Date: Fri, 5 Sep 2014 21:54:20 +0200
Fairtrade is an unjust movement that serves the rich
The narrowness of the system favours Latin America over Africa and Asia and
is beyond the reach of many developing countries
* Ndongo Samba Sylla
* Friday 5 September 2014 07.00 BST
*
<http://www.theguardian.com/global-development/2014/sep/05/fairtrade-unjust-
movement-serves-rich#start-of-comments> Jump to comments (40)
The unequal distribution of the gains of Fairtrade (FT) derives in a large
part from the characteristics of certification. The certification system
presents a twofold bias against the poorest developing countries. First,
there are considerations related to the costs of certification. These being
the same everywhere, they are relatively more expensive for the most
disadvantaged countries, all other things being equal. Then, due to its
sliding-scale price structure, certification is less costly for large
producer organisations than for smaller ones. Finally, the cost of
compliance with FT standards (changes in agricultural and administrative
practices that often lead to an increase in working hours) is higher for
small organisations due to their lower productivity and lower economies of
scale.
FT-certified articles tend to be based on products usually exported by Latin
American countries. Coffee represents 36% of certification demand. Tea
(9.3%), fresh fruit and vegetables (9.1%) and bananas (8%) complete the list
of top certified products in 2009. One out of two FT-certified products is
either coffee, bananas or cocoa. In terms of export revenue, coffee is also
the most sold FT product, at 47%, followed by bananas at 18.8%. Coffee and
bananas account for two-thirds of export revenue generated by FT. Yet, Latin
America accounts for 263 out of the 317 coffee certifications granted in
2009 (or 83% of certifications) and 70 out of the 71 banana certifications.
The Fair Trade Scandal book coverThe Fair Trade Scandal by Ndongo Samba
Sylla. Photograph: Pluto Press
Latin America enjoys a double benefit compared with Africa and Asia, namely
that certification is less costly in its case and FT markets are dominated
by its main exports. The result of this bias is that Latin America accounts
for 56% of effective certification demand against 29% for Africa, 14% for
Asia and 1% for Oceania. Though Latin American countries are no doubt among
the most unequal in the world, they are certainly not among the poorest.
Mexico is the first country where FT was tried out. Yet this OECD member
state accounts for nearly a quarter of the GDP of Latin America and the
Caribbean. Its GDP is actually higher than that of the whole of sub-Saharan
Africa. Seen from this angle, it would seem that the FT system was biased
right from the start.
FT no doubt helps poor and vulnerable producers, but it certainly is not at
the service of the poorest. Effective certification demand is positively
correlated to country income. Countries ranked by the World Bank as upper
middle-income account for 54% of producer organisations having received FT
certification against 21% in the case of low-income countries. As for least
developed countries (LDCs), they only account for 13.5% of effective
certification demand. Whatever definition of poverty and economic
vulnerability is used, the conclusion is the same: FT tends to exclude the
poorest countries.
Some argue that in rich countries such as Mexico, there are huge social and
economic inequalities as a result of which some populations find themselves
in a situation of extreme poverty. This is undeniable, but not convincing.
First, this argument does not explain why within these inegalitarian
countries, the least poor groups are generally selected by FT. Then, the
criterion used to justify which nations deserve to enter the FT system is
contradictory. France, for example, is a very rich country. Yet it has many
poor workers and farmers. So why not promote FT in France, as some have
argued, or in the US or UK? FT protagonists will argue that these countries
can tackle their own problems, as they have the means to do so. But this is
also the case of Mexico and of the richest developing countries. Better
still, differences in income between France and Mexico are much less
pronounced than between Mexico and LDCs. If we choose to favour Mexico over
France based on the need criterion, the same logic should mean favouring the
poorest countries at the expense of wealthier developing countries.
Some countries are highly dependent upon the export of a limited number of
primary products. The slightest price variation can have a significant
impact on their economies. Within the FT system, dependent countries are
underrepresented, whereas those countries with the most diversified exports
are overrepresented.
Let us take the case of coffee, a product with a major distributive
advantage, as it is mostly produced by small producer organisations.
