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Challenges facing Fair Trade: which way now?

Can Fair Trade (FT) continue to compete in the marketplace? What is the impact of the relationship between FT organisations (FTOs) and producers? How can FT substantiate its claims to benefit producers?

Research by the Natural Resources and Ethical Trade programme (NRET) discusses producer development, accountability and retailing, and considers future strategies, in light of the increase in other approaches to trading ethically.

FT faces challenges at both ends of the supply chain in relation to producers and consumers, reflecting its dual roles as a business and a development instrument. Its main challenge is to retain its distinctiveness in offering improved livelihoods for disadvantaged producers excluded from the export market, but also to use this to influence the approach of others in the market.

FT’s overall impact is linked to impact at producer level and to FT’s influence on the market, both in relation to consumers and to other traders. FTOs are being encouraged to pursue impact assessment to be accountable to donors and to develop systems to assess and demonstrate their development impact, for learning and to improve effectiveness. In addition, FTOs need to be accountable to their primary stakeholders, both producers and consumers, and to be able to substantiate their claims to the general public, consumers and competitors.

FT has significantly influenced the behaviour of mainstream companies. Conventional companies are increasingly claiming ethical values, creating intense competition for ethical products. FTOs may more effectively maximise their impact on the conventional market through means other than direct competition, for example by educating and mobilising consumers strategically. There may be some way to go before FT reaches a natural limit to its market growth; however, recognising such potential limits and considering alternative strategies to maximise the influence of FTOs is crucial for the future.

Research findings include:

There are many contradictions inherent in FT: it challenges the market’s unfairness, but assists producers to compete in that market; it deals with multiple stakeholders and has to balance producers’ needs with consumer demands.
FT is different: unlike other ethical approaches in the marketplace, it aims to change unequal relationships between primary producers and the market; however this difference is not appreciated by many observers – whether donors, consumers or other traders.
The FT ‘difference’ must be demonstrated: credibility in the marketplace is dependent upon FTOs demonstrating, in an accountable and transparent way, that they do what they claim to do.

Further research is needed on the following issues:

comparing different trading relationships offered by FT and conventional companies in terms of benefits to producers
enabling FTOs to be accountable to key stakeholders
analysing whether FT has indeed catalysed other traders to improve their social performance and exploring how this influence can be maximised
consumer attitudes to FT and ethical trade.

Policy implications include:

FT’s key future role appears to be as an innovator and catalyst rather than as a major trader.
FT must not alienate companies which do not adopt all aspects of the FT approach, but must demonstrate how benefits to producers can be increased in efficient, effective trading.
Networking and coalitions may offer opportunities to scale up FT ideas.

Source(s):
‘Challenges facing Fair Trade: which way now?’, paper presented at the Development Studies Association Annual Conference, Manchester, by Anne Tallontire, September 2001 (see Small Enterprise Development, forthcoming)

Funded by: Natural Resources and Responsible Business Resource Centre, Department for International Development (DFID)

id21 Research Highlight: 18 October 2002

Further Information:
Anne Tallontire
Natural Resources and Ethical Trade Programme
Natural Resources Institute
University of Greenwich
Chatham Maritime
Kent ME4 4TB
UK

Tel: +44 (0)1643 883865
Fax: +44 (0)1643 883377
Contact the contributor: a.m.tallontire@greenwich.ac.uk

Natural Resources Institute, University of Greenwich, UK

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