2, and I’d already seen the huge slum from the train window). It has been the subject of discussion for many social scientist and the unique ingredients have come to be known as the “Kerala Model’.

But the problem is, implementing all these standards come at a price and in the big world market race to the bottom, that price is too high to compete. So I sense that Kerala is at a bit of a crossroads; there is pressure from outside and within to do away with some of the rules around labour and wages. To put it into context a farm labourer would get paid around 200 rupees for a day’s work in Kerala, whereas the neighbouring state of Tamil Nadu pays about 40 rupees and so can afford to offer lower priced goods to the world market. So there’s no other option it seems but for Kerala to join the rest of India and do away with these people first policies.

Well hold on a minute… Fair Trade Alliance Kerala, in particular the promoter Tomy Matthew, would like to propose an alternative. There is a market where decent wages, labour rights and unions make you more, not less competitive. This is the Fair Trade market. This small but growing market offers a framework in which commodities that are produced to certain social and environmental standards can succeed.

Beyond Kerala there are other governments who are looking at how to encourage fair trading practices. The Brazilian government passed a law that will promote Fair Trade practices in government and society and other governments, like that in Malawi, resist neoliberal pressures to maintain minimum prices.

With this in mind, there is a conversation to be had about the role Fair Trade can play in preserving sustainable and fair farming practices which are implemented not just on a farm by farm basis, but on a state or even country scale. And the conversation needs to start now before the Kerala model is something just on paper, rather than in the land and with the people.

To read a more full discussion around the issues please email me on kate.fairtrade@gmail.com to receive a copy of 'Fair Trade and the Kerala Model’ by Tomy Matthew

Combating poverty in a market driven world

This was the topic discussed at a conference in Mumbai that I attended last week, along with about 200 international delegates. Amongst the varied arguments that were put forward, all pulling in different directions, the free market argument was brought up again and again. Will economic growth bring prosperity to the greatest number of people:‘a rising tide will raise all boats’?

I thought I’d stick to the analogy of the rising tide and look at the case of very small producers.

‘A rising tide will raise all boats’ assumes that everyone has a boat.

Small producers don’t have a boat; in this case a boat means access to markets and information on them. As Claribel David from the World Fair Trade Organisation explained, small producers have little or no land, huge price competition, exploitative middlemen, little or no access to credit and poor technology. In short they are in the water, without a boat… or a lifejacket… and they can’t swim. Economic theories proposed by academics don’t have a grasp of the reality on the ground; they take the bird’s eye view, when sometimes it is the worm’s eye view that we need.

As Josantony Joseph, an Advisor to the Indian Commissioner on Food Security, explained in what we’ve seen to date, market liberalization doesn’t seem to help the poor. It only helps people if they have already reached a ‘take off point’, for example you can see that the Indian middle class have an increased standard of life now since India’s economic boom, but yet still 77% of people in India live on less than 16 rupees a day (about 13p… not a lot… the equivalent of 3 cups of chai).

So how does Fair Trade fit in with this analogy? Fair Trade is a lifeboat? No, Fair Trade is trying to do something more than a rescue mission. Perhaps instead Fair Trade is a build your own boat kit, complete with instructions and information (that are much better than your usual flat pack info), and with an onboard navigation system.

If Fair Trade can help overcome some of the disadvantages that small producers face then it gives people the chance to benefit from the market driven world, that is unless Nick Hildyard from The Corner House (UK) is right and in the end turbo capitalism will cause a giant tsunami...?!

Trade not aid or aid through trade?

Animma Aroy with her cell meeting minute book

“Trade not aid or aid through trade?”

This was the challenge from Tomy Matthew, the promoter of Fair Trade Alliance Kerala (FTAK), to a group of visiting Traidcraft campaigners. He put forward that the narrative around Fair Trade, despite an initial acceptance that aid is disempowering, has crept back into the charity 'help the poor farmer' version.

