Fair Trade Certification and Complementary Arrangements

A. Fair-trade Certification

Fair-trade certification was developed and reviewed under the informal umbrella of Fairtrade Labelling Organizations (FLO) International, a multi-stakeholder association including producer networks, labeling initiatives, traders, and experts.

FLO's strategic intent is:

• to deliberately work with marginalized producers and workers in order to relocate them from a position of vulnerability, and help them attain security and economic selfsufficiency;
• to empower both producers and laborers as stakeholders in their own organizations; to play a wider and more active role in the global arena in order to achieve equitable terms of trade.

For a product to be labeled fair-trade, it must meet the international standards set by the FLO. The certification is done by an independent international certification company under the FLO umbrella.

The FLO has two sets of of generic producer standards:

• The first set applies to small farmers or smallholders organized in cooperatives or other organizations with a democratic, participative structure;
• The second set applies to organized workers on plantations and in factories²

The generic standards specify “minimum requirements,” which producers must comply with in order to be certified as fair-trade, and “progress requirements,” which contain conditions that producers are encouraged to improve over time. Progress requirements cover working conditions, product quality, environmental sustainability, and investments in the development of the organizations and their producers/workers (FLO 2006a).

FLO trading standards stipulate that producers have to:

• pay laborers a salary that is enough to cover the costs of sustainable production and living;
• pay laborers a premium so that they can invest in development;
• allow partial advance payments when laborers ask for it; and
• use contracts that allow long-term planning and sustainable production practices (FLO 2006, Fairtrade Foundation 2006).

In 2006, sales of FLO-labeled fair-trade products reached about €1.6 billion worldwide, 42% higher than that of the previous year. Fair trade-labeled products are mostly food-related, such as coffee, cocoa, bananas, and tea. As of 2006, there were 569 certified producer organizations in 57 countries. The FLO certification system benefits an estimated 5 million producers (FLO 2007). However, further empirical investigation is needed, particularly concerning the additional costs that may be involved with fair-trade labeling.

There is evidence that suggests that organic certification together with fair-trade certification can be a feasible and optimal combination for meeting the multiple objectives of the MDGs. Impacts of fairtrade certification include narratives on how it doubled farmers' income, how they were taught better resource management procedures, how their children were sent to school, and how they were consulted on current and future projects, among others.³

B. Combination of Organic and Fair-trade Certification

Organic certification mainly involves the technical aspects of production, with the main objective of producing safe food while improving the environment. Since organic certification standards originated and evolved based on the existing conditions of farmers in developed countries, they are likely to favor farmers from temperate regions and developed countries, and may be biased against farmers from the south or from tropical zones.

On the other hand, fair-trade certification has strong pro-poor features, having been developed based on the needs of small farmers in developing countries. Fair-trade certification strives for longterm benefits for poor communities. For example, fair-trade requires that producers organize themselves into democratic groups/associations, which allow them a higher level of collective action and bargaining power. Fair-trade also provides a guaranteed free-trade price premium that must be reinvested at the community level and not at the individual household level. In addition, it addresses the challenge of high certification costs for small-scale farmers by providing financial support during the start-up period. These unique features under fair-trade certification directly contribute towards target 12 and target 13 of the MDG8.

Target 12: Develop open, rule-based, predictable, non-discriminatory trading and financial systems

Target 13: Address the needs of the least developed countries

One of the key benefits of this market-based instrument is that certification brings about the formation of smallholders' groups. Beyond facilitating information dissemination and collective bargaining, groups can help smallholders overcome marginalization and social exclusion, and can lead to the accumulation of social capital.

Organic and fair-trade certifications seem to complement each other, and the combination of certain aspects of both could more effectively contribute to the achievement of the MDGs. Moreover, the potential for achieving the highest premiums is maximized when farms have both organic and fairtrade certification (ESCAP 2002). Table 2 [ PDF 30.2KB | 2 pages ] outlines the key differences between organic certification and fair-trade certification, and how fair-trade could complement parts regarding social objectives where organic certification is lacking.

Download this Discussion Paper [ PDF 147.3KB| 23 pages ].

Comment(s)

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1. Lauren
   (posted 23 November 2008 / 08:28:08 AM)
   
   The Australian Government needs to listen to this article and put into place an actual timeframe for when they are going to meet all the MDGs.