What is Fairtrade? A Case Study
Fairtrade is a commercial brand marketed as an ethical business model. The owner, the Fairtrade Foundation, persuades clients to offer fair prices to consumers, deal with clients justly, and provide financial support to producers in developing countries (Griffiths, 2012). Although the model is promoted as supporting fairness in the market, its economic implications on underprivileged growers prove that it fails to achieve the suggested benefits.
Fairtrade was initiated in reaction to the serious struggles among coffee producers in Mexico after the world prices of the commodity collapsed in the 1980s. Until 1989, the global market maintained a balance in the demand and supply of the product. However, a decline in prices and unfair competition since the late 1980s created challenges for farmers in developing nations (Fairtrade Foundation, 2019). The system was created as an attempt to restore order in the international marketplace for coffee and help producers to overcome the implications of poverty.
One of the arguments in support of Fairtrade emanates from its vision. The idea behind the business model is to create a world where workers and farmers receive income worth their effort. The system aims at achieving a responsible business globally. In many countries, especially in third-world nations, producers are suffering in poverty regardless of their determination to market their products internationally. Therefore, Fairtrade involves efforts to ensure fair deals for manufacturers. The initiative helps the producers to overcome the effect of low prices that keep them disadvantaged regardless of their hard work.
Strong evidence from research and commissioned studies indicates the economic impact of Fairtrade. A review of literature conducted by Nelson and Pound (2009) revealed the financial benefits of Fairtrade for smallholder farming families that are capable of creating producer organizations and sending to the international market products with correct specifications. The process achieves higher returns and more stable incomes compared to the traditional competitive marketplace. Producers who sell their goods at the Fairtrade price manage to generate more revenue than in the normal environment. As a result, the process helps them to overcome the adverse effects of poverty.
Regardless of the claims that some money is paid to poor producers through Fairtrade, the organization does not monitor whether those funds reach the intended people. The financial support passes through a long channel before the impoverished farmers finally benefit from it. The lack of a mechanism to monitor and control the money places the plan at risk of being misused. Research shows no evidence for the argument that “Fairtrade guarantees a fair price for the producer” (Griffiths, 2012). Therefore, regardless of the noble intention of the Fairtrade model, it lacks evidence of success in protecting the interests of poor producers.
Besides, a considerable portion of the money intended for the producers in emerging economies is spent to meet the Fairtrade criteria for certification. The organization requires the primary cooperatives, exporting companies, and farmers to meet the conditions for obtaining a certificate. They should meet the criteria for all their products regardless of whether they receive Fairtrade branded. Although they would wish to sell their goods at higher prices, the international market for branded products is limited (Griffiths, 2012). Some cooperatives struggle to trade 10 to 15 percent of their overall products as Fairtrade at an extra cost that is even higher than what they earn from the goods. Eventually, they spend on certification without any guarantee of benefiting from the business model.
Although Fairtrade coffee appears like a beneficial business model that protects producers in developing countries, I would advise Barry Manilow to use conventional products. The arrangement fails to provide the anticipated benefits to farmers in developing nations. The certification requirements have added an extra cost burden to the people expected to profit from the system. Hence, the process is a presentation of unethical and irresponsible business, which is presented as helpful but, in the end, creates a burden on poor producers. Besides, Fairtrade is contributing to an uneven economic advantage for growers, leading to low-quality coffee sold to consumers.
Fairtrade Foundation. (2019). About coffee. Retrieved from https://www.fairtrade.org.uk/en/farmers-and-workers/coffee/about-coffee
Griffiths, P. (2012). Ethical objections to Fairtrade. Journal of Business Ethics, 105(3), 357-373.
Nelson, V., & Pound, B. (2009). The last ten years: A comprehensive review of the literature on the impact of Fairtrade. Natural Resources Institute, 1-48.