Greed and the hunger for quick profits have unfortunately always been apart of mankind’s flaws. The notion that we ourselves come first, despite how our actions affect others around us, is a constant struggle. It is clash between those who take the time to realize this phenomenon and strive to help by bringing change, those who are oblivious to it and those who flat out do not care. The actions by people trying to get rich often at the expense of others, has over time cost people their quality of life, their families and homes and even their lives. This is particularly true in the cacao industry. Companies and people alike claim to have moved on from slavery, although we still see instances of companies using child labor and paying wages that are far too low. It’s a topic that is too often untold or covered up by large corporations and governments and has severe consequences. This paper will strive to understand fair trade, one of the most popular strategies to combat this issue. It will also look at the some of the critiques of fair trade in order to assess the value of the program.
Chocolate is made primarily from the cacao bean. The bean needs a specific climate in order to grow and thus it is most often found in places like West Africa, Asia and Latin America. Countries like Ghana and the Ivory Coast are among the countries that supply the most cocoa worldwide. In these countries the problem of child labor in the cacao market is very prevalent. With the recent media exposure of this issue, companies and governments have take precautions in order to protect themselves. We saw an example of this in 2010 when the Ivorian government detained 3 journalists after they had published an article speaking out about the corruption of the government, which was trying to hide the child labor, and low wages issues that were happening in their country in the cacao industry. Perhaps the scariest part about this problem is these farms are the ones responsible for supplying companies like Hershey’s, Mars and Nestle. It is understandable that governments in countries like Ghana and the Ivory Coast want to protect their cacao export businesses as it consists of huge profits for the country. In the Ivory Coast specifically, cacao exports account for 60% of the export revenue for the entire country. This is a huge amount and we slowly see why the importance of concealing the labor issues in these countries becomes vital to them. This labor issues relating to child labor do not stop there, problems of human trafficking have also been apparent in these areas. This leads to further problems where the children and people being trafficked are working for no money at all.
We have all seen labels on different products labeling them as fair trade or many other fair labels but what does that really mean. The following is the definition taken from the Fair Trade USA website.
“Fair Trade Certified™ products were made with respect to people and planet. Our rigorous social, environmental and economic standards work to promote safe, healthy working conditions, protect the environment, enable transparency, and empower communities to build strong, thriving businesses. When you choose products with the Fair Trade label, your day-to-day purchases can improve an entire community’s day-to-day lives.”
Fair trade in the cacao industry arose from years of labor shortages, which created the child labor problems we hear about which in turn was caused by low wages. Throughout the 1990’s 90% of the world’s cacao came from small independent farms in West Africa and Latin America. The cacao was then purchased by what are called “middle men” who purchased the product from the farmers and the sold it to processors around the world. This created an industry where for the most part, farmers had no idea where their cacao ended up. It also created an industry in which the farmers were making far too little for the product they were producing. The incredibly low wages resulted in a labor shortage, which inevitably lead to the issue of child labor. The first fair trade certificate in the cacao market was issued in 1994 in the Netherlands. Since then, the fair trade market has expanded along with the fair trade programs. In 2002 Fair Trade USA began issuing certifications for companies within the USA until 2011 when they broke away from the Fair Trade International (FLO) and now manage their own certifications.
Getting into the impacts of fair trade, there are two main goals, the first is creating extra income for the farmers and the second is helping with the development of communities where the farming is done. There are two main vehicles through which fair trade operate. The first is called wage floor. It is a strategy by which the fair trade associations set a minimum wage the farmers can be paid for their work. A price floor accomplishes many great things for the farmers and their families. Among those things are helping the farmers have better living conditions for them and their families by allowing to them accumulate some wealth and save for the future. This point directly ties into child labor. The sole biggest reason for child labor is the need for the children to help bring in money for the family to survive. By paying the farmers a fair price, there is less of a need for the children to work at a young age and can focus on others things like school. The second vehicle is called the social premium. This is a strategy by which the extra money collected through selling the chocolate at a premium price gets redistributed back to the farmer’s communities. This is often the case when the farmers do not have ownership of their farms; the extra income received for the sale of a fair trade good goes back to the local country or area in order aid in improving local living conditions. These funds can help establish things like scholarship funds, heath care programs, sanitation improvements and even helping out with loans for small local businesses. In a perfect world, fair trade seems like the ideal solution to fix low incomes and child labor. Chocolate companies can still make profits while selling a product that comes from good working conditions and pays the farmers a salary that is equitable for the work they produce. Unfortunately there are certain economic externalities that come into play with fair trade.
