Fair Trade in India

By Saumya Roy, Shloka Nath

Forbes India’s focus for this July 2010 article is the expansion of the certification scheme in the Indian market. This article is of particular interest as it focuses on one of the core foundations of the Fairtrade certification scheme: the differentiation between producing and consuming countries.

In line with Fairtrade’s central aim, farmers are strictly located in developing countries: the producing countries.

Typically, Fairtrade labelling initiatives (e.g. Fairtrade Labelling Australia and New Zealand) are located in developed countries. As these organisations are responsible for awarding the Fairtrade label in their respective locations, and promoting the Fairtrade market to national consumers, Fairtrade labelled products are exclusively sold in developed countries: the consuming countries.

The hook for this article was the announcement by the Fairtrade Labelling Organisations International’s (FLO) of its willingness to make India the first hybrid Fairtrade market, reconciling both producers and consumers in a same country.

The article does well at keeping a neutral tone and presenting the facts. It starts by explaining the basics of Fairtrade “an organised movement that helps producers in developing countries get a premium for their products if they follow better social, labour and environmental standards” (p.1) and leaps into the economic characteristics of the market with “more than $4 billion worth of fair trade products sold internationally in 2008, an increase of 22% from the previous year”.

Note that the writers talk about Fair Trade and not Fairtrade, meaning that the statistics account for goods sold on the Fair Trade market that are not Fairtrade certified. This is typically the case with handicrafts, for example, because such goods can by definition not be standardised. The article seems to confuse the movement with the certification scheme, while the certification scheme is introduced through the FLO, the movement is not and is free to develop in any part of the world.

The rationale behind opening up the Fairtrade market to producing countries is to increase Fairtrade’s reach and market size. Fairtrade also promotes changing the rules of international trade and allowing the producers to become the agent of their own development. With such goals at its core, it appears logical to open up the market to producing countries for them to directly impact the growth of the market.

The authors note that for the Fairtrade market to work, Indian customers will need a sense of, and to be sensitive to, its importance. It makes even more sense as India producers sell a lot of their products on the local market, because the label hasn’t been introduced there yet, they cannot benefit from the floor price or the premium.

The article does very well at demonstrating the value of the Fairtrade premium and the ways in which it has been used as well as portraying the way the Fairtrade price works and the fact that the label does not have any control over the price the retailers are charging for Fairtrade. Very interestingly, the authors highlight that the Fairtrade market in India will only be able to develop and succeed if it is supported by “a civil society movement as it is in the West”, thereby highlighting the importance of the movement as part of the certification scheme.

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