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In response to BBC2 The Money Programme – Friday 10th March

The BBC’s Money Programme aired on 10 March 2006 raised a number of questions in connection with the retail pricing of Fairtrade products. While Fairtrade is first and foremost intended to support disadvantaged farmers and workers in developing countries in their efforts to improve their lives, the Fairtrade Foundation understands that our work only generates benefits for producers through the support of the public. Consumer trust in the Fairtrade system is crucial. We recognise that questions about the relationship between the price paid by consumers at the checkout in our shops, and the financial benefits received by producers are a legitimate area of concern and we were therefore pleased to cooperate with the BBC to explore these issues.

However, we were very disappointed that the programme approached this matter from a very narrow perspective, asking only what proportion of the “extra” price paid by consumers for individual Fairtrade products is returned to the producers. While this may seem, at first sight, to be a relevant question, in our view it misses the point about how Fairtrade actually works. This is to provide an alternative model of trading for the organisations that meet international Fairtrade standards, based on ensuring market access for producers who are marginalized by conventional trade and on providing fair trading relationships including minimum prices, additional social premiums and improved terms of trade. It is these standards and the form of trade they promote that ensure Fairtrade genuinely provides “a better deal for Third World producers” and promotes development among the farming families and communities with whom we work. It is this process of change that consumers are supporting when they buy Fairtrade products. It was a shame that the Money Programme didn’t interview any producers and hear from their personal experience how they benefit from Fairtrade by investing the premium in projects that benefit their communities.

If we didn’t promote this alternative model of trade, we would simply be operating a charitable programme that treated producers as passive recipients of our goodwill, without really changing the problems that prevent them from securing a more sustainable livelihood in the future. In fact, Fairtrade has always been totally explicit that it is not this kind of charitable project. That is why we do not set our rules in respect of a price premium at the point of sale that would then be paid back to producers. Instead we set a minimum price that is paid to the certified organisation when they sell their produce. The minimum price covers the costs of sustainable production and includes a premium for investment in future improvements.

We have also tried to make it clear that it is impossible to calculate the “extra” price that is charged by retailers for Fairtrade products when the price of conventional products lacks any transparency or consistency and therefore doesn’t provide a valid comparison. Just last week we saw several leading supermarkets reduce the price of conventional loose bananas by 21 pence per kilo, which we believe represents a disaster for many farmers and workers in the producing countries. However, although consumers are apparently now paying an “extra” 21 pence per kilo for Fairtrade bananas than they were two weeks ago, does this mean that this difference should now suddenly be paid to Fairtrade producers when the price of Fairtrade products hasn’t been changed? Clearly that would be impossible. The guarantee of the FAIRTRADE Mark is that regardless of the marketing and promotion strategies of the companies selling the product, consumers can be assured that Fairtrade means the producers have received a fair price, as required by our standards.

Buying from Fairtrade producers in line with the requirements of our standards is not an easy option. It can mean buying from remote groups of farmers with high production costs and incurring additional costs in shipping, processing and distribution. Many Fairtrade products are still sold at much lower volumes than leading brands and so the costs of distribution and marketing are relatively higher as a proportion of the selling price – although these are coming down as the market grows. These factors impact on the price that consumers pay at the end of the product’s journey from farm gate to shop shelf but we believe they represent a sustainable price for everyone in the supply chain. The real question in our minds is not why Fairtrade products are so expensive, but why non-Fairtrade products are often so cheap.

In short, the costs of a Fairtrade product are more than the extra price paid to producers (which itself varies enormously depending on the prevailing market price for each commodity) while the benefits of Fairtrade to producers are also far more than just this price difference. We would ask that Fairtrade be judged on the overall difference that Fairtrade is making to millions of people around the world, and that consumers consider whether buying Fairtrade products represents value for money. There are many stories illustrating the impact of Fairtrade on our website and we believe they show that the cost of Fairtrade products is a price worth paying. In my own work, during almost 10 years at the Foundation, I am fortunate to see these benefits at first hand from Fairtrade producers. With more and more farmers and workers benefiting from the doubling of Fairtrade sales in the UK every two years, we hope you will agree and continue to support Fairtrade in the future.

Ian Bretman
Deputy Director, the Fairtrade Foundation

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Web: www.fairtrade.org.uk