“Trade, not Aid”
Issue Paper: Fair Trade
Date: 02/10/2009
LEADERSHIP AND ISSUES (BKM09GBS-09)
Professor: Prof. Dr. R. van Tulder
Group 7:
Tijana Batista 287271
Deirdre Gras 316264
Kelvin Hollebrandse 287488
Ward Ripmeester 289850
Executive Summary
The last thing someone will be thinking about in the morning when they are drinking their first cup of
coffee is the story behind the coffee. Coffee is the second largest commodity in the world, right after oil.
For a product in that is so important all over the world, the importance of its producers, the farmers,
and their well-being are completely neglected. Currently, the global marketprice of coffee is so low that
farmers in the developed countries are not able to maintain their families anymore by just producing
their main product, coffeebeans. There is however an alternative to the “exploitation” of these famers,
its called Fair Trade. Fair trade products ensure that the farmers are getting a fair price that will make
them able to maintain a sustainable business and living for their families. However this is not just an
issue in the coffee market, but is occuring in many products that arise from agricultural activities. It
being a fact that agriculture is one of the the most important incomes for the majority of the people in
the least developed countries, its clear for us to state that Fair Trade is an important issue.
In this paper we did research in the issue of Fair Trade, main question that we asked ourselves, was how
to make Fair Trade products become mainstream. We have elaborated on what exactly Fair Trade is and
what the current trends and opinions are about this topic. In the diagnoses part we analyzed and
discussed the stakeholders and their role in the Fair Trade issue. In what way do they contribute to the
issue, can they influence other stakeholders and are they doing so. According to these analisys we have
formed our opinion on the problems’ current stage of development, where the most important
problems lie for Fair Trade products and its actors and whether we feel this is the right direction. We
have introduces some ideas about how the development of the Fair Trade market can be positively
influenced. Most of these ideas are based on partnerships between the different stakeholdergroups, we
have elaborated on all three of the stakeholder groups in order to create a good view on their part in
this problem and possible solutions in which they can play an important role in. To show examples of
methods on how to create a more mainstream market for Fair Trade products we have also included
two case studies that discuss the implementation of Fair Trade in the UK market, which was considdered
a success, thanks to succesful partnerships between the stakeholders. Finally we will give our advice on
how Fair Trade products can become mainstream succefully and mention areas that we feel should be
up for further research.
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Table of Content
Executive Summary .......................................................................................................................................................1
Table of Content ............................................................................................................................................................2
1. Abbreviations and Keywords .....................................................................................................................................3
2. Introduction...............................................................................................................................................................4
3. Problem definition.....................................................................................................................................................5
3.1 What is Fair Trade?....................................................................................................................................5
3.2 Free Trade .................................................................................................................................................6
3.3 Current developments ..............................................................................................................................6
3.4 Criticism.....................................................................................................................................................7
3.5 Trend analysis: Kondratieff wave ..............................................................................................................8
4. Diagnosis....................................................................................................................................................................9
4.1 Stakeholder analysis..................................................................................................................................9
4.2 Issue Life Cycle.........................................................................................................................................12
4.3 Triple-E ....................................................................................................................................................14
4.4 Tensions...................................................................................................................................................16
5. Design/Solution .......................................................................................................................................................19
5.1 Civil society..............................................................................................................................................19
5.2 The Market ..............................................................................................................................................20
5.3 Government ............................................................................................................................................23
5.3.1 State-governance ...................................................................................................................23
5.3.2 International governance.......................................................................................................24
6. Implementation .......................................................................................................................................................26
7. Evaluation ................................................................................................................................................................29
8. Conclusion ...............................................................................................................................................................33
References ...................................................................................................................................................................34
Appendix......................................................................................................................................................................38
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1. Abbreviations and Keywords
FINE
An informal association for the four main Fair Trade Network,
consisting of FLO, NEWS!, WFTO, EFTA.
FLO
Fair Trade Labeling organization
NEWS!
