Fair trade - is it fair?

A number of years ago Craig was approached by a small commercial venture seeking business advice. Nothing unusual in that - he often acts as a business consultant. The difference was that this was a fair trade venture. To cut an incredibly long story short Craig became very cynical about the ethics of the fair trade movement, what really exists beneath the surface and the business models of many of the large fairtrade businesses in our country. The small commercial venture veered away from fairtrade towards 'main stream' trade which surprised me immensely as the founder of the enterprise had worked with a hardcore free trade organisation for over ten years.

Over the past few years fairtrade has occasionally come up in conversation and Craig's view hasn't changed. I didn't necessarily agree with him and have continued where possible (availability and price permitting) to buy fairly traded products.

Last night Hermione, Craig and I braved the driving rain and headed off to a fairtrade event. I suspect there will be events on in many cities as it is Fairtrade Fortnight. The event was essentially run by the marketing manager (or was it director?) of Divine Chocolate. He talked about fairtrade generally, Divine specifically and the increasing success of fairtrade. He had with him a farmer from Ghana who with the help of a slide show explained the process by which cocoa is grown, harvested, and processed.

The information about the cocoa farms, harvesting and processing was very interesting. What also interested me was Divine's business model. I suddenly had a 'lights on' moment and saw one of the gross injustices of some fairtrade business models.

The cocoa is bought from the farmers in a crude state and they are given a percentage of that price. The cocoa then progresses up the supply chain where it undergoes various processes to turn it into chocolate, wrap it, pack it etc. Although all of these businesses are proud to be involved in a fairtrade industry not one of them gives anything back to the farmers. They all add value to the product and add to their own coffers - but not the farmers. The chocolate finally reaches Divine where it is sold on for retail. The profits Divine make are in part (less than 50%) reinvested in the farming co-operative - the rest of the profits go to Divine shareholders, not fairtrade farmers. The biggest uplift in product value is at the retail end - again fairtrade farmers don't see a penny of this.

I stand to be corrected in my understanding of the above business model - but this is how I see it right now - and I'm not impressed.

There are lots of retailers out there who bang their drum about supporting fair trade but what are they really giving back? Anything? Nothing? Okay, by bringing the product to the consumer they are supporting a supply chain which sees fairtrade farmers reap a small benefit, but that's it. They're not giving anything in a financial sense are they?

What's the solution? I don't know. A lot of people are put off from buying fair trade because of the price premium. Perhaps one possible solution would be if retailers were to cut their profit margin to a level by which fairtrade could compete on an even playing field as regard to retail price. This wouldn't increase the per unit profit to the fairtrade farmers but could possibly increase the through put as demand could grow amongst consumers if they didn't have to pay a premium.

As you can probably tell I'm not hugely knowledgeable about this and would welcome input from anyone who has any thoughts. I guess I'm just at that stage of scratching my head and thinking that perhaps there is a whole lot more to this than meets the eye. Perhaps it's just not as fair as some would like us to believe and may be there are ways in which it could be made much fairer (in an ideal world that is).

It was an interesting evening. We enjoyed the chocolate samples and sitting in an Italian restaurant, (check out your local Pizza Express they currently have a two for one deal on), discussing fairtrade ethics over a delicious pizza, I had a smug home ed moment knowing we possibly wouldn't have the flexibility to do such things if we had made different life choices.