While this move has the prospect to increase the impact of
Fairtrade on producers, it also challenges FLO's traditional
business model.
The traditional Fairtrade model - based on consumers in
developed countries buying Fairtrade-certified products from
disadvantaged farmers in the global South - is undergoing change as
the growing number of consumers in emerging markets opens up new
opportunities for Fairtrade producers in the South. With the
increase in South-South trade, the Fairtrade Certification Mark is
acquiring meaning as a quality standard for consumers in the South.
This is because, unlike in the North where consumers relate the
meaning of Fairtrade certification primarily to support for
disadvantaged producers in the South, the newly emerging class of
consumers in producer countries places high confidence in the
quality and safety of domestic products that are certified in
accordance with international standards.
India is a case in point. Despite a rapidly growing middle class
currently estimated at 300 million people, India is still home to
one-third of the world's poor,1 and more than 70% of the
working-age population depends on agriculture for their livelihood.
Small-scale farmers and workers from close to 100
Fairtrade-certified producer organizations currently benefit from
Fairtrade's improved terms of trade on export markets, but they
still sell an often larger share of what they grow to domestic
markets on conventional terms. Tapping the potential of India's
growing consumer market has the potential of increasing the impact
of Fairtrade for Indian producers while giving consumers domestic
products of high quality and safety due to the traceability and
environmental standards associated with Fairtrade certification.
For FLO International this presents a strong case to invest in the
Indian Fairtrade market. In 2009, Fairtrade products with a
combined retail value of almost €50,000 were sold on the Indian
market. With the plan to establish a national Fairtrade initiative
that provides marketing support to Indian producers, traders and
distributors, we expect our current market position to strengthen
considerably.
Fairtrade is already seeing the value of investing in emerging
consumer markets in the South. Fairtrade Label South Africa (FLSA)
is an example. Established in 2009 as the first Fairtrade marketing
organization in a producer country, FLSA made almost €500,000 in
domestic retail sales from 14 certified producers in its first year
of operation. By becoming licensees of the Fairtrade mark, they are
able to sell a larger share of what they grow on Fairtrade terms
and are less dependent on demand from consumer markets in the
North. FLSA also shows that domestic products with international
certification appeal to consumers in the South.
The new opportunities presented by consumer growth in emerging
markets are challenging the way in which the Fairtrade system
traditionally works. Firstly, it requires accommodating differences
in consumer sentiment towards Fairtrade between developed and
developing countries. While Fairtrade is seeking to empower
consumers in developed countries to contribute to the fight against
poverty in developing countries by purchasing Fairtrade products,
poverty is still an everyday reality for consumers in the South. In
emerging markets, consumers care more about the development of
their own country and people, and the domestic marketing of locally
produced Fairtrade products offers them a way to do so in an
equitable and sustainable manner.
Secondly, Fairtrade standards were originally designed with the
model of South-to-North trade in mind. Empowering producers to
enter domestic markets has required a rethink of our product and
pricing policies to better align with the specific needs,
conditions and consumption patterns characterized by emerging
consumer markets in the South. FLO has recently launched the New
Standards Framework (see box) - the first revamp of its standards
to be more responsive to the needs of producers and enable them to
plan their own business and development strategies.
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|
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Small Indian produc-ers (such as this pepper farmer)
benefit from fair prices and better trading conditions in export
markets. Through the new national Fairtrade initiative and the
proposed changes to the Fairtrade standards, sales on the domestic
market should also increase. Photo:François
Guénet
|
|
Scaling up: Emerging markets, such as India, offer a great
opportunity for Fairtrade to increase its impact on small-scale
farmers and workers.
Photo: Didier
Gentilhomme
|
Finally, the face of poverty is changing in emerging markets and
with it the core target groups of the Fairtrade system. The shift
in economic activity from agriculture to manufacturing, which has
spurred economic growth in many developing countries, means that
poverty is increasingly becoming an urban phenomenon experienced
most severely by migrant workers and landless labourers. To fulfil
its mission in the more rapidly growing developing countries, FLO
will have to account more directly for workers engaged in the
processing of Fairtrade-certified products by broadening the scope
of its standards beyond agriculture to other sectors such as
manufacturing.
1 Measured by the percentage of the population
that lives below the new international poverty line of US$ 1.25 per
day.
NEW STANDARDS FRAMEWORK
Fairtrade
Fairtrade Labelling Organizations (FLO) International's New
Standards Framework (NSF) will be built on the current standards
model but it aims to help strengthen producers' social organization
and self-determination, reinforce the unique features of Fairtrade
standards and build the basis to create an even more effective
Fairtrade system.
Unique to FairtradeUnder the current model, Fairtrade standards are divided into
generic and product-specific producer standards. The generic
producer standards cover small producer organizations, hired labour
set-ups and contract production. There are also generic and
product-specific trade standards that lay out the requirements for
traders. The new framework reorganizes existing standards into
Production, Trade, and Business and Development standards. The
Business and Development standards will include all requirements
and features that are unique to Fairtrade, while the Production and
Trade standards will consist of standards that could eventually be
benchmarked with other standards and certification schemes. This
reorganization of standards may serve as a first step in working
towards mutual recognition of certificates with other schemes.
The concept of Business and Development for both producers and
traders is to maintain requirements that are unique to Fairtrade,
such as mandatory social organization, the Fairtrade Minimum Price,
Fairtrade Premium and pre-financing. But with the NSF, in addition
to these requirements, a Business and Development plan is
introduced that provides the space for producer, workers and
traders to define their own development paths. Lists with proposed
topics for development activities are provided that producers,
workers and traders can choose from according to their own
development strategies and needs.
It is expected that the new standards will be published and
implemented in the first quarter of 2011.
For more information, visit www.fairtrade.net/standards_in_progress.html.