Network of European Worldshops
WFTO
World Fair Trade Organization
EFTA
European Fair Trade Association
WTO
World Trade Organization
MNE
Multinational Enterprises
CSR
Corporate Social Responsibilities
FTF
Fair Trade Federation
IFAT
International Federation of Alternative Trade
BRIC
Brazil, Russia, India and China
KNCU
Kilimanjaro Native Co-operative
EDD
Export Development Programme
TWN
Third World Network
Fair Trade –North-South - Free Trade – Ethical trading - Sweatshops – Marketing – Strategic Choice –
Trade Barriers – Sustainable Trade – FINE – Farmers – Alternative Trade – Certification – Labeling – WTO
– Partnerships – Networks – Developing countries
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2. Introduction
It seems that the number of Fair Trade products in the mainstream supermarkets and shops are
increasing, which has increased the credibility of the Fair Trade labels on an international level. This has
been driven by a number of different influences, which A.J. Nicholls (2002) has put together into four
groups, namely political, academic, cultural, and informational (see Appendix 1). He states that these
influences interact with each other to generate a change onto the publics view to the recognition of the
importance of Fair Trade in the developed economies. Furthermore, according to the latest press
release of The Fair Trade Foundation consumer’s confidence and business support for the Fair Trade
products is still increasing. Their recent research shows that even during the economic slowdown the
awareness and spending figures have been increasing (The Fair Trade Foundation, 24 September 2009).
However, Fair Trade is still considered to be in a niche market. Recently consumers and producers have
been reaching out to each other and taking the first steps in making Fair Trade mainstream and making
it overall accepted. The question we asked ourselves is whether Fair Trade is at a maturing stage? Even
when it appears that Fair Trade is approaching maturity, it still faces challenges at both ends of the
supply chain, which we try to identify. We start by a description of the characteristics Fair Trade, where
we identify different stakeholders involved and the criticism associated with this topic.
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3. Problem definition
3.1 What is Fair Trade?
One of the current trends on the consumer platform of the developed countries is the rise in ethical
consumer behavior by purchasing products that are advertised or perceived by the consumer as ethical
(Pelmacker, 2005). Ethical consumption is when the purchase of the products involves an ethical issue,
such as environment, human or labor rights. Fair Trade products are an example of such ethical products
(Doane, 2001).
There have been many different definitions for the term Fair Trade over the years. In 2001 FINE stated
the following which is now widely accepted among the actors in the Fair Trade movement as the
definition of Fair Trade.
“Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in
international trade. It contributes to sustainable development by offering better trading conditions to, and
securing the rights of, marginalized producers and workers – especially in the South. Fair Trade organizations
(backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning
for changes in the rules and practice of conventional international trade”.(FINE, 2001)
The terms Fair Trade and ethical trade are used interchangeably; however, it is of great importance to
make a distinction between Fair Trade and ethical trade. Ethical trade is a principal of corporate social
responsibility that fits in any modern business, where Fair Trade is more product specific and sustainably
focused (Bird and Hughes, 1997). In its basic terms it represents an approach to supply chain
management where it aims at equal exchanges between the buyers-supplier transactions (Strong, 1996).
The WFTO has issued 10 set principles that have to be carried out and monitored by any Fair Trade
organization:
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1. Creating opportunities for economically disadvantaged producers
2. Transparency and accountability
3. Trading practices concerning the social, economic and environmental well-being
4. Payment of a fair price
5. Child labor and Forced Labor
6. Non discrimination, gender equity and freedom of association
7. Safe and healthy working conditions
8. Capacity building
9. Promotion of Fair Trade
10. Be environmentally sustainable
Source: WFTO (2009)
3.2 Free Trade
Visions between Free Trade and Fair Trade are not comparable and are based on completely different
visions. Where as Fair Trade is based on doing business in such a way that is ethical and equitable to the
farmers, Free Traders believe that the market, in the end always corrects itself and countries, rich and
poor can benefit from having full access to each others markets. According to these Free Traders, Free
Trade is Fair Trade (Nardi, 2005). Free Trade would involve the complete elimination of all trade
barriers, quotas and tariffs, up until today no country has ever carried out such a policy (Sharman, 2005).
