Fair Trade as development cooperation

As a volunteer, one of my tasks is to write a midterm report and an end report, where I’m encouraged to ponder what I’ve learned about development cooperation. Fair Trade is not exactly development cooperation between two countries, but in a way you could call it development cooperation between consumers in the first world and producers in the third world.

It’s more equal than traditional development cooperation, because both sides give something and get something back. The consumers make a conscious choice to buy products that have been produced and traded in a fairer way. In exchange, they get a clearer conscience and a product of high quality. The producers live up to all the demands concerning quality, farming techniques, labour conditions and social benefits. In exchange they get to sell their bananas to a stable market, directly without middlemen, at a stable price and with an extra premium.

The premium is the part of the system that most resembles traditional development cooperation. It’s not part of the price the farmers get in their pockets for the bananas they sell, even if it depends on the amount of bananas sold. It’s an extra sum of a dollar per banana box, that goes to a mutual fund. The money has to be used for the best of all the farmers through social, economic and environmental projects.

The classic dilemma of development cooperation is that a group of foreigners come to a developing country and dictate how the money should be used. The project doesn’t spring from local needs and is not led by local people. Fair Trade manages to avoid that problem because the farmers themselves decide together and democratically about the use of the premium. They are also the ones who manage the projects, in Asoguabo for example the health clinics, the medical insurance and the support to the school for handicapped children. One fifth of the premium goes to the 15 farmer groups, who often use the money for enhancing quality, efficiency and productivity on their farms. It’s the farmers, who know what they need and what works, who manage the premium.

But everything happens within certain limits. According to fairtrade rules, the premium can’t be used for any project. Here is the document that sets the limits. And the farmers have to report about the use of the premium. So they’re not completely independent.

But the thought is good. Thanks to the limits, the fairtrade cooperatives take on a social responsibility for their members, but also for the rest of the society, as in Asoguabo’s case. The farmers for example give bananas to the school children in the area and pay several teachers’ salaries, so it’s not just the farmers that benefit from the projects. The cooperatives set the example for other companies. That’s good in a country where the governments so far haven’t taken their social responsibility seriously. But the companies and first world consumers shouldn’t have to take the responsibility that belongs to the state. That’s what the present president thinks, too. With his government a lot is changing in Ecuador.

No development cooperation in the world can substitute the country’s goverment. No matter how good or bad for example Fair Trade works, the benefits will only reach part of the population. Someone is always left out. The government’s policies, on the other hand, have a deeper impact. A fresh example: in June, the government decided to raise the minimum price for bananas to 5,40 dollars per box. Just like that the farmers’ income rose, for fairtrade and non-fairtrade farmers alike. The farmers in Asoguabo have so far been paid 5,05 dollars for conventional bananas. The Ecuadorian government guarantees a fairer price than Fair Trade.

The fairtrade floor price for bananas in Ecuador is 6,75 dollars per box. The sum goes to the cooperative, which deduces the export expenses and gives the rest to the farmers. The minimum price is a minimum, and the farmers are encouraged to negotiate better prices with the buyers. But in practice, it’s hard to get a much higher price.


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