Fairtrade Responds to the Institute of Economic Affairs Report

09 November 2010

A recent report titled, “Fairtrade Without the Froth,” was released by the Institute of Economic Affairs, a UK-based free-market think tank. The report by Sushil Mohan looks into claims made by the Fairtrade system and the overall impact of Fairtrade efforts. While the report is not overly critical of the Fairtrade system and brings many important facts to light, it has elicited a number of critical media articles in part due to the IEA’s press release.

The Institute of Economic Affairs is wrong to suggest that Fairtrade does not offer a long-term strategy for development. In Mali, Fairtrade certified organic cotton farmers earn 50% more than conventional farmers. Thanks to the increased income, 95% of these farmers’ children are able to attend school. This is more than double the national average in one of the most impoverished nations on earth. Increasing access to education is well recognized as one of the most effective investments in any country’s long-term development.

Whilst Fairtrade does work with poor rural communities in some middle income countries, it is also wrong to suggest that we do not focus on the poorest countries. In fact, of the 870,000 small scale farmers in the Fairtrade system, 47% are in East Africa alone. We work with raisin farmers in Afghanistan, coffee growers in the Democratic Republic of Congo, Rwanda, Ethiopia and Tanzania and cocoa farmers in Cote d’Ivoire to name just a few. Read about other successful Fairtrade producers here.

It is true that there is a cost to certification, as our system uses professional auditors. The figure of $1,570 quoted as a certification cost is the amount charged for a group representing up to 50 farmers. Producer organizations often receive support from traders or NGOs in meeting costs. We agree that cost should not be a barrier to joining the Fairtrade system and to that end we offer the Producer Certification Fund, which covers up to 75% of the certification fee for eligible organizations.

In addition to organizational support, 100% of the Fairtrade Premium – an additional sum of money above the selling price to support local development efforts – goes to the producer organizations and this is audited. Farmers and workers decide democratically how to invest this money according to local priorities. It is often spent on maternal health centres, water supply projects, climate change adaption and mitigation, business development, education initiatives and pensions, among many other efforts.

At the consumer level, there is now such a wide range of Fairtrade products available that often they do not have to pay more – the IEA report itself acknowledges that many companies do not increase the price of products when they start to carry the FAIRTRADE Mark.

The Fairtrade movement was born out of a desire to improve the benefits of trade for marginalized small scale farmers and workers in developing countries. The Fairtrade movement has also helped bring attention to ways trade can work for poor communities and producers.

Huge US and EU subsidies continue to deny poor farmers access to markets, while retail pressure has forced down costs and thus wages for farmers and workers. These are issues that continue to fire up Fairtrade pioneers, campaigners, supporters and the millions of shoppers around the world who choose Fairtrade products as one way to play their part in redressing the balance.

 
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