Interview | Wednesday, 14 May 2008

Fair trade: not just for hippies

Interviewing academic and fair trade proponent Vince Caruana, David Darmanin discovers whether the fair trade phenomenon will ever hit Malta with the same success as in other EU countries

Although Malta is still very much at its early stages in this sector, sales of fair trade-items across the EU are growing at the staggering rate of 20 per cent every year. One cannot therefore the baby steps Koperattiva Kummerċ Ġust (KKG) are taking as one day, they plan to reach international standards of the ‘Fair-Trade Towns’ and ‘Fair-Trade government tenders’ kind.
“Fair trade began when its proponents started recognising that trade in the south needs to be more just, and that emarginated traders need to be included in a level-playing field market,” Vince Caruana started.
Caruana lectures at the centre for environmental education research at university, while he is very active in a national platform made up of 13 local NGOs involved in overseas development - SKOP, which he chairs. Caruana was also one of the main founders of KKG, the co-operative launching the fair trade concept in Malta 10 years ago.
“Fair Trade co-operatives would normally work with those emarginated from the trading area, and it does not necessarily cover all areas of the south, or only the south. Fair-trade also takes the empowerment of women producers very seriously, as world statistics show that poverty hits mostly women, by 70 per cent in fact,” he said, clearly struggling with trying to simplify the concept as much as possible.
When KKG was launched in Malta, the founders chose not to stop at just selling fair-trade products. “This was not our primary objective when we started, and neither is it today,” Caruana explained.
“We set up KKG mainly to educate the public on the injustices of the market – such as sweat shops and child labour. KKG primarily focuses on education, informing on what really lies behind the production of certain products while highlighting the potential of fair trade. We also needed to facilitate the supply of fair trade products in the local market, so we opened a specialised shop in Valletta, called l-Arka,” he said.
On the international front, fair trade works by means of importer co-operatives setting up partnerships with emarginated producers in developing countries.
“The relationship between the producer and the importer goes beyond the standard supply-resale setup. Fair trade partnerships often rely on intercultural exchange. This would require the importer to thoroughly analyse a product and its potential to be sold and distributed in the EU as well as the setting up of an exchange mechanism for the producer to be better informed on purchasing trends within the EU, Invited producers to countries were their products are distributed is also very important, inter-culture is experienced at first-hand.”
The concept however, is not as straight-forward as it seems.
“There are a lot of variations that need to be factored in when setting and agreeing on prices. One needs to keep fairness in pricing as the main priority. This needs to be done in tandem with ensuring that the product and its set price are feasible for the market requirements of the EU. It is not easy to know what fair-trade products will actually sell in Europe or how well they are bound to do. A thorough knowledge of the market, trends and fashion are therefore essential,” he explained.
Shopping trends are very fast changing in EU countries. The latest fad for example is the demand for biological products, which the fair-trade lobby was quick enough to grasp.
“EU consumers are becoming increasingly discerning on biological products,” he said. “Eco-friendly measures on fair trade products have increased sales substantially, as their demand keeps on increasing.”
Fair Trade Organisations (FTOs) are normally in charge of the dynamics needed to trigger exportation of products from those developing countries they work in.
“When producers export independently,” Caruana explained, “they at times find it difficult to overcome the bureaucracy that commonly stifles exporters in developing countries. From the feedback producers provide us with, we know that when a European partner is involved, export projects are somehow facilitated.”
Surely, as the fair-trade concept developed, FTOs have expanded their target market from the die-hard conservationists, assuming that initially the core of fair-trade consumers was made up of those having social and environmental issues at heart.
“Consumers choosing to purchase fair trade products nowadays are those who understand the commercial system. They are perhaps the ones who were curious about what really happens in the production of a pair of jeans or a can of coffee. Once a product remains anonymous, one may not necessarily be aware that it is associated to sweat shops. As consumers access to information, they would naturally ask themselves questions on how their purchasing behaviour can reflect their values. Spending power is a tool that can be used to reflect what you believe in, what you think is fair. That aside, if you are discerning on quality, then you are most likely to be a prospective fair trade buyer.”
As fair trade product principles dictate that production processes are carefully set and origin of materials very cautiously selected, the end product is often of a distinguishably better quality. But with better quality comes a dearer price. Do the end prices justify the quality? Does fair trade come at a fair value?
“Let us make a comparison, like with like, forgetting fair trade principles. I had enough of purchasing fruit juices made from concentrate. I had enough of buying low quality chocolate. When I purchase a fair trade product, it is often one that would have undergone massive research.
“Also proof of better quality is the fact that if, in the mainstream market, producers are not paying fair prices to their labourers, they are also likely to make similar compromises and cost-cutting on other aspects of the production process and raw materials used. When there are decent budgets and proper working conditions, the chances are that the attitude of your work force will flow on to the quality of the end product.
“In clearer terms, it is known that a good number of mainstream coffee producers would shorten the harvest as much as possible in order to capitalise on the land as much as possible. This will obviously reflect on the product.
“Such practices are unheard of in fair trade. Fair trade honey brands for example, will use traditional methods that involve slow and careful processes. We know that honey is one of the chief scam industries, so it is important to have such products accessible to the market,” he said.
But at prices that are clearly more expensive than their mainstream counterparts, wouldn’t fair trade products still target niche markets? Wouldn’t it be a good idea for FTOs to make an effort in further mainstreaming the product to make them more competitive?
“Unfortunately yes, fair trade products still attract select niches. This happens for two reasons. Firstly, fair trade products, especially in Malta, are normally purchased from specialised outlets – such as health food stores, or non-mainstream co-op shops. There is also the clear difference in price that automatically inhibits access to those not affording the products. I believe fair trade products are still good value for money, but one needs to take into account that any quality product sold at higher rates will automatically create barriers for mainstream customers. The way I reason out is different, especially when it comes to food and drink. If it enters my body, it needs to be healthy. I pay more for food because I owe it to my body.