Trade barriers can exist in many forms, like the above mentioned quota’s or tariffs, but they can also
include language, law or culture barriers. Some countries have created a free trade area between the
partnering and, or neighboring countries, examples include the EU, NAFTA and SAFTA, partnerships like
these are usually based on geographical and cultural similarities.
3.3 Current developments
You can see a clear trend in the Fair Trade industry, multinationals have started adopting Fair Trade
products within their product lines, partnerships are being created by the multinationals and the Fair
Trade channels, including working with the Fair Trade networks and sometimes even directly with the
farmers. There are a some recent examples of these kind of partnerships between the commercial profit
oriented organizations and Fair Trade actors, one of these examples is the switch in July 2007 by one of
UK’s largest supermarkets, Sainbury’s, to sell solely bananas that are Fair Trade. Other examples are the
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adaptation of 100% Fair Trade tea’s and coffees in the home brand of Marks & Spencer. Dunkin Donuts
is currently only serving Fair Trade coffee to its customers in the Northern America’s and Europe, the
Swedish hotel chain Skandic adopted that same approach where they only serve Fair Trade coffee. (FLO,
2007) The Dutch supermarket Albert Heijn has acknowledged the trend in Fair Trade and is adopting
more Fair Trade products in their shelves. During the Fair Trade week in 2008 they put the Fair Trade
products in the “spotlights” and during that week, average sales in Fair Trade products had doubled.
(Albert Heijn, 2008) Very recently Starbucks made a statement that they want to convert all their coffee
into Fair Trade coffee in the European market. (Food Holland, 2009) We will be elaborating on
partnerships and show examples of successes through case studies further on the research.
3.4 Criticism
Certification fee: An issue that receives criticism is the fact that producers have to pay an initial
certification fee of 2000 Euro and 500 Euro every year in order to be able to use the certification. This is
a huge barrier to many farmers, who before selling their products at market prices; barely made enough
money to provide for themselves and their family, let alone save this hard earned money for the
certification fees. This method immediately excludes the poorest famers from participating in the Fair
Trade movement as most of the farmers have no or only very limited access to credit. (World Centric,
2009)
Social-greenwashing: Most of the Fair Trade products are being represented by one of the FINE
networks, those manufacturers are relatively small and produce 100% Fair Trade products. While most
of the multinationals only carry a fraction of what is officially Fair Trade, however with the Fair Trade
labelling, these companies are now seen as ethical by the public. This is a very controversial approach as
critics claim that these manufacturers are only adopting these products for an increase of good
reputation and “social-greenwashing” purposes. (World Centric) (Reiber, 2004)
Transparency: Currently there is still a lack of transparency, importers may claim that they are selling
products that are “fairly traded”, while in reality they are not and do not carry the official Fair Trade
certification, however, consumers might believe that they are buying Fair Trade products, due to the
misleading advertisement as fairly traded. The products that are traded with the official certification
have set prices, however that does not take into account the disparities within the different parts of the
world. Fairly Traded products can be bought for any price as they are not obliged to this set price (World
Centric).
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Gap: All of the above stated criticisms have most likely contributed to the fact that in reality only small
fraction of the consumer buys Fair Trade products. There is a gap between the willingness of the
consumers and their commercial buying attitude. Co-op (2000) has publicized that more than 50% of the
customers have stated that they would purchase Fair Trade products, while less than 1% of their buying
behavior consists of Fair Trade products. This perception gap is worth exploring it into more detail.