This section will cover some of the externalities that are not intended with fair trade but arise nonetheless. The first externality is that fair trade produces a surplus of product. In a paper written by Kohler Pierre called “The Economics of Fair Trade Coffee: For Whose Benefit? An Investigation into the Limits of Fair Trade as a Development Tool and the Risk of Clean-Washing.” which uses coffee fair trade as an example Pierre writes that only 30% of coffee can be sold at a fair trade premium due to the surplus, and the rest of it has to be sold at conventional market prices. Secondly, as mentioned earlier, the premium often accounts for what is redistributed as social premium. There is no doubt that social premium is a great thing, the only issue is that is does not always redistributed to the farmers but rather used for collective projects. It also in many cases does not even directly increase the income of small producers. Again, this is a point that can be argued for both sides but since the goal of fair trade is to aid the farmers in the long run we can see how this sort of redistribution does not always align with the goal. Another issue surrounding fair trade is that it on often does not reach the poorest arts of the country because producers in those areas are not organized into cooperatives or in some cases the cooperatives will not let the farmers enter the cooperative without reaching some certain internal standards. This is a major issue as the whole goal behind fair trade is to help the farmers who need the help most.
When we walk through a store and notice the fair trade symbol on a chocolate bar does it necessarily mean that it is in fact a fair trade product? Unfortunately we never know. This is perhaps the most alarming issue about the certification. An example of this happened in 2009 when the founders of the fair trade certification process had to suspend several of their West African suppliers due to evidence that they were using child labor. It is a constant struggle between suppliers, governments and chocolate companies in terms of transparency of their operations. Since the events in 2009 chocolate companies continue to advocate that all their farmers are paid fairly and child labor is not used. Nonetheless these claims have been disproved. In a 2011 documentary by Miki Mistrati his investigations led him to many farms in Western Africa, where till this day most of the chocolate companies in the world purchase their cacao, and was able to film the use of child labor on many farms who were technically supposed to be under a fair trade agreement. This makes us wonder whether the large chocolate companies are aware of what is happening on their farms, or another alternative can be that they might not be entirely aware. The latter definitely sounds less feasible considering the resources and employees available in such large corporations.
So who should the responsibility lay on? The simple answer is on everyone, the people in charge of fair trade certifications have to monitor their farms more firmly and assure their restrictions are being respected. The chocolate companies should certainly take pride in upholding the values of fair trade. A fair trade certificate should not be a marketing tool in order to reach a certain niche market, the certification should be an authentic will to improve the world we live in by creating better conditions for everyone and not only themselves. Perhaps the group that is most often forgotten as a strong force in this battle is the consumers themselves. Too often the consumers are the first ones to point the finger at the large corporations and the various instances of corruption that happen in governments in these countries. In my opinion, the consumers have just as much of a role in diminishing food injustices around the world. As fortunate citizens in a world where almost all information is at the end of our fingertips, we have the responsibility to educate ourselves and make conscious decisions as to what we are supporting or not supporting by the purchases we make. At the end of the day we the consumers are the ones with the purchasing power. This is especially true when we are considering a product like chocolate. Contrary to fruits, vegetables and protein, chocolate is a luxury and not a necessity. Through taking this class and doing thorough research on the subject, I have noticed how incredibly easy it is to educate ourselves on the products we buy and also how easy it is to make decisions that support ideas we believe in. At the end of the day it comes down to our consciousness and willingness to take the time to make the right decisions. It may cost us a little more at the end of the day but in the end knowing we made the right decisions for the greater good is priceless.
World Cocoa Foundation. March 2012. “Cocoa Market Update.” http://worldcocoafoundation.org/wp-content/uploads/Cocoa-Market-Update-as-of-3.20.2012.pdf. (2/27/14)
Mistrati, Miki, and Romano, U. Roberto. Shady Chocolate. Performed by Mistrati, Miki (2012; Copenhagen: Bastard Film & TV)
Mistrati, Miki, and Romano, U. Roberto. The Dark Side of Chocolate. Performed by Mistrati, Miki (2010; Copenhagen: Bastard Film & TV).
The Economics of Fair Trade Coffee: For Whose Benefit? An Investigation into the Limits of Fair Trade as a Development Tool and the Risk of Clean-Washing. (By Kohler Pierre)Fair trade USA, http://fairtradeusa.org/what-is-fair-trade
BBC. March 24, 2010. “Tracing the bitter truth of chocolate and child labour.”http://news.bbc.co.uk/panorama/hi/front_page/newsid_8583000/8583499.stm.
The Problem With Fair Trade Coffee, Colleen Haight, Stanford Social Innovation Review.http://ssir.org/articles/entry/the_problem_with_fair_trade_coffee