Well, of all the people I expected to be railing against, I’m as surprised as you no doubt are to find that the first people to appear in my sights are the Fairtrade Foundation. I am writing this post on Fairtrade very carefully, (at least it starts out that way), because, although we’ve pretty much decided that Fairtrade (as in the foundation, not the concept) isn’t all it’s cracked up to be, they have at least advertised the concept of trading fairly to a very wide audience, and this is definitely going on the right direction.

Finding fault with an organization who’s heart is in the right place, even if the evidence that they are benefiting their producers isn‘t there, is difficult to do. Perhaps they’ll consider the new wave of criticism coming their way and reassess their strategy.

Why bother with accreditation? Accreditation makes it easy for people to know you keep to specific standards. It’s a matter of trust; in general we believe that organizations like Fairtrade and the Soil Association are neutral assessment bodies unencumbered by the political or financial concerns that might compromise their judgment. When we want to buy organic food in the UK we believe we can trust the organic claims if we see the Soil Association logo, and when we want to make sure that what we’re buying has been fairly traded, generally we look for the Fairtrade logo, because we believe that this means that the producers received a fair deal. It makes sense then that if you want to tell people that your own products are organic and fairly traded you’d get them certified with the Soil Association and Fairtrade. Until recently I never questioned that this would be the way for us to go, but there is more and more evidence emerging that Fairtrade fails its producers, and that its main benefactors are the businesses who are associated with the Fairtrade brand, and not the producers they claim to support.

(Shock, horror, surely this must be blasphemous I hear you cry. If this is hard to believe, read “Stewards of Virtue? The Ethical Dilemma of CSR in African Agriculture” by Michael E. Blowfield and Catherine S. Dolan. If you’re not an economist you may find a dictionary useful, although it becomes a much easier read from page nine onwards. There is also another paper due out later this year that looks specifically at a Fairtrade tea producer in Kenya, and the effects Fairtrade has had on them, also by Blowfield and Dolan – it’s enough to make you breathless. I went to hear Dr Blowfield speak recently in Oxford and I have to say it left me feeling depressed. This post is already a long one, so I’ll tell you what he said in another post. The post below doesn’t cover the stuff he talked about – these are all my own ramblings …)

Fairtrade is an organization that set itself up in 1998, conveniently cornering the market by calling themselves ‘Fairtrade’, and then set about establishing the criteria against which we judge whether something is fairly traded or not. Companies signed up, it became an established brand, and we were led to believe that in some places in the world the problems of poverty and bad trade practices were now being taken care of. In the public mind the Fairtrade Foundation became synonymous with trading fairly. Through clever marketing and lobbying they established themselves as the unquestioned authority on fair trade (one of their stated aims), and although they have established themselves as the regulators, they are not themselves regulated by anyone. What started as a progressive, almost anti-establishment, bottom-up movement exposing unfair and exploitative trading practices, has become an established top-down accreditation body; a gatekeeper with the power to redefine the original concept. That their definition and practice of fair trade might be quite different from our own isn’t something we even consider. I don’t think this is a problem just for the Fairtrade Foundation, but a problem for many emerging ‘progressive’ organizations, and it is also a problem for us, because we trust these unregulated organizations to maintain the moral high ground. In an attempt to quantify the meaning of ‘fair trade’ it appears they have redefined that meaning, and at the very least they have changed the order of priorities of the principles of fair trade. The ‘fair trade’ that Fairtrade promotes, and the ‘fair trade’ that we believe in appears, after some rooting around, to be quite different. (Ticking a list of boxes on another continent whilst avoiding speaking directly to the community about their messy issues isn’t what I envisioned as fair trade).