Trade Barriers: Farmers who would like to export their products to western economies will find another
hurdle as soon as they want to cross the border. In any country that these farmers want to export to,
they will find trade barriers that will keep them from entering the market unless the home country of
the farmer and the country of the potential “market” have trade agreements, the farmer is able to pay
the fees or have partnerships with national companies of that particular country. Countries want to
maintain the trade barriers in order to protect their own market and not create too much of a
competitive environment that might hurt national organizations. With the WTO being one of the most
important legislative institutions around the world, they can be a very important factor in opening up
markets and create a better competitive environment for the exporting farmers.
3.5 Trend analysis: Kondratieff wave
Fair Trade has been existing for over 60 years and is well established in its own niche market, but with
its current rising popularity and trying to tap into the mainstream markets more people are aware and
want to know more about the Fair Trade. With the information that is available today due to the
technologies and the proactive attitude of consumers, there is a need for more grounded, objective and
legitimate theories and information about the subject. A large number of research have been
conducted, but that does not eliminate the need for more. Currently we are living on the turning point
of the fifth Kondratieff wave, a time period focusing and synonym for Internet, bio-technologies, mobile
technologies, soon there will be a need for a new trends that will start of the beginning of the 6th wave.
Nefiodow (2006) claims that we already at the beginning of the 6th wave, a wave that will be
representing a time focusing on life sciences and health which includes topics such as mental, physical
and social health and further bio-technologies (See appendix 2). It is believed that there will be a radical
change in the competences needed in order to create a competitive advantage (Nefiodow, 2006). This
well seems like an era that will use a more social approach in ways of doing business , a time were as
CSR and more specifically more ethical trading would be placed perfectly in the context. In this case, Fair
Trade is making its debut on the shelves of the mainstream supermarkets at exactly the right time.
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4. Diagnosis
4.1 Stakeholder analysis
The issue of Fair Trade mainly exists between governments and companies, because of the difference in
perspectives on how international trade should be dealt with (see Figure 1). Companies are profit
oriented and want to be able to import resources and export goods with the least amount of trade
barriers like import taxes or restrictions. Free Trade would be the optimal solution for multinationals or
companies that are oriented on international trade. This way all goods and recourses can be distributed
to any country in the world without additional expenses. National governments do not always see this
as the optimal solution and are usually not willing to open their borders to all forms of trade.
Governments want to protect the local companies from excessive competition from abroad. Local
companies need this kind of protection, because in many cases multinationals or foreign producers can
produce the same goods under lower costs. This can lead to economic disadvantages for the local
companies.
Figure 1: Position of the issue in the triangle
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The WTO, who consists of 153 member states, manages these trade barriers and every participating
government has a representative. WTO rules are resulting from negotiations between governments,
ratified by members’ parliaments and are made in consensus between the participating members.
Representatives of countries bargain about how the trade barriers should be. (WTO, 2009). In many
cases, local companies benefit from the trade barriers. However, in for example the agricultural sector
the trade barriers only make it more difficult for small companies, especially originating from developing
countries, to enter the global market and to make a decent profit. Farmers in developing countries are
often exploited, because further on in the supply chain, middlemen or multinationals need to pay
import taxes for the goods they bought from these farmers and all still want to maintain their marginal
profits. This can be seen in the overall profit discrepancy in the supply chain , as only a small part of the
profit that is made on the end products is distributed to them (Parrish, et al., 2005).
Fair Trade tries to deal with this exact problem. The underlying thought is that if the farmers in these
developing countries are compensated enough for their work, they have a bigger chance of escaping the
poverty trap. To elaborate more on this issue, one needs to understand who the most important
stakeholders are and what their role is in enhancing or demoting Fair Trade. Stakeholders are divided
into three main groups: state, market and civil society and are elaborated on below.
