- The demand for fair trade products is going up as consumers embrace the concept of increased incomes and working conditions for low income farmers in developing nations, but what are the implications for the fresh fruit trade?
Fair trade products are becoming increasingly available in our supermarkets and on my trip to the United Kingdom last year I found the international Fairtrade® certification system has now extended from tea and coffee across to fresh fruit products. Fairtrade apples from South Africa are available in the UK and in New Zealand you can buy Fairtrade bananas from Ecuador.
Fair trade is generally considered a way to recognise products from the developing world that ensure better prices for farmers and growers, provide decent working conditions, avoid child or forced labour, deliver fair terms of trade and assure environmental protection.
‘Fairtrade’ or ‘fair trade’?
For the observant, you might notice the use of ‘Fairtrade’ and ‘fair trade’. In Australia there are two different systems to help consumers identify products and businesses that support fair trade.
‘Fairtrade’ is an internationally recognised certification system that operates in Australia under Fairtrade Australia and New Zealand. You will see the Fairtrade label on individual products that have been certified by the system.
This is different to the Fair Trade Association of Australian New Zealand that certifies businesses as Fair Traders of Australia. These businesses, which may include businesses that sell certified Fairtrade products, can display the Fair Traders of Australia logo to demonstrate that they have committed to the Australian Standard for Fair Trade. Under the Fair Trade Association communities, including towns, businesses, schools, universities and faith groups in Australia can also be recognised as supporting the fair trade movement.
Other counties have different systems for recognising and certifying fair trade products but, in the UK (an important export market for Australian apples) the Fairtrade certification system is used. So I’ve focused my article on Fairtrade.
Benefits for Fairtrade growers
Fairtrade claims to provide a better deal for farmers in the developing world through:
- a fair and stable price for their produce
- security of long-term contracts
- investment in local community development
- improved working conditions
- environmentally sustainable farming methods
- support in gaining the knowledge and skills needed to operate successfully in the global economy
Only growers in countries with a low and medium development status that get official development assistance, as defined by the OECD, can be certified as Fairtrade. This means a grower has to be located in Africa, South America or certain Asian countries. For apple production, Fairtrade certification extends to China, South Africa and Chile, all of whom produce and export apples in competition to Australian apples. Other Fairtrade countries such as Brazil, Argentina and India also produce apples and pears although at this stage their exports are small and do not currently represent a major source of competition.
Fairtrade certification works through grower associations and organisations, their co op pack house or traditional sales agents who are the certified organisations in the country. It does not apply directly to the small grower. Fairtrade conditions are passed down to the grower through these certified organisations. The trade, including income, occurs through these organisations and the organisation pays the growers for their product and receives the Fairtrade premium, typically 10 – 15% of the total sale, which they use for community projects. The growers themselves do not receive this premium although they have a say in the community projects funded by their certified organisation.
Projects that the premium can fund include education and welfare, farm improvements to increase yield and quality or processing facilities to increase income. This structure does not necessarily eliminate the traditional ‘unjust’ marketing entities and it can in fact strengthen them if they are the body that becomes Fairtrade certified.
In addition to the premium, to ensure price stability for the growers, the Fairtrade standards also incorporate a minimum price that the growers’ organisation is to receive. If the market price is higher than the minimum, the market price is meant to be paid.
Fruit crops where there is a minimum price set include apples, apricots, avocados, banana, passionfruit, peaches, nectarines, pears, blueberries, cherries, grapefruit, lemons, limes, litchi, mangoes, melons, oranges, papaya, pineapples, pomegranates, raspberries, red currants, strawberries and grapes. For apples, the minimum price for South American (Chile, Brazil, Argentina, etc) fruit at current rates of exchange is 60c per kilogram plus a premium of 8c. For South African ‘Braeburn’ apples there is a minimum price of 48c a kilogram plus 7c, and South African ‘Cripps Pink’ have a minimum price of 53c and a premium of 8c. Similar prices apply to South American and South African pears. Certified Fairtrade organisations are guaranteed these base prices under all market conditions.
Australian growers already fairly trade
Australian growers already have to comply with most of the conditions of Fairtrade certification and, if they are also involved with a charity or voluntary service association, they are probably also complying with the social components of the Fairtrade certification as well. However, because of our geographic location, Australian growers are precluded from Fairtrade certification. This could put Australian apple and pear growers at a competitive disadvantage in export markets compared to our Chilean and South African counterparts. Although, it would be interesting to see if Australian fruit growers could become members of Fair Traders of Australia, and to see if that had any international traction.
Competing on price
Fairtrade certification is not cheap as it requires annual external audits for certification and there is a requirement for the Fairtrade companies to employ various managers such as a Fairtrade manager, medical officer, health and safety officer, and administration staff. There is a requirement for access to communication equipment as well as continually providing education activities on Fairtrade to the members of the organisation. In addition, the Fairtrade company must ensure their staff and children have access to primary education, which may necessitate the purchase of a bus or the construction of a school. They are also expected to develop business and social development plans, a quality management system and are required to form a legal entity (company) for the administration of the Fairtrade premium. There is an initial application fee to the grower organisation of €2,040 and an annual fee of €1,610. There are additional fees if more than one product group is marketed.
In the UK and here in Australia, I have taken a look at supermarket prices of Fairtrade versus conventional products for comparable items. For the products I looked at in the supermarkets I visited, the Fairtrade products were actually cheaper than the conventional product.
Competing on ‘green’ image
One of the principles of fair trade includes ensuring sustainable production. As a result, Fairtrade certified products cannot use a variety of pesticides. Their Prohibited Materials List is divided in two lists: the Red List and the Amber List. The Red List includes materials that must not be used by producers while handling Fairtrade products. The Amber List includes materials which are being evaluated by Fairtrade International as candidates to be prohibited. A lot of the pesticides on these lists, such as DDT and arsenic have already been banned in Australia and not in use by our growers.
Moreover, Australia has a growing reputation as a supplier of clean, green and safe produce.