Ethiopia and Burundi are among the countries most dependent on coffee.
Coffee accounts for 34% and 26% of their export revenue, respectively. For
both these countries, only three FT coffee certifications were issued in
2009. In contrast, Mexico and Peru received 42 and 57 certifications,
respectively, which represents nearly 31% of the effective certification
demand for coffee. Yet these two economies are relatively diversified and,
at any rate, coffee exports account for less than 2% of their export
revenue.
In Latin America, Honduras and Nicaragua are two countries relying greatly
on coffee. In relative terms, their dependency on coffee is at least 10
times higher than that of Mexico and Peru. But their share of certification
demand is lower. FT bananas, cocoa and cotton follow a similar narrative.
The countries most dependent on these products are underrepresented in the
FT system. Among flagship products, only FT tea seems to be an exception.
Yet, one of its specificities (as for bananas, flowers and plants, fruit and
vegetables) is that it is produced primarily by male and female wage workers
in plantations.
This exclusion of LDCs and other vulnerable developing countries is not the
result of a deliberate choice by FT labelling initiatives. Indeed, the
movement especially seeks to help those that already are on its "path", in
other words, producer organisations showing a development potential and
organisational predispositions.
The path taken by FT is much too narrow for poor countries to tread. FT
chose to specialise in the trade of agricultural products. It is true that
LDCs are generally countries where the labour force is primarily employed in
agriculture. The problem is, however, that LDCs are often dependent to a
greater extent on the export of non-agricultural primary products. UN trade
body <http://unctad.org/en/Pages/Home.aspx> Unctad only ranks 11 out of a
total of 49 countries as exporters of agricultural products (over half of
export revenue). To make matters more complex, most LDCs are net importers
of food products. With the exception of three countries, all LDCs are part
of the FT category defined by the UN's Food and Agriculture Organisation as
low-income food-deficit countries.
Therefore, FT tends to mostly benefit Latin American countries because this
region is a net exporter of agricultural products. Argentina, for instance,
draws half of its export revenue from agricultural products. To put things
differently, agriculture in Latin America is mostly focused on exports,
whereas for African and Asian LDCs, agriculture serves a subsistence
purpose.
In a sense, the "mistake" made by founders of FT and of the movement that
they helped to establish was to believe that what applied to the Latin
American context could also work in other developing regions. If FT had been
born in the African context, it would probably have had a greater focus on
mining or petroleum products. Likewise, if it had been inspired in Asia, it
would probably have been more specialised in the trade of textile products
and clothing.
It seems in reality that international trade is all about "clubs": all other
things being equal, the rich trade more with other rich than with the poor.
This is justified by their different levels of development. Evidence of this
is that, outside of all plutocratic logic, it is difficult to identify a
consistent pattern to the expansion of FT certification in some areas of the
globe. In sub-Saharan Africa, the country with the richest economy (in GDP
terms), South Africa, tops FT certification demand with 54 out of a total of
260 in 2009. Its two major FT products are fresh fruit and vegetables, and
wine grapes, products that are not part of the country's top 10 exports. In
Asia, India accounted for 56 of the 124 FT certifications that were granted
in 2009. Its two major FT products are cotton and tea.
In a nutshell, although low, the gains of FT for the most part go to Latin
American countries. In its global operations, FT does not partake in a logic
of international redistribution in favour of the poorest countries, or even
of dependent countries. In reality, this movement seems to follow a
plutocratic logic, in other words, one that serves the government of the
rich.
What is striking is that the protagonists and supporters of FT still have
not realised this. The funniest part is that these detractors of free trade
are usually unaware that each cup of Max Havelaar coffee that is drunk in
the world is a tribute paid to the glory of "Mr Market".
. This is an edited extract from
<http://www.plutobooks.com/display.asp?K=9780745334240&st1=fair%2Btrade&sf1=
kword_index%2Cpublisher&sort=sort_pluto&m=3&dc=5> The Fair Trade Scandal:
Marketing Poverty to Benefit the Rich by Ndongo Samba Sylla, published by
Pluto Press
(image/jpeg attachment: image001.jpg)