The rise of Fair Trade was established without any form of governmental interaction. Fair Trade started
as a small niche within the global market to supply those consumers that had the opinion that not
enough development aid was given (Becchetti & Huybrechts, 2008). The fact that in the beginning
governments had no influence on the rise in demand on Fair Trade products does not imply that they
are not part of the issue, since trade barriers or boundaries are setup by governments. The WTO can be
seen as the most influential organization as a part of the Fair Trade issue, as it is in fact the only
regulatory body for international trade. They do not hold executive power by themselves, but do have
the possibility to give incentives to the member states to lower their trade barriers. Many of the least
developed countries are part of the WTO, but not all the countries in the world are member states. This
is a great disadvantage of the organization, as some of these excluded countries have no voice on the
decisions made in the context of international trade. There are is some criticism regarding the WTO,
most of these are legitimacy and transparency related. The major countries (most developed countries)
are getting the most favorable treatment when it comes to the decision making process. Resulting the
less developed countries as the “underdog”, while they could be the ones benefitting the most. Another
issue is the transparency, of lack off in this case. A lot of the meetings where decisions are being made,
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are initially informal meetings, who is attending, when and the place is often unknown to the public,
until more concrete implementation is being presented to the public. (TWN, 1999)
Multinationals, middlemen, distributors, processors and retailers are the main stakeholders from out
the market sector. They are all part of the global supply chain that makes international trade possible
and in addition makes Fair Trade possible. Many of these stakeholders have a choice to whether or not
to participate in a Fair Trade supply chain. Multinational Enterprises, for instance Sara Lee, made the
decision to implement some Fair Trade products to their product lines (Renard, 2002). Others, like some
middlemen, are just after profit and want to buy products or resources for the least amount of money
and sell them with the highest amount of profit. Supermarkets or other retailers can choose to have no
Fair Trade products at all, or next to the regular products have some Fair Trade products or solely sell
Fair Trade products. World shops are an example of retailers that only have Fair Trade products in their
product lines. In most cases, this has something to do with the demand on these products.
Within civil society, consumers can be seen as one the most important stakeholders regarding to the Fair
Trade issue. Fair Trade labeling organizations are trying to reach and improve consumer awareness and
with the consumers buying power, they can change the global market (Renard, 2002). The farmers in the
developing countries are in this case part of the civil society as well. These farmers are part of the global
supply chain, but often they are not part of an organization. Individually, these farmers are trying to
survive, rather than making a profit. Furthermore, the economic and political globalization, with its
effects of social exclusion and ecological destruction, has brought a range of new stakeholders on the
stage that could put more pressure on the issue, for example “green” activists, anarchists, unions and
other social organizations (Renard, 2002).
These new stakeholders are brought together by the
introduction of the NGOs that have the goal to enhance Fair Trade. Another organization is FINE, which
a forum that brings together four international movements that support Fair Trade. (Audebrand &
Pauchant, 2009) Certified labelling organizations such as Max Havelaar and TransFair are all part of the
umbrella NGO, which is the FLO. This regulated the issue of to who and when it is possible to label
certain products as “Fair Trade products” (Hira & Ferrie, 2006).The second one, IFAT, brings together
producers and buyers, this organization consists of approximately 110 producers and 50 buyers from all
over the world. European world shops are part of an umbrella organization called NEWS!. It acts as an
over viewing organization for European shops that predominately sell Fair Trade products. And EFTA is
an association that has 12 members within 9 European countries. These members consist of importing
organizations (Moorre, 2004). Next to the international movements that are part of FINE, there are two
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more notable NGOs that deal with the issue of Fair Trade. The first one is the FTF, this is an association
of Fair Trade wholesalers, retailers and producers. In 2000 it had 84 members and foremost they are
active in the U.S. and Canada to promote the TransFair label. The second is the WFTO, it is an
organization to which companies that have a 100% Fair Trade strategy can apply for being a member.
The NGOs are brought forward by the civil society to promote Fair Trade and to be able to have a
collective influence on the world market and governments. The most influential stakeholders are part of
the market and state, but civil society has the power to create alternatives to solve these problems.
4.2 Issue Life Cycle
When we look at the typical stakeholder positions along the Issue Life Cycle stages (Van Tulder, 2008),
there are a few matters to be considered. To begin with, the issue Fair Trade is in our opinion in the
third stage of the cycle, namely the development stage. To make this assumption clear, we will take a
short view on the role of the different actors in this stage.
