Fair Trade: Overview, Impact, Challenges - Are you looking for one ...

Can the costs of FT regulation and certification be reduced?
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Fair Trade: Overview, Impact, Challenges
Costs of regulation and certification can be reduced to some extent by moves towards
local certification and increasing volumes. In the cases quoted in Table A4.6 for
chocolate, the cost of the licence fee is equivalent to two-thirds of the premium
received by producers.
To what extent is the FT premium for producers payable as a result of efficiency
in the supply chain?
Insofar as data is available, the margin paid by consumers appears to exceed the
premium received by producers. In the example quoted in the Ghana case study
(Table A4.6), 45% of the premium paid by the consumer is passed to the producer (or
rather to the producer organisation). This does not take into account, however, nonprice
benefits received by producers or their organisations. In principle, however,
there are strong reasons to expect that there are potential “efficiency” gains (including
in relation to improved quality and credit relationships) through the development of
long-term relationships between producer organisations and purchasers.
Could FT supply chains be made more efficient through competition?
In many respects FT supply chains are highly competitive – with brands competing
for a relatively small, though growing, niche market. It is also important to note that
the bulk of sales by registered FT producer organisations are into the mainstream
commercial trade and not through a FT supply chain.
Are barriers to entry to the FT supply chain significant?
The costs of certification do pose a constraint especially for small producers and
traders. In addition, access to registers is managed rather than based purely on
meeting qualifying criteria and ability to pay for certification.
Is “direct” purchasing from small farmers efficient?
There are generally several different marketing routes – all of which may have
advantages to both producers and purchasers in particular circumstances. It is also
important to note that under conditions of pervasive market failure, focusing just on
prices and output marketing costs rather than other aspects of the marketing
relationship may be misleading. First, even MNCs may in some circumstances
operate local buying companies that purchase direct either from farmers or from
farmers’ organisations. Second, market intermediaries of various kinds may play an
important role in providing services to small farmers. Third, increasing pressures to
maintain the ability to trace products along the marketing chain (for quality control
and public health reasons) is creating increased commercial pressures for direct links
to farmers.