My uninformed understanding of Fairtrade was that it is primarily there to benefit producers. By paying a decent rate for goods and services, producers have more money to benefit their own communities as they see fit, and develop the kind of multilayered economy we find in the West. I thought it only obvious that a fair trade organization would enable people to grow their own economy, establish their own infrastructure and even establish their own charitable organizations – like we have in the West… I also assumed that the criteria to judge whether something was fairly traded or not was established by the producers themselves, and in general I expected a thoroughly equitable relationship between supplier and consumer rather than the exploitative one favored since Europeans first set sail to distant lands. A form of partnership that radically changed the existing colonial dynamic where, for example, poor rural farmers rely on the handouts and kindness offered by the rich developed nations rather than on the fruits of their own labor (my bias may be shining through here…), thus effectively preventing developing economies from ever establishing themselves as ‘developed’ economies. I expected a lot more respect and an end to the patronizing dependency that charity can bring. (How naive was I!)

It was with this in mind that I visited the Fairtrade website to see how our Nepali suppliers might benefit from a little Fairtrade intervention. Under the heading ‘Facts and Figures’, where I expected to find facts and figures about the benefit to farmers and the like, I found two categories: ‘Sales of Fairtrade certified products in the UK’ and ‘Consumer awareness of the FAIRTRADE Mark’, with pages of data on how businesses branded as Fairtrade were doing (very well it must be said). Surprisingly there were no facts and figures on the supposed benefactors of the Fairtrade brand, the actual producers of these Fairtrade goods. Instead I found lots of encouragement on how we, as a UK company, would benefit from being branded Fairtrade.

There seems to be a very clear division between the businesses using the brand, and their suppliers benefiting from the brand, and it appears from their own website that the actual benefactors are the UK businesses. I assume from their list of newly built schools, health facilities, roads and the anecdotal stories from some of the suppliers that this charity-like benefit is the way Fairtrade think it best to ‘reward’ their suppliers. (It’s not enough for me to know how many schools have been built. A school is just a building; I’d like to know how many children attend those schools, what the community genuinely thinks of those schools, and how many of those schools are standing empty. I’d like to know who decided to build the schools in the first place.) I have to say I didn’t expect to see an organization that promoted trade, using methods more akin to charities as a way to benefit suppliers. (They are advertising for volunteers on their site.)

I thought the actual fair trade was the benefit.

As my main primary concern is for the workers and not about how much mileage can be gained from being associated with what is now a large brand, I’m more interested to see how, through fair trade, communities have been able to establish their own facilities, and have been able to raise themselves out of poverty. Something beyond a few personal anecdotes and a list of how many schools the kind benefactors have built. Perhaps some data a little like the data provided for the UK companies!

Here is how Fairtrade describe themselves:

• “The Fairtrade Foundation is the independent non-profit organisation that licenses use of the FAIRTRADE Mark on products in the UK in accordance with internationally agreed Fairtrade standards.” (Obviously one needs to find out what these standards are somewhere else).

Here is their mission statement:

• “being a passionate and ambitious development organisation committed to tackling poverty and injustice through trade
• using certification and product labelling, through the FAIRTRADE Mark, as a tool for our development goals
• bringing together producers and consumers in a citizens’ movement for change
• being recognised as the UK’s leading authority on Fairtrade”

So straight off I realize I have a very different understanding of the role of trade. Their first mission statement leaves me cold, in an incandescent kind of way. I don’t believe it’s the job of companies to build infrastructure and encourage democracy (monetizing democracy can‘t be a good thing!) It is outrageously patronizing.
It appears that Fairtrade is trying to play the role that we used to believe should be played by sound governments: regulating against injustice (including trade injustices), encouraging democracy and eliminating poverty.
This mash-up of responsible trading and political agenda is condescending. Would we be happy if large trading bodies believed they held the key to our democracy? Would you like to hand your chances of poverty elimination and justice over to Sainsbury’s, Tesco’s or Starbucks, all of whom use the Fairtrade branding? I know I wouldn’t. Outrageous.
Two points in the mission statement pertain to benefits for UK companies, so by my reading the only benefit Fairtrade is offering their producers (other than the citizens movement for change whatever that might mean to an itinerant farmer) is that they will help you to get what you should be getting from your government. They will make you dependant on UK companies for these rights, rather than dependent on yourselves and your ability to form and run sensible governments.