Within this stage, companies can be seen in their behavior as active: they are working on the
development of alternative brands, labels or codes. This phenomenon of development can be seen
concerning the Fair Trade issue, for example with company cases like Douwe Egberts (‘boerenkoffie’)
and the Jacobs company (‘Café Condor’), who developed an alternative product in order to improve
their own image (Renard, 2002). But also the example of Tony’s Chocolonely, who established an
alternative chocolate brand in an (active) way to inform consumers about the social benefits of Fair
Trade (Raijmans, 2009). The active behavior of companies in the development stage involves
formulation and implementation of codes of conduct, trademarks and certification schemes (Van Tulder,
2008). Moreover, the statement can be made, that the actors in our example are in focus of the positive
reputation mechanism, perhaps due to a strong vis-à-vis relationship with NGOs or forced by other civil
society movements. In the development stage of the Issue Life Cycle, the focus on a positive reputation
towards an issue is to be considered as more important than the negative reputation mechanism, which
occurs often in the birth of an issue (Van Tulder, 2008). There is a well-known example of the coffee
company Starbucks, that has decided to sell Fair Trade coffee and subsequently work with other NGOs,
after a confrontation with activists about human rights (Argenti, 2004).
Besides the role of companies, we can see a corresponding view on the role of NGOs, which is according
to the Issue Life Cycle to be considered as cooperative. In this view, NGOs are supporting and developing
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plans for alternatives and plea for more stringent regulation. Regarding to Fair Trade, the cooperative
form of NGOs (the umbrella bodies, like FLO, NEWS! etc.) are resembling the introduction of common
labels or so-called ‘world-shops’ (Moore, 2004). NGOs are in the process of developing certification
schemes/labels, and the birth of new Fair Trade organizations (as well as their membership to umbrella
organizations) is rising.
Aside from the typical stakeholder position in the cycle, we also want to make a remark on the
dynamism of the interaction in order to make a brief explanation on the identification and assigning on
the responsibilities of the different actors within the issue. Fair Trade can be viewed as an interface
issue, where the most involved actors do not have sole responsibility for creating the problem and thus
an interactive approach is required between the different spheres in order to establish a solution (Van
Tulder, 2006). Regarding to Fair Trade, the most involved actors that will have to cooperate in order to
bring the issue to the mature stage, are the state and the market, whereas the civil society (NGOs) can
only help in triggering the problem and could try to develop alternatives. This interface between the
different actors obviously results in challenges to solve the problem of Fair Trade. For instance, some of
the elements of the success of Fair Trade are showing aspects of good practice in conventional chains,
including longer-term relations between producer and buyer, transfer of knowledge between the two
and fair trading practices, which all will eventually result in trust (Blowfield, 2003). Governments and
firms will need to collaborate and participate to make sure that the issue of Fair Trade will develop itself
to the maturity stage, in where companies and government will go even to a pro-active role. NGOs on
their behalf, are trying to plea for more stringent regulation by the formulation of the earlier mentioned
certification schemes and labels.
At the same time the business sector is changing through the arrival of new small entrants, that are
based on ideals instead of market power, in order to identify and serve the critical consumer (for
example: Tony's Chocolonely). Consumers are, as stated before, more critical than before and have
much more access to market/product information. Furthermore, we can see a challenge in the
cooperation between NGOs and firms and/or small producers. When producers and/or firms are
attracted to be part of an umbrella organization, they will need to fulfill some necessary requirements of
standards to 'earn' their membership. Some of these standards involve topics like transparency, child
labor, working conditions, discrimination, environment and price payment (WFTO, 2007). This could
mean that firms will need to adapt or change their mission and working environment in order to find the
way to long-standing relationships and partnerships.
