What Kate found in India is an important issue for Fair Trade to address as a global movement, and for the Southern Fair Trade Movement to ponder. What she observed is Shop for Change wanting to be competitive in a local market, but they are overly centered on cutting costs. Unfortunately for the producers, the primary cost-cutting measure they employ is a reduction in the wages of the poor. However, there are alternative measures that need to be explored.
Admittedly, Fair Trade products retail higher than non-Fair Trade products (in the South, I estimate 5-10% higher) and there are a few key reason for that. Firstly, the producer is paid a fair wage, not a subsistence level wage. Secondly, the nature of working with small producer groups entails higher costs per product versus large scale manufacturing which can reduce costs and overhead through mass production. Also large production will decrease transportation costs per piece and so on.
What those in the North seldom perceive is the immense pressure in the South for FTOs to reduce prices in order to be “competitive” on local markets. Competitive in the South is not comparable to competitive in the North. Firstly, pressure exists because of the need to establish a foothold in the marketplace where little-to-no knowledge of Fair Trade exists. In the previous posts, I presented the importance of advocacy for trade justice parallel to retailing Fair Trade in the South as a showcase on how established principles can be incorporated as a business model, thereby localizing Fair Trade.
Crafts are made by locals and often sold to buyers or agents who represent the bottom rung in a long chain of middlemen leading to larger companies, which wholesale locally or export. There is a power relationship that exists between local artisans and the buyers, many of whom the Fair Trade producers have had some degree of experience in dealing with. In short, buyers dictate the price in a take-it-or-leave-it offer. For buyers, there is no room for discussion on ethics or utilization of child labor; they are there to collect select products and transport them out of the village.
What is happening in the local markets of the South?
What about the products that are exported to Northern markets?
What is Competitive?
Keep in mind that Fair Trade is not a charity, it is a business model. Producers don't want your sympathy, they want empowerment through opportunity!
Value-added measures: When we visited the mountain provinces of the northern Philippines, we saw firsthand an example of value-added measures. I wrote about our visit in Introducing Fair Trade high above the Clouds. Rather than selling coffee beans at fluctuating free market prices (30-60 Pecos per kg), the farmers cooperative was buying the beans of their members at a fixed price of 100 Pecos per kg, roasting, packaging and serving coffee from their fields in a cooperative cafe. Not only did they value-add, they localized Fair Trade; they made Fair Trade tangible to the community. The end product was selling for 400-500 Pecos per kg and the dividends are utilized in community development projects and divided amongst the members.
Localizing Fair Trade in communities also means having appropriate products. Chou and I met with a family business in Mindanao, Philippines. Go Bananas are producing banana chips for the local market, and over the past few years, they have become increasingly popular! What started out as a hobby, turned into a venture that is on the cusp of becoming an international export. Locally grown bananas, "organic by neglect" as Mr. Manuel describes them, are bought from farmer groups he organized to ensure local and neighboring communities benefit from the trade.
For Small Producer Groups or Cooperatives...
A cooperative must learn what businesses understand so clearly. Firstly, if you are looking to cut costs, look internally and analyze the processes and systems utilized. Check for what time saving or energy saving measures you can make. To operate like a business is not to depend on charity, but to self-mobilize.
Secondly, cooperative members need to understand that they need reinvest in training and appropriate technologies. To reinvest in their own production, whether it is to cut material processing costs, or save time or reduce wasted energy, they need to take the same measures as a business without sacrificing jobs or wages. The producer groups that are proactive are the most likely to succeed.
Lastly, for cooperatives that are in need of purchasing equipment, there are ways to raise funds within your organization. If your cooperative is in need of funds for a costly purchase and a loan is not possible, take the approach of Dr. Muhammad Yunus, founder of Grameen Bank. However, use his approach as a means to generate capital versus paying back an existing loan. Simply asking each member to contribute a small amount once a week over a period of a few months will generate a substantial amount of capital. Producers investing in their own cooperative; that is empowerment and that is Fair Trade!
It is my personal hope that this post will stimulate a discourse on what it means to be competitive in Southern markets and how it differs from competitive in markets of the North. If you have any ideas or suggestions, please feel free to comment below.
Mitch Teberg, MA