Tomy is not alone in his concerns. In answer to the question posed by an interviewer for a Candian radio station 'if Fair Trade is NOT a poverty alleviation strategy, what is its purpose?' Frans Van der Hoff, the co-founder of the Fairtrade label,said:

“Getting a more democratic system into the market can build upon a world where everyone can live [well]. To alleviate poverty, I never said it, because I hate it, because it’s a world upside down. First you produce poverty and then the north all of a sudden says we will alleviate what we have produced. No, that doesn’t work. No, you have to go to the system which is producing poverty and create a quite different system… It’s an endeavor to correct the charity approach of Fair Trade which we hate. I buy so that the poor bugger can have a better deal. It’s ridiculous and that we don’t want…”

I'm coming back to this topic, that I briefly discussed in the Small Farmers. Big change blog post, as I have just got back from a visit to one of FTAK's 'social premium' projects in the hilly and beautiful Waynaud area. I have come back several pounds heavier from the generosity of my hosts and also with some food for thought.

The farmers' cooperative decided to spend some of their social premium on a project to see if was possible to increase the earnings of the very small isolated hill farmers of Waynaud; all whom fell beneath the poverty line and who weren't at that time part of the cooperative. They worked with local partners and selected a strip of land which included 34 farmer families to take part in the pilot. All the families were given the option to buy on credit cattle,pigs, chickens, cash and food crop seeds and were given three years to pay back the loan. 

 

Instantly the families got milk and eggs from the animals which they could then sell and over time they harvested the crops. Depending on their circumstances they selected a mixture of cash and food crops; coffee for example takes 3 years to yield so it's a longer term investment. Interestingly, and despite the complicated logistics of getting small quantities from these hard to reach farms, FTAK agreed to buy their crops so they were brought into the Fair Trade system, rather than just passive recipients.

The evaluation of the pilot showed some very impressive results, all farmers had increased their incomes and most had managed to more than double it e.g. a farmer named Susamma had increased her income from 19000 Rs in 2008 – 2009, to 34,100 Rs in 2009-2010. The group of farmers also formed a cell and collected a fee from each member every week in order that they can continue to provide micro-finance for future ventures. FTAK will now roll out the programme to other areas.

I was impressed and eek, dare I say it, yes the poor buggers are getting a better deal! I was impressed because it had concrete results, I was impressed because the leader of the cell was a strong smiling woman called Animma Aroy who kept impeccable records and accounts from the repayment and micro credit scheme. I was impressed because the cows and chickens that they got last year now had babies meaning their income would grow again and I was impressed because they've set something up that will continue by itself and that brings the most marginalised producers into the Fair Trade system.

The temptation now is fall back into that comfortable 'save a farmer' campaign line and write up this case study and shout about it to campaigners, but this would skew the reality of the FTAK farmers as this is just a tiny story from a few members of the 3,500 strong membership so I will resist! But it also shows to me that the social premium can be used to further the core aims of Fair Trade, rather than simply a pleasing distraction.

Life after farmers. How will we manage without them?

Kerala farmer and son

An informal and unscientific poll of the farmers that I’ve met so far in Kerala confirm that within the next decade or two we may be moseying along into a huge farming crisis as  NONE of the farmers thought their children would take over the family business. 

Kerala is a bit of an exceptional place as they have universal access to education resulting in 100% literacy. The educated young people inevitably go abroad or to the city to earn better money in office jobs. However that aside we can see this scenario being reenacted across the rest of the globe, for example in the UK and the US the average age of a farmer is 58 and in Kenya it’s 60.

There are lots of reasons for this. In all countries, low prices and the constant uncertain fluctuating market have pushed people away from farming. In others farming is a low status occupation, so even if the returns are good, a job elsewhere is preferred.

Cadbury’s recognized the problem and the threat this insecure situation posed to the long term viability of their business and so decided to invest in the supply chain through the Fairtrade system and also their own cocoa programme. The move, amongst other things, resulted in the Dairy Milk bar achieving Fairtrade certification and meant cocoa farming being a more attractive proposition for workers and young people in the area.

Another difficult truth is that the practically universally agreed with right of access to education for young people (especially dear to Fair Trade supporters), has an unintended other consequence: the traditional skills which for centuries have been passed down from generation to generation are getting lost as people learn about computers instead of farming.

I’m not saying that we should reverse the situation and if I was offered a job as a farmer I would turn it down straight away (pros: nice views, driving a tractor and fresh food. Cons: early starts, bad pay, bad weather, no holidays and never ending long hours). But it does need serious thought and debate in the Fair Trade world and beyond.

What on earth are we going to do when there are no more farmers?