© Still Pictures/Ron Giling These bananas were harvested from
a fair trade plantation in Ghana. Marketed under a fair trade
label, they will sell to European consumers wanting to support
Don't look at fair trade as a charity - treat it as a business
model, argues Paola Ghillani, former head of the Max Havelaar fair
trade organization in Switzerland.
Q: How did you come to take over leadership of Max
Havelaar in Switzerland after being at a big business
A: I wasn't the first choice, since I didn't
come from the development cooperation field. Max Havelaar
Switzerland was created in 1992 by six Swiss NGOs to show
solidarity with smallholders in coffee production. In 1998, when
the Director had been ill for two years and unable to lead the
organization, it was decided to appoint a new director - but with
the order to make Max Havelaar self-financing within one and a half
This gave me my chance, since I came from management and
marketing. And the reason I applied was that I believed in fair
trade as a business model. I knew that I did not buy fair trade
goods myself out of a sense of charity, but because they
represented value for money to me.
Q: What was your strategy?
A: I set myself the goal of introducing at
least one new product per year onto the market, partly to make
people aware of the new approach. Each new product exists in a
different economic situation, with a different set of problems. We
had to make people aware of this.
We started with cut flowers and organic bananas. Of course, you
have no guarantee that your approach is going to be successful. But
we found a market among people who wanted to buy fresh products and
fruit they could safely give to their children.
The retailers were initially suspicious. It required some hard
negotiations to persuade them to feature our products. But when
they saw that fair trade products were growing by 30-40% per year,
after two or three years they came to us and asked for new products
That's how we achieved the target of making Max Havelaar
Switzerland self-financing within 18 months. It gave us the
resources to take financial risks, which has not been the case in
some other countries. As a result, we were able to develop other
fair trade products and improve the income of new beneficiaries in
Q:What does fair trade mean in your
A: It means paying producers enough to cover
the cost of sustainable production plus the value of their work
(salary, wages) to enable them to develop themselves, their
families and their communities. It does not mean what I call the
extreme pricing model that we see today in, for example,
Q:What's wrong with
A: The average cost to produce a pound of
coffee is 70-90 cents ($1.56-2 a kilo). The minimum price set for
fair trade producers in 1992 was $1.26* and it hasn't changed. It
is no longer in relation with the market price. It is no longer
up-to-date and thus is distorted.
On the conventional world market, the coffee price for producers
is 40-60 cents a pound. This is due to overproduction that is
encouraged by the importers, because they can make higher margins,
since the price of coffee to consumers has not gone down much. So
that price is distorted, too.
I argue that fair trade producers could accept lower prices for
their coffee beans - more in line with the fair trade production
costs and the value of their work - and still come out ahead
because they could sell a lot more coffee closer to market prices,
rather than a small amount at a distorted price.
Q:But the consumer is still paying
a premium price for fair trade goods…
A: Not necessarily. Fair trade bananas in
Switzerland, for example, don't sell for any more than the
conventional products. They are still profitable because fair trade
cuts out the intermediaries.
Q:Another criticism made of fair
trade is that it locks developing country producers into low-priced
food commodity production, rather than helping them out of this
A: That's why we introduced items such as
cotton products. But maybe, with the rising cost of oil pushing up
the expense of transport, we are not doing such a good thing in
encouraging such exports. That's where I think ITC is doing such
good work: it is helping countries to develop their own markets and
export where there is some potential.
Q:What are the benefits of bringing
NGOs into the trade equation?
A: NGOs can help ensure there is more
transparency about what is happening in trade, particularly in
remote regions where you cannot learn from companies or even the
media what the situation actually is. But they are not able to
manage trade. What they can do is help companies to find
But though the fair trade movement was created by NGOs, they did
not see that fair trade could be a business model rather than a
charity operation, and the charity approach has made some fair
trade rigid and uncommercial in the way it operates.
Q: The business model of fair trade has worked in
Switzerland, a small and prosperous country, but has it made any
A: When I was President of the Fairtrade
Labelling Organizations (FLO) International, I argued for fair
trade as a business model. It was accepted in the UK, which has
probably the most successful fair trade system, then in Italy,
France and the USA.
Q: But the model of the rich consumer buying food
commodities from a poor country at a slightly higher price can't
apply in a developing country.
A: That's why I say each country needs its own
fair trade system. Fair trade is about economic, social and
environmental responsibility. As a result, I'm in favour of
encouraging local suppliers for local consumers.
That is as true of Switzerland as of any developing country. The
farmers in both regions have the same interest. In Geneva now you
can buy local products under a special label, Terre Avenir. And you
can find them in the supermarkets as well as in the gastronomic
specialty shops. In fact, you can apply fair trade principles
wherever you live.
Max Havelaar is the title of an 1860 novel written by
Eduard Douwes Dekker under the pen-name Multatuli that played a key
role in changing the Netherlands' colonial policy in the Dutch East
Indies in the 19th and early 20th centuries. In the novel, the hero
Max Havelaar battles against a colonial government system in Java
which is applying slavery and unfair trade policies.
Paola Ghillani was head of the Max Havelaar Foundation
(Switzerland) from 1999 to 2005. She was Chairwoman and President
of the Board of FLO International from 2001 to 2004, and now works
as a fair trade consultant.
Peter Hulm, Trade Forum contributing
editor, interviewed Ms Ghillani in June 2006.
*Ed. note: $1.26 is the minimum price FOB
(free on board) at the port of origin of a well-defined Arabica
type of coffee. Other types and other qualities have different
For more information on fair trade coffee, seehttp://www.thecoffeeguide.org
, particularly section 03.06. This ITC site is available in
English, French and Spanish.