Ethical Objections to Fairtrade

By Peter Griffiths; and The Journal of Business Ethics (July 2011)

I believe to express an opinion one needs to thoroughly understand both sides of the argument, only then can one formulate an informed argument. I chose to review this paper to present the other side of the argument: the one I do not share. My travels to Vietnam and India interviewing Fairtrade farmers, families and cooperatives have convinced me this argument is wrong.

This is the argument against Fairtrade.

It is in an assumed climate of strong market-utilitarian ethics and ‘no-alternative’ market solution (see for example Radin 1996; Hayek 1944; Held 2006; MacEwan 1999) that Fairtrade organisations advocate an ethical and human economic practice which “alters, challenges, or, in its proponents’ strongest claims, exist in opposition to, the dominant economic order” (McMurtry 2009: 28). Elevated by its most fervent advocates to the rank of an alternative market infused with ‘transformative objectives’, there is little doubt that the model advocated by Fairtrade runs counter to the dominant economic order (Low and Davenport 2006; see also Boersma 2009; Gendron, Bisaillon and Rance 2009; Steinrücken and Jaenichen 2007). 

When in his paper, Ethical Objections to Fairtrade, Peter Griffiths then proposes to analyse the ethics of Fairtrade by using Utilitarian ethics, there is little doubt about the direction of Griffiths’ argument. I shall not delve too deeply into the intricacies of Utilitarian ethics itself. I should point out the theory’s well known double-edged sword.

Griffiths proposes two sets of criteria derived from Utilitarian ethics through which to investigate the ethics of Fairtrade:

  • The first he labels death and destitution; the rationale for which is that if “money or resources intended for the very poorest people are diverted to people who are less poor or relatively rich” (p.358), death and destitution will increase. Re-reading the paper, I am left wondering: how did ‘death and destitution’ become an appropriate set of criteria in the first place? Did Griffiths not announce an ethical analysis of Fairtrade?  

This criteria does not leave much room for analysis – it is clearly an established opinion. Another option would have been to investigate the value created by Fairtrade and consequences through an ethical lens. With his first set of criteria, Griffiths asks: “should the money be at all given to Fairtrade?”; as well as “is the money spent in such a way as to maximise its impact?”. It is interesting to note that just by looking at the question the analysis is meant to answer we can see the true meaning of Fairtrade appears having been lost. Fairtrade is not about giving, it is not about aid: it is about trade. It is about empowering the farmers as the agent of their own development, and giving them an equal opportunity to engage in international trade – taking into account the price of producing sustainable produce. 

  • Griffiths’ second set of criteria: Unfair Trading is relatively more straightforward and relies on the legal understanding of Unfair Trading practices and the disclosure of information. Such criteria are then linked back to utilitarianism giving the impression of utilitarianism being used to justify handpicked criteria rather than providing a lens for analysis.

While Griffiths’ analysis is divided into multiple themes, I would like to review his two main arguments:

  1. ‘What happens to the money?’, and
  2. ‘The creation of ignorance’.

Griffiths starts the analysis demonstrating that of the additional price consumers pay for Fairtrade products only a fraction goes back to the Fairtrade farmers.

It is a common misconception that the premium paid by the consumers goes back to the farmers in full.

The Fairtrade certification scheme provides the farmers with the guarantee of receiving the Fairtrade floor price as well as the social premium. While certification is acquired and controls are conducted throughout the value chain, Fairtrade does not regulate non-Fairtrade licensees, i.e. mass retailers; retailers are free to charge the amount they deem appropriate, as they are for traditional products, organic products etc…as dictated by the law of supply and demand. To put it in Griffiths words: “this is standard economics” (p.358).

Griffiths further argues: not all Fairtrade farmers receive the Fairtrade price, not all crops produced under Fairtrade are bought on the Fairtrade market and some of the extra money made has to be spent on satisfying Fairtrade standards. While the paper attributes all these shortcomings to Fairtrade, it is important to understand where it is all coming from.

Even though farmers are certified Fairtrade and therefore all their crops could be sold on the Fairtrade market, there is not enough demand for them to do so. It is, however, not possible for them to produce different types of the same crops (i.e. Fairtrade and non-Fairtrade). Typically, farmers would sell all their crops as a cooperative to the exporting company who will sell everything they can on the Fairtrade market and the rest on the mainstream market. If for a specific period of time there was no demand for Fairtrade, the farmers will not be paid the Fairtrade price. Nor will they receive the premium.

While this suggests an issue, it is not a price issue but a communication issue. The farmers might not be told by the exporting company what is happening to their crops. 

Griffiths continues to argue that even though the social premium is used for social developments there is no reason why these should be better than the ones put in place through aids and charities. Here again, the author is missing the point about the importance of trade as opposed to aid and empowering the farmers as the agent of their own development. Griffiths’ final theme refers to The Creation of Ignorance in which he argues information disseminated through Fairtrade organisations is false and misleading.

I would like to finish the review by going back to my opening statement.

While there is no doubt that there are issues wtih Fairtrade. However, Griffiths’ paper does not display a thorough understanding of “the other side of the argument”. He does not demonstrate a clear understanding of what Fairtrade is about, and how it functions, and this diminishes the strength of his argument. 

I would like to conclude with a quote from an officer at one of the Fairtrade cooperatives I researched in India, who said that: “Fairtrade is the only certification scheme that gives something back to the farmers”.

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