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Fair Trade: Overview, Impact, Challenges
producers. The direct poverty impact may be greater in the case of other FT products,
such as handicrafts, and this is worthy of further analysis.
In some cases, the provision of premium prices and price guarantees can make a
significant direct contribution to producer livelihoods. However, the nature of the
price guarantee and the size of the market willing to pay the premium means that this
is likely to be of limited value to the vast majority of southern producers. The
premium will tend to provide a rent to particular producers who have access to this
market. To the extent that the premium is pooled rather than being passed directly to
producers, its income stabilisation effect is limited, acting more as a social transfer.
Further work is required to assess the distribution of value within FT marketing
chains compared with conventional chains to improve understanding of the links
between premium prices paid by consumers in the North and benefits to producers in
the South. Other factors also need to be explored, such as the role of economies of
scale in determining final prices of FT products. In addition, it would be useful to
assess how FT activities fit within the broader livelihood strategies of smallholder
farmers engaged in export production.
d. Empowerment
The case studies suggest that the most important impact of FT initiatives lies in their
work to strengthen the capacity of producer organisations and increasing their
bargaining power. Successful capacity building, organisational development and
marketing support provided as part of FT initiatives can have an impact far beyond
the value of products traded by ATOs. This may be particularly valuable during and
immediately following the reform of marketing and trading arrangements, as
illustrated by the experience in the Ghanaian cocoa and Tanzanian coffee sectors. FT
activities in this regard go beyond the provision of information and traditional
business development support and include facilitating greater participation and
confidence in civil society structures that emphasise accountability and transparency.
The FT relationship can also provide a solid platform for producers to innovate – for
example, converting to organic farming methods.
Empowerment through participation in FT marketing channels is only one route to
capacity strengthening. A number of ATOs are also working to enable producers to
operate more effectively in mainstream markets: the potential synergies and tensions
between these two roles deserve further enquiry. Given the likely demand-side
limitations on FT products, ATO support for accessing the mainstream is an area of
work worthy of greater attention and support in the future. While producer controlled
co-operatives may play an important role in improving producer livelihoods, there is
room for greater flexibility in the FT movement to encourage a diversity of marketing
channels - a reality that has already been faced in sectors not reviewed in this study,
such as tea and handicrafts. Furthermore, indicators of empowerment are still hard to
come by, and more work is required to evaluate the institutional as well as individual
gains, such as growth in producer self-esteem. Finally, there is scope for more work to
empower Southern producers to become more engaged in the governance of FT
labelling and standard setting initiatives.