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Fair Trade: Overview, Impact, Challenges
♦ The domestic policy environment in the southern producer country at the macro
and sectoral levels and its effect on the supply chain up to the point of export;
♦ The structure, coverage and workings of the marketing chain in the southern
producer country for the product in question, between (potential) producers
engaged in conventional trade and the point of export or processing;
♦ The socio-economic context, in particular the poverty profile and livelihood
opportunities of households engaged in FT;
♦ The structure and workings of the marketing chain in northern markets up to the
point of purchase, and the impact of northern government policy.
FT impact has to be assessed at many different levels (policy, organisational,
developmental and operational). In addition, many of the key benefits are intangibles
(such as improving the confidence of producers and their understanding of market
operations) which are difficult to measure. In principle the impacts of the different
types of activities carried out by FT organisations also need to be separately
identified. In the absence of baseline data, analyses of the benefits are going to have
to rely heavily on qualitative rather than quantitative indicators.
4.2 Evidence on the Benefits and Costs of Fair Trade
As a result of these considerations, it is difficult to make generalised assessments of
benefits and costs of diverse FT initiatives. Boxes 3 and 4 below summarise the main
results of evaluations of some Traidcraft and Oxfam initiatives. These suggest that it
is the capacity building, and related trade facilitation element of FT initiatives
that is most amenable to impact assessment.
As discussed below, mainstream market operators facing competition from FT
brands have been forced to respond in a number of ways. This has included a
stronger emphasis on justifying and making more transparent their own trading
practices, as well as contesting some FT claims. As a result, ATOs can justifiably
claim to have prompted initiatives (like the Ethical Trading Initiative) that would not
otherwise have happened.
The second element whose impact it should be relatively straightforward to assess is
the FT price premium: both in terms of the level and the variability of prices
received. In many cases, as in the two case studies undertaken by the consultants, the
price premium is not passed on to the producer but is pooled at the level of the
farmers’ organisation and used to fund social infrastructure or market development
activities.
When the premium is pooled, there will be no impact on price variability and on
production incentives at the farmer level. Instead, the price premium is best seen as
equivalent to a charitable transfer to fund particular projects whose value should be
assessed on a case by case basis. Key issues here (particularly in large organisations)
will be the effectiveness of producer control over the use of the premium (i.e. the
strength of the governance structures) and the extent to which the interests of