What Is Fair to Expect of Fair Trade?

June 18, 2014

Several colleagues and I are still debating what we’ve learned about Fairtrade from the recent flurry of attention to the topic. The Fair Trade, Employment, and Poverty Reduction (FTEPR) project garnered a lot of attention when it reported that Fairtrade certification does not help extremely poor agricultural workers. My colleagues Matt Collin and Theo Talbott pointed out in an earlier blog post  that there was not enough evidence in the study to support that conclusion. They noted that the authors could not rule out unobserved factors that might explain the worker’s low wages and poor working conditions in areas with Fairtrade certification.

But is the impact of Fairtrade on wage laborers even the right question to ask? By design, the primary targets of Fairtrade certification are marginalized smallholder producers who are poor and who, by definition, rely primarily on their own and their family’s labor. For commodities such as coffee and cocoa, where smallholders are the majority of producers, Fairtrade International only certifies smallholder producer organizations. Fairtrade International also certifies some commodities that are typically produced by large-scale operations where hired labor is the norm. These include flowers and other commodities that are typically large-scale, as well as commodities like bananas and tea that both smallholder organizations and plantations produce. But smallholder organizations account for three quarters of certified operations and generate 90 percent of total Fairtrade sales revenues (see the most recent Fairtrade International monitoring report here).

Under those circumstances, why would anyone expect Fairtrade certification to have much impact on rural labor markets? We might still hope that certification would have positive spillovers on others in the area. But the fact that certified producers often sell only a fraction of their output on Fairtrade terms makes that even less likely. It would have been legitimate for the FTEPR researchers to argue that Fairtrade International has the wrong target. It doesn’t seem fair, however, to criticize Fairtrade for not helping workers that it is not primarily designed to help.

If the authors nevertheless wanted to better understand Fairtrade’s impact on wage laborers, why not examine the subset of commodities where Fairtrade does target them? Yet, only one of the four certified producer organizations in the study is a large-scale, hired labor organization (producing flowers). There are several large-scale tea operations in East Africa, but the authors selected a certified tea organization comprised of smallholder producers. The other two cases examine smallholder organizations producing coffee.

So we don’t know from the FTEPR study whether Fairtrade works for the smallholders, which are the primary target, because that is not the question the authors asked. (The fact that small producers are willing to bear the costs of certification suggests they do see benefits, however.) And we don’t know whether Fairtrade works for wage laborers because neither the study design nor the case selection was well-suited to answering that question.

There is an interesting experiment underway that could help us better understand the opportunities and limitations of Fairtrade. Around the same time that the FTEPR team was launching its research, Fairtrade International’s US chapter withdrew. Fair Trade USA founder and President Paul Rice did not reject the traditional Fairtrade model as a failure. Rather, he believed it was not reaching as many of the rural poor as it might. To reach more of those wage laborers, the revised model allows certification of large-scale, hired labor organizations for coffee and other commodities dominated by smallholders. It will also certify smallholders that are not members of cooperative organizations. This revised model may not succeed, but it should shed more light on the questions about whether or how fair trade certification improves livelihoods, and for whom.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.