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4.3 Triple-E
In this part, we will try to make a correlation between the Triple-E model in consideration with Fair
Trade. The Triple-E model consists of efficiency, ethics and effectiveness, where there is a tension or
trade-off between the disciplines efficiency and ethics. The solution for this conflict should be sought in
the posing question of effectiveness (Van Tulder and Van der Zwart, 2006 - 153).
As Blowfield (2003) described, “Ethical Trade involves that a company at one part of the supply chain
(typically a brand owner, retailer or other Western company with a public profile) takes responsibility
for the social and/or environmental performance at other stages of the chain, especially for that of
primary producers”. This is a significant change from the traditional practices, as it means that a
company should take responsibility for the behavior of other parts in the supply chain, even if it does
not have any long-term formal liability for the results of that behavior.
Fair Trade involves more than just following codes of conduct and meeting the right labor standards. As
the IFAT states on their website: "Fair Trade organizations specifically seek to work in partnership with
marginalized and disadvantaged groups to try and help them overcome the serious barriers they face in
finding markets. Therefore, while a Fair Trade business must be ethical, an ethical business is not
necessarily Fair Trade" (IFAT. 2009)
The issue of Fair Trade depends for a large part on the protectionism that governments implement to
secure their local markets. To manage trade efficiently, the member states of the WTO set standard
operational conducts that are used to create a healthy trade interface (Moorre, 2004). Protectionism
does not promote a global market that is needed to make Fair Trade mainstream. In this case the
idealistic, but most efficient way to deal with trade is Free Trade. Without trade barriers, export from
developing countries to western countries would be easier to manage. Free Trade might lead to more
profitable supply chains from farmer to retailer. With Free Trade, small local firms and farmers will have
a greater chance of entering the global market and compete with companies in the western world. This
could lead to better chances for escaping the poverty trap. In addition, the quality of products might
increase, since the end consumer can decide what products are best and will buy those products.
(Chase, 2003)
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Figure 2: Triple-E model
A combination between Free Trade and Ethical Trade would be the most effective way to deal with the
issue of Fair Trade. The disadvantages Free Trade could have for national firms or farmers in developing
countries would be compensated by an Ethical way of trading. Every company that is part of the supply
chain takes responsibility over social and environmental performance in other stages of the chain, while
borders are open for trade and barriers do not exist for international trade. In the Triple-E model, we
call this type of trade: “Frethic Trade”, the optimal solution for combining Free and Ethic Trade.
At this point Fair Trade generally is a combination between efficient, ethical and effective measures
taken to implement an initiative for the global market. Fair Trade can be efficient on the long run,
because it might help farmers in developing countries to alleviate from poverty.
It is related to Free Trade, because in the end markets are opened for farmers in the least developed
countries. On the other hand, some criticism about the effectiveness is in place here. Compensating
more to farmers without them putting more effort into the production process might decrease the
quality of the products (Reed,2008). Fair Trade is for a significant part dependent on Ethical Trade as
well, because partnerships between disadvantaged groups and firms that already operate in the global
market are made. Firms in the supply chain basically take responsibility over the disadvantages the
farmers have for being able to enter into the global market space. (Blowfield, 2003)
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Whether or not Fair Trade will lead to an effective solution to overcome the contradicting opinions of
civil society, state and market as a whole, can only be experienced in the long run. In our opinion, it has
major possibilities to change the global market and it could lead to a more effective trade mechanism on
global scale.
4.4 Tensions
Issues are caused by tensions between certain stakeholders. Different ideas or initiatives from out civil
society, the market or states can lead to these tensions. Tensions can be categorized in four main
groups: Tension as a Puzzle, Tension as a Trade-off, Tension as a Dilemma and Tension as a Paradox (van
Tulder, 2009). In this part we will explain what the most important tensions are regarding the issue of
Fair Trade. The tensions will be categorized in one of the four main groups and furthermore we will
discuss the possibilities on how the tension could evolve in the future.
Figure 3: Tension, State vs. Civil Society
Free Trade and Ethical Trade are both based on an
idealistic view.
