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