Clearly this isn’t something I can offer to the Nepalese, who are very much aware of their own right to govern themselves.

As an aside, when we asked our Nepalese partners if they’d heard of Fairtrade, and whether they would want to be part of it, they went to great lengths to assure us they would trade fairly with us (as in they wouldn’t diddle us). That put us nicely in our place.

This is possibly needless to say, but we’ve decided not to hand over our social responsibilities to an organisation in the hope that they know what they’re doing, and we’ve decided to steer clear of using our little business as a great movement for the lofty ideals of democracy etc. Privatising people’s democratic rights just isn’t my thing… Also, there have been enough stories of brand new empty schools built in the wrong places and with no teachers by well meaning charities who never got round to asking the communities they were benefitting what they really wanted. How can making decisions on someone else’s behalf ever empower them?

We’d rather work with the socially responsible suppliers we found ourselves, the Nepalese social entrepreneurs or ‘middle people’ (as in ‘middle men’, except that they’re not all men) others are trying to eliminate. We’ll find other ways to help (perhaps even talking to our suppliers and seeing what they’d like help with – how novel is that!).
The notion of the rich cousins from over the seas helping out the poor and destitute cousins in the developing world without ever asking them what it is they might want is not a good strategy for mutual pride and independence. (Ok, that’s probably enough of that for now.)

There are a number of people trading fairly who do so without using branding to increase their market share, but instead put their efforts into ensuring that their trading partners aren’t being exploited, whilst also helping them set up stuff that they find difficult to organise. I think we’ll be joining their ranks.

Whilst discussing where this leaves us, we ended up discussing all the ethical pitfalls in setting up a business that trades in goods produced in a developing country, and we’ve come to what for us is a radical conclusion, but the only logical one.

Long term aid prolongs poverty. It’s for this reason that companies in the developed world are not so willing to invest in genuine entrepreneurs in the developing world (surely not!), however, they are happy to give aid. It is not in the interests of the developed partners to see their developing partners move from poverty to prosperity. If this were to happen the margins that they rely on would disappear, and their businesses would collapse. (England can no longer afford to produce anything, as the cost of production in a developed economy is high). Far better to keep them dependant, and long-term aid is a good way to do this.

We realize that although trade with our partners in Nepal is helpful to them now, our whole business model is essentially predicated upon Nepal’s relative poverty. If the value of the Rupee was to strengthen significantly against the British pound our margins would disappear, and so would our business. In fact the only way for the business to survive after this point would be to cut out the ‘middle people’ (ourselves) and hand the business over to our Nepali partners. (I realize that this is a different understanding of which middle people should be cut-out. Other business models will prefer to cut out their Nepali middle people, and keep themselves in the picture, and this is indeed the direction most ‘fair trade’ businesses seem to take, although they call it working directly with the farmers/weavers etc. However the results of this model are what we see today in countries that have never developed a multi-layered economy, because no-one invested in the entrepreneurs).

So, this is our conclusion: we will work with our Nepali partners and attempt to help them develop their own economic growth. When the margins in our own business disappear due to their relative economic growth, we will then hand the business over to them (instead of charging an absolute fortune for our products, relative to the market). This will be our exit strategy. From our perspective if we followed any other strategy we would be perpetuating a poverty model in Nepal. We are not so foolish as to believe we can single handedly change the Nepali economy, but the advisors all say you should start your business with the exit strategy in mind, as it provides a clear model and pathway for the development of the business.

This is a radically different approach to the one we’ve been following up to now; in fact last night was a watershed moment.

Neither of us are economists or business school graduates and we may have come to a conclusion that appears rather crazy, so please feel free to point out the faults in our argument…