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Fair Trade: Overview, Impact, Challenges
competitive, exhibit pervasive market failures and have a limited capacity to support
the emergence of the type of contractual arrangements that will improve quality,
enable credit to be mobilised and used through the marketing chain, and enable
producers and traders to manage the price risks they face.
Producer organisations (including marketing cooperatives) have a potentially
important role to play in strengthening the functioning of agricultural marketing
systems. FT initiatives, through providing support to producer organisations, may
therefore have a significant role in a strategy to improve the functioning of markets
for small producers.
The most promising framework for assessing the impact of FT initiatives consists of
supply chain analysis in the relevant domestic and international markets, livelihoods
analysis, and an analysis of the sustainability and cost effectiveness of FT. The
consultants reviewed experience with FT initiatives, undertaking case studies of
coffee in Tanzania and cocoa in Ghana. The main conclusions of the case studies
were as follows:
♦ The quantities of cocoa and coffee designated as FT (i.e. attracting an FT
premium) were only a fraction of the total quantities sold by the respective
producer organisations. Therefore, it was not generally meaningful to separate the
impacts of the FT and non-FT aspects of the producer organisation's activities.
♦ The effectiveness of producer control and the transparency of the management of
the co-operatives will to a large degree determine the extent to which producers
benefit from FT.
♦ In both cases, the liberalisation of domestic markets and the existence of private
competition were viewed positively by farmers.
♦ The most important impact, and the area where there is the strongest case for
donor support, relates to the capacity building and trade facilitation role,
particularly in the context of marketing systems undergoing significant reforms.
♦ In both cases there are tensions between the realities of the relevant production,
domestic marketing and international trade processes, and certain of the
arguments advanced by the FT movement, in particular in relation to the use of
the premium and price stabilisation support.
There are a number of tensions and dilemmas in the FT movement, each of which
represents a potential conflict between profitability and development objectives.
♦ There is a tension between definitions of FT emphasising altruistic values and
development objectives, and suggesting FT as a standard to which all businesses
may aspire.
♦ There may be sensitivity amongst ATOs to fulfilling their commitment to sharing
commercially valuable information between fellow ATOs in a tight market for FT
products.