Fair trade to ensure a fair reward for producers

Coffee, tea, chocolate, bananas … It is becoming more and more common to buy products from Ivory Coast, Guatemala, Peru, Cambodia or the Dominican Republic in the supermarket. But we are consumed more often at the expense of producers and workers in the countries of the South, located at the very beginning of the production chain.

In fact, the prices of raw materials, set in international markets, are separated from the land and production costs and the balance of power is completely unbalanced in favor of buyers.

As for the workers of large farms, for products such as bananas and tea for example, they are often exploited and deprived of their social rights. So we can clearly see how globalized trade, when not regulated, can contribute to the impoverishment of those who produce our food and the widening of inequality.

fair trade model

Fair Trade emerged several decades ago to combat these abuses and allow producers in southern countries in particular to live a decent life.

The NGO Max Havelaar France is one of the main players in this ethical economic model. It is part of the International Fair Trade/Max Havelaar movement that launched in 1988 the so-called Fair Trade system, based on exact specifications, and compliance with which is monitored by the independent organization FLOCERT.

Thus the Fairtrade/Max Havelaar brand guarantees: better reward for producers and agricultural workers through a guaranteed minimum price and development bonus, decent working conditions (respect for their fundamental rights, sanitary rules and social provisions), as well as assembly in cooperatives. Since these populations are on the front line facing the already tangible consequences of climate change (cycle of drought, cyclones or floods), the label also includes environmental standards in order to preserve natural resources and ecosystems: banning genetically modified organisms and dangerous chemical products, promoting organic farming, etc.

For millions of consumers, the mark has become a guarantee of a production style that respects local workers and their rights. They are allowed to consume without contributing to the impoverishment or exploitation of the population in the countries of Asia, Africa or Latin America. In other words, by purchasing Fairtrade/Max Havelaar branded products, consumers are ensuring that producers receive a fairer wage.

Victor Samuel Gallix and Dixon Ramirez, coffee growers at the COCAOL Cooperative in Honduras – Credit: Sean Hawkey

What is a fair price?

But what does a fair price mean? It is a price that makes it possible to pay decent wages to all participants in the production chain and to ensure decent working conditions. Unfortunately, the race to lower prices in stores has been known to destroy the value they can produce in terms of social and environmental impact. The producers, who are the first in the series, are often negatively affected. Hence the importance of the model that protects them from market fluctuations.

Guaranteed lowest price, safety net

This is where the Fairtrade/Max Havelaar movement and guaranteed minimum price come in, which is one of the pillars of their system. This is the minimum amount that buyers must pay producers for their products or raw materials to cover production costs. This price is regularly re-evaluated by Fairtrade / Max Havelaar in order to comply as closely as possible with the economic realities on the ground.

This guaranteed minimum price is especially necessary when commodity prices are falling. Thus it serves as a safety net for producers whose production costs have not fallen. When the price of raw materials is higher than the guaranteed minimum price, the price of raw materials is of course that applies. This price is the mandatory minimum base, companies participating in Max Havelaar France can purchase at higher levels, as many do.

Thus, the world price of coffee in 2019-2020 was about $ 2 / kg, when the minimum guaranteed price of Fairtrade / Max Havelaar was $ 3.2 / kg. In Côte d’Ivoire, the world’s leading cocoa producer, the state sets the price for this raw material and generally does not allow farmers to cover production costs. Thus, the activation of the guaranteed minimum price for the 2021-2022 harvest represents $121.70 per ton in addition to the price set by the Ivorian government.

Fair Trade Start / Max Havelaar Minimum Price in the Face of Changing Coffee Market Prices – Credit: Max Havelaar France

Development allowance to finance economic and social projects

Fair remuneration should also allow producers to continue their activity. This is the goal of the development bonus. This amount goes directly to farmers’ cooperatives who vote democratically to determine their use.

They can collectively choose to pay it as additional income directly to farmers in the slowest periods, or invest it in production equipment or in training for better agricultural practices. This amount can also finance infrastructure that benefits the whole community such as schools, health centers, drinking water wells, roads, etc.

A wellness center funded by the development allowance in La Santa Cruz in the Dominican Republic – Credit: Fairtrade / José García

How to determine and guarantee a living income with all actors?

The living income corresponds to the amount that the family needs to ensure decent living conditions for all its members. Amount varies in different regions and countries. Although it covers farm production costs, a fair guaranteed minimum price does not always allow producers to have such income. Costs other than operating costs play a role in the lives of these farmers: food for the whole family, drinking water, housing, health and education costs, clothing, etc. Income and other resources in the family must also be taken into account: food crops, salaried activities outside the family farm, etc., …

This is why the Fairtrade / Max Havelaar movement since 2017 has been working to raise awareness among economic actors and consumers about the need for a living income for producers.

To define it, an international coalition, with the support of researchers, works area by area and takes into account, for example, the size of farms, their agricultural productivity, production costs and food resources from these farms.

Elements of Living Income – Credit: Max Havelaar France

Truly changing the game: the cocoa sector example

To give clear guidance to the chocolate industry and public authorities, the Fair Trade Movement / Max Havelaar has calculated the reference price, with the help of other developers and on the basis of research and studies, the reference price that makes it possible to achieve this vital income. Setting this reference price makes it possible to determine the gap between current market prices and the price that should be paid to ensure the sustainable development of the cocoa sector, for example. The 20% increase in the minimum guaranteed price in 2019 is the first step in a phased approach to closing this price gap. This increase made it possible to reduce the gap by 40% between the guaranteed minimum price and the reference price.

Given the often intense competition between chocolate players, it is very important to share this goal of real and fast improving the incomes of all cocoa farmers. To this end, the Max Havelaar Society of France endorsed and signed French sustainable cocoa initiative In October 2021, bringing together for the first time the French state, chocolate manufacturers and major retailers, but also the research community and NGOs. One of the main commitments of the initiative is to achieve decent income for cocoa farmers and their families by 2030 for all types of French chocolate.

Picture Explanation: Cynthia Arifi, a cocoa grower at the Asuadai Cocoa Farmers Cooperative Society in Ghana – Image credit: Fairtrade / Fairpicture

Leave a Comment