About Us

Fair Trade

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As we sat sipping tea with Merrill J Fernando, founder and owner of Dilmah Tea, on the verandah of his elegant 19th century villa in the suburbs of Colombo, it was easy to be transported back to the earlier colonial era when Ceylon was one of many outposts of the British Empire. Britain appropriated the raw materials of her colonies to fuel her burgeoning economy and global power. Merrill wove a entrancing kaleidoscopic story of the challenges of doing business in Sri Lanka as his country moved beyond colonialism through socialism and nationalization of the tea plantations, the subsequent decline and the slow emergence into a mixed economy. He explained how global corporations acted to carry on the first world appropriation project through placing pressure on former colonies to continue the practice of exporting their raw materials at subsistence prices such that the value through brand and packaging accrues beyond their shores. He shared with us how the world’s major tea brands such as Unilever placed political pressure on him through a multiplicity of sources to undermine his ambition to develop and market a Sri Lankan branded tea. For Merrill fair-trade is when producer countries develop the capability and capacity to brand and add value to their raw materials and supply direct to customers and consumers such that the added value accrues to third world producers rather than to the developed world.

We enjoyed a delightful few days staying in a colonial era plantation manager’s villa in the Tientsin mountain region on the Bogawantalwa plantation. The plantations present a lush vista of green tea bush to the horizon in every direction. Tolerably cool in the mountain air away from the lowland heat, walks along the plantation tracks are a delight. We walked easily because in the mountain region no snakes lurked in the bushes to poison our pleasure; a comfort the pickers in the lower regions do not enjoy. But during our visit there were no tea pickers to be seen. The tea gardens were empty and silent. Shortly before our visit a national strike had been declared for an 85% pay rise to 300 rupees a day from 165. A big jump to be sure, but set in context by the knowledge that 300 rupees is less than US$3 a day.

Before you've finished your breakfast this morning, you'll have relied on half the world" - Martin Luther King. MLK highlights that as consumers we rely on other people and communities to support our existence. Therefore the choices we make can foster equitable living if the choices are ethical ones. The Fair-trade movement, and its visible manifestation through fair-trade certification, encourages people to make the right choices and highlights inequalities of common trading practices.

To claim fair-trade status, or to gain certification, enterprises must uphold basic human rights such as; paying employees the local minimum wage or higher, ensuring healthy working conditions, supporting local sustainability and eradicating child labor.

Consumers are made aware of fair-trade products/services by two main forms of fair-trade certification or labeling. FLO labels products and IFAT labels organizations. Fair-trade Labeling Organizations International (FLO) http://www.fairtrade.net and its national subsidiaries, for example the Fair-trade Foundation in the UK, Transfair in North America, and the Fair Trade Association of Australia and New Zealand administer certification for products. In contrast The International Fair Trade Association (IFAT) http://www.ifat.org label certifies that every aspect of the enterprise is dedicated to fair-trade. If products/services or enterprises claim to operate ethically in accordance with fair-trade requirements but do not have certification it is up to consumers to decide if they are honest in their claim or abusing ethical consumers trust. The higher margin paid for the products/services also gives producers the opportunity to invest in social and economic development projects.

The higher costs of fair-trade products and services, in part, is passed onto consumers willing to pay greater market prices for a product/service they are assured is ethical and sustainable. This conscious consumer market is growing and many enterprises are leaping into Fair-trade to service what has become the moral mainstream. Fair-trade markets have increased significantly since the beginning of the century; in particular retail sales of fair-trade coffee in the US was $50 million US in 2000 and increased to nearly $500 million US by 2005.1

One of the original intentions of fair-trade was to reduce the poverty of disadvantaged third-world producers by cutting out middle-men so consumers could buy directly from the producers. But now as fair-trade certification changes to include large producers with different levels of independence from employees, instead of solely involving small farmers and co-ops, some consumer groups are becoming wary of the certification. Because fair-trade certification exists for individual products it is easy for large enterprises to produce one product that is fair-trade as a means to leverage an ‘ethical’ brand image. So according to www.thegreenlife.org as fair-trade becomes more mainstream the reality is that large enterprises, such as Nestle, could appear more responsible to consumers than is warranted by the small proportion of their fair-trade products. On the other hand large enterprises that adopt ‘fair-trade’ purely as a marketing strategy can suffer strong boycotts in a similar manner to enterprises that greenwash. The repercussions of boycotts can seriously affect shareholder value. Nestle was the fourth most boycotted brand in 2005 (GMI pole) after Nike, Coke and McDonalds and in another GMI survey over a third of consumers worldwide said they boycott at least one brand.2

Nike has been extensively criticized for its failure to enforce fair-trade and Human Rights practices of it’s contractors in Asian factories, which do not have unions, endorse child labor, intimidate employees with sexual abuse and contravene local wage laws. Unicef reveals that “one out of six children in the world today [246 million] is involved in child labor, doing work that is damaging to his or her mental, physical and emotional development.” 3

Child labour and unfair working conditions can be a problem associated with fair-trade certification in that although the materials may have been produced fairly the final manufacture could have taken place in unfair working conditions. So all a consumer may be aware of is that the certified fair-trade pyjamas they just purchased are made from ‘organic’ ‘fair-trade’ cotton and are oblivious to the fact they have been produced by a child in a sweatshop.

The idea behind fair-trade certification is noble. The practice is more suspect. There is increasing concern that such certification is simply another way for global corporations to leverage the power of their brands and extract value from the third to the first world. This perception has not been helped by well publicised failures in fair-trade audits; for example stories of fair-trade certified products which have been grown on land made available through clear felling of virgin rain-forest.

A current example of this third-first world tension is Ethiopia’s bid to trademark its leading coffee brands Sidamo, Harar and Yirgacheffe, in America. The idea was to enable farmers to receive a greater share of the retail price. In July 2006 the US Patent and Trademark Office supported an appeal by the National Coffee Association, of which Starbucks is a member, against the trademark application. Oxfam accused Starbucks of being behind the US patent bureau’s ruling against Ethiopia’s bid. Ethiopia appealed in January 2007 and the wrangle continues.

As a consequence of these ambiguities around fair-trade certification there is a movement towards emphasising ethical practices and transparency beyond fair-trade certification. Where did the products come from, who produced them, and under what conditions? Authentic and engaging stories about source of origin of products that provide transparency for consumers, NGOs and BLOGs are likely to provide more enduring value creation.

1 www.transfairusa.org
2 www.gmi-mr.com/gmipoll/2005 Both surveys the result of a GMI study of 15,500 consumers in 17 countries: US, UK, India, Australia, Canada, France, Germany, Italy, Japan, Mexico, Netherlands, China, Poland, Denmark, Spain, Malaysia, Russia.
3 www.unicef.org