“I agree that fair trade products need to be mainstreamed but it is in fact unfair trade that needs to come in line, as it is subsidised by the poor. Prices need to come closer. On fair trade items, I think there should be many more points of sale and more institutions promoting fair trade items. Through their offices, local councils and churches in the UK are already starting to popularise the idea as much as possible. Some local councils in Britain are now opting for the ‘Fair Trade City’ model, a concept that, as its name implies, will bring fair trade products closer to the people by default. Economies of scale will also help decrease prices, but even if so, discounting would not be substantial enough have fair trade compete with mainstream products on cost leadership.”
In certain parts of Europe, fair trade is clearly a market phenomenon that is enjoying significant growth, reaching an average of 20 per cent per year throughout the EU.
“This success is mainly attributed to campaigns and direct education. Many more schools, organisations and local councils abroad are now networking to bring the message across. Fair trade items are also very well labelled, so the product will very often market itself. Surveys are practically all coming to the conclusion that 90 per cent of consumers are ready to pay up to 10 per cent extra for a better quality product,” he said.
While left-leaning lobbies would at times criticise the fair trade movement that advocacy needs serious improvement, other factions will accuse fair trade organisations of creating market unfairness in forms of subsidies. How is this criticism dealt with?
“There is no culture of subsidy in fair trade, FTOs will simply pay a fair price for the work done. It is, as I mentioned before, the sweat shops that promote subsidy in the form cost-cut from their payrolls. So in that case, it is the workers that are subsidising the industry. In fair trade, the only practice that perhaps comes close is that sometimes co-ops and producers will agree on what they call a social premium. This would include a 10 per cent cut that would be invested in the community. The way I look at this is more as an investment rather than a subsidy. We have just mentioned that empowerment of women is high on the agenda of fair trade projects. An example of social premium investment would for example entail the setting up a crèche for children. Wouldn’t this help the business too?
“As for the other criticism, it may be at times justified. One must first take into account that fair trade is not homogenous. Each organisation works differently and independently. But sill, it is a fact that a large number of organisations have focused on advocacy in parallel to the trading operation in the past year. So this criticism probably addresses a minority of organisations that have not yet reached that stage. From what I have observed, advocacy is increasingly becoming more central to operations at FTOs.”
On the Maltese front, we are evidently not at the same pace as abroad. Caruana explains that the boom in other EU countries reflects the hard work and experience of the past 30 or 40 years.
”We’ve only been at it for the past 10 years in Malta, although I must say, the project is growing slowly but surely. Strengthening links between NGOs and schools, we are comfortable in saying that diffusion of information among students is being done effectively, and that students are becoming increasingly aware of the underlying issues. Let us not forget however, that students do not yet have the purchasing power of adults – which explains the delay in growth on the island. Also, in other countries fair trade products are much more available, such as within special supermarket sections and local councils.”
Even if so, the sectors fair trade operates in are highly competitive. The food and beverage industry as well as the clothing and apparel sector have for the past 20 years in Malta worked on a neck-to-neck competitive atmosphere. Fair trade has missed the boat of the 1980s boom in the success witnessed by fashion retail stores and of what food and beverage importers have gained throughout the years since liberalisation. Competitors now have enough experience, financial power and acumen to crush any newcomer that attempts playing in the same field. How do FTOs in Malta expect to penetrate the market without a proper setup? Caruana looked less worried than expected with this question.
“This is a chicken and egg situation. If we don’t have enough people to organise a proper sales and distribution centre we’re stuck. But then on the other hand, one would need the resources to set it all up. As fair trade in Malta runs mostly on a voluntary basis, distribution tends to be at times unreliable. It is no secret that suppliers in Malta would subsidise bars and retail outlets in order to push their products. This is at times done with the provision of coffee machines, equipment and cash benefits. But then, the way we work is by creating demand. If nowadays I walk into a café and ask for fair trade coffee, the best I can get is a blank stare. If a hundred customers ask for it then it’s a different story. This is the way an FTO works to let the product enter the market. With more awareness one is bound to increase demand. Once demand is high enough to reach critical mass, then distribution, supply and organisation increase accordingly.”
On volunteering, Caruana added that although the fair trade model may still be competitive without the voluntary input, the model wouldn’t be the same without the philanthropic element.
“I believe that in a sustainable world the voluntary input is extremely important. Admittedly, the value of fair trade goes beyond market exigencies. The principle also extends to the quality of the voluntary experience. Most co-ops will operate on a non-profit structure, meaning that the directors renounce their dividend at the end of the financial year and that profit is in turn re-invested into the project. There are also FTOs that, in a declared way, run as a conventional business. The ones I’ve seen are fully transparent about them being profit-making organisations, and as far as I know the model works equally well.”
On a final note, as a fair trade proponent and an academic, Caruana explained how he envisages the development of fair-trade in the future.
“Fair trade is being discussed at both European Parliament level as well as at the council of ministers. Fair Trade has become a source that cannot be ignored. We are also seeing government tenders specifying the inclusion of fair trade principles. I am also seeing a clearer link between NGOs and Fair trade organisations. The two are joining concepts together. For example, pesticide in cotton is extremely harmful – both to the environment and especially to people who work in the industry. This way, both fair trade organisations as well as environmental organisations will address these issues together in joint discussions and projects. There have also been experimental projects linking environmental and fair trade causes – such as the transportation of goods by means of sailing boats. Of course, such projects are still in their early stages but I am quite confident that they are bound to develop.”