FairTrade or Fairly Traded?

This blog is about Sainsbury’s decision to stop stocking “FairTrade” tea and to replace it with” Fairly Traded” tea. As I understand it, “Fairly Traded” is an equivalent organisation to “FairTrade” with two key differences:

• It’s run by Sainsbury’s;
• Instead of the profits going directly back to farmers, they go to a central fund run by Sainsbury’s which farmers have to apply to for grants.

The scheme has been widely condemned on social media – and, as usual, misrepresented (I saw one post claiming Sainsbury’s scheme was called ‘Fairer Trade’ which seemed to treat ‘Fair Trade’ as a second class rival. That name is fake).

At first, I joined in the condemnation. I think FairTrade is a great concept and I couldn’t see the point in setting up a second bureaucracy to do the same job. It seemed like a waste of money. But then I thought about it a little more, and I wasn’t quite so certain that “Fairly Traded” is a bad idea.

Let me explain. The condemnation on social media seems to centre on two assumptions:

• Giving the profits made from selling goods directly to farmers is a good thing.
• Sainsbury’s are a big corporation so their ultimate motive must be profit.

I’ve given each of these a subheading.

Giving the profits made from selling goods directly to farmers is a good thing

This is one of those assumptions that everyone makes because it feels right. People who work hard to grow tea or other crops should not be forced to accept minimal prices so that others in the chain should make money – they should get a fair return for their labour. Local people are the ones who know best how to use the money for good. Central funds with few administrators encourage corruption. Words like ‘empowerment’, ‘investment’ and ‘micro-finance’ get bandied about.

But let’s assume for a moment that some local farmers are actually just as corrupt as (some of) their politicians. Some have formed into cliques and use the money to undercut rival farmers or to overbid for vital equipment.  Some cliques control the local flow of money and will only give it out to those of the same tribe, religion or political party. Some simply use the money to bribe local politicians and regulators.

Is this true? I hope not, but the history of human endeavour suggests that everywhere you find people, you find goodness and evil. So it might be happening. The best way to prevent it  would be for the FairTrade organisation to have some checks and balances in place to see how the money has been used in the past before they give out money in the future.

I do not know whether FairTrade apply any such system. It may be that their remit is simply to pass the money back to the farmers with as little interference as possible. Sadly, the lesson of history is that where a significant quantity of money suddenly becomes available, there is an inverse relationship between the degree of supervision of how the money is used and the amount of money that is misdirected.

There are, of course, plenty of stories of how the money that flows from FairTrade or other sources to the developing world is put to good use by local entrepreneurs. Here we come to one of the really odd things about this debate: how various semi-political groups in our country have flipped their usual position. Our media tend to report the good news stories of how small amounts of finance have produced good results in the developing world, but don’t report the bad news about times when money has been wasted or mis-used. This contrasts with their usual policy of emphasising bad news.

Meanwhile, those who are most vocal opponents of Sainsbury’s because of their supposed capitalist intentions are arguing against having a benevolent central agency to control the distribution of finances, in contrast to their typical socialist approach to UK politics where they want the State to manage everything. Perhaps it’s because the central agency of “Fairly Traded” would be controlled by a corporation rather than a government. Which brings me to the next section.

Sainsbury’s are a big corporation so their ultimate motive must be profit.

This assumption is too simplistic. Two 19^th century firms who were in the same line of business as Sainsbury's – selling food products made from 3^rd world crops – were notable for their commitment to benefitting their communities and the welfare of their workers. Cadbury’s and Rowntree’s were both founded by Quakers, and streets of houses that those companies built for their workers can still be seen. And in the modern day, Bill Gates and Mark Zuckerberg are giving away significant amounts of the profits from their corporations. So assuming that a corporation’s only motive is profit is far too simple.

Sainsbury’s do not stand to make any direct profit from “Fairly Traded” given how it is set up. So why have they done it? From a neutral point of view, I can think of 3 possible reasons:

i) They are aware of corruption with funds from FairTrade and want to introduce significant supervision over how the money is used, so they have set up something similar to the UK’s research grants funding system.

ii) They are wary that FairTrade is a monopoly supplier and want to introduce competition.

iii) They want some good news stories from the grants they provide that they can use in their marketing.

Option (ii) is indeed focussed on profit. It could be argued that option (iii) also contributes to profit, but it’s pretty indirect. Option (i) is not about profit for Sainsbury’s at all; it’s about benefitting the farmers.

Summary

I still think FairTrade is a great concept. I still think that setting up a similar organisation with a second bureaucracy is a waste of money compared with making any necessary improvements to the FairTrade organisation itself.

However, I allow the possibility that FairTrade may not be working as well for those in the villages that supply the crops as it ought to be. If supervision of how money is used is needed, and FairTrade won't change their approach to do it, then Sainsbury’s approach is a good idea, even though it adds extra bureaucracy.

If anyone knows of a decent and fair audit report/survey on the effects and value of FairTrade, I’d be interested to read it. Meanwhile, I shall hold fire on criticising Sainsbury’s until the underlying situation is clearer.