Governments are creating trade
barriers to avoid the world economy to be completely
in the hands of market forces, because that would
lead
to
economic
disadvantages
and
unfair
competition, which is not ethical. Ethical Trade is a
view based on the ideas of civil society, in this case
NGOs, to provide a fair chance for everyone. This can
lead to positive discrimination in some cases and can
have an effect on competition (Blowfield, 2003). With less Free Trade, more Ethical Trade will be needed
to give excluded parties a better position in the supply chain. The tension between state influences (Free
Trade) and the demand of civil society (Ethical Trade) therefore is a Trade-off.
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On the long term, a combination between opening borders for trade and social responsibility within the
supply chains might be possible. There is room for more intervention from out the civil society, through
the voice of NGOs, with state regulations. This could be the key to eliminate this tension. Second, a
tension between state and market exists. The tension lies with the fact that Free Trade will only be
beneficial to enhance Fair Trade to certain extend. Fair Trade is an initiative introduced by the market
that makes it possible for farmers in the least
Figure 4: Tension, State vs. Market
developed countries to participate on the global
market. Governments can have influence on the
competitive position of these farmers as well. By
removing trade barriers it will be made possible
for everyone to export and import without
additional expenses. This can only have a positive
influence on Fair Trade to a certain extend,
because small firms and more specific farmers in
developing countries can more easily be exploited
as well. The more economic variables are influencing markets in general, the faster resources get
depleted. (Damian & Graz, 2001)
In addition, Free Trade does not exist at this point and in a way, it is preventing the least developed
countries from being exploited. To come up with an optimal solution a mixture between Free Trade and
Fair Trade is needed. The tension therefore is a Puzzle in which one optimal solution point must be
searched for. At this time, that optimal point has not yet been found. Later on we will discuss how
market forces can give incentives to states to come closer to the solution.
The third and last tension we will discuss is the tension between civil society and the market. NGOs and
farmers have interests to gain a more ethical trading strategy. Fair Trade has some elements in common
with Ethical Trade, but this does not always count the other way around. (IFAT, 2009)
17
Figure 5: Tension, Civil Society vs. Market
The stakes are different for civil society and the
market. Stakeholders within the market sphere are
profit oriented. They did introduce Fair Trade
products, which are funded on an ethical base, but
still they make profit out of this. (Renard, 2002) Civil
society wants to create chances of survival for even
the weakest and poorest. Profit is not one of their
main goals. The relationship or tension between
Ethical and Fair Trade therefore is not linear. It does
count that when the trade gets more fair, more ethics are involved too, where technically spoken the
ethics cannot get below a certain point. On the long run by making Fair Trade mainstream, ethics could
get dominant.
18
5. Design/Solution
5.1 Civil society
In our view on civil society, we have mentioned the importance of NGOs, probably the front
representative of the civil society sphere regarding Fair Trade. They have evolved from the typical role
of a watchdog (monitoring the issue and keeping it on the agenda in order to create a way to start the
discussion) to a cooperative role, demonstrated by their forming of standards and certifications
nowadays. These umbrella organizations need to collaborate intensively to coordinate and complement
their activities to reduce/avoid duplication and/or competition, which could harden the way of solving
the issue (Renard, 2002). In other words, they need to focus on consistency and similarity about their
view on Fair Trade, because this collective practice results into a network and produces identity.
Moreover, since we are dealing with an issue that involves dependency of actors from different spheres,
NGOs should invest in the development of long-term partnerships. This could be reached by lobbying
with the different partners for a set of collective principles, because NGOs do not have to power to
change laws and treaties. A good example of leadership that participates in this cooperative role can be
seen at the success pioneer organization the Max Havelaar Foundation, the world’s first labeling
organization. Its policy strives towards fair relations worldwide, sustainable production, trade and
consumption and they are cooperating with producers, companies and consumers (RSM, 2008). They
are aiming at a continuous improvement in the labeling process of products, and have a variety of
partnerships with NGOs, corporations and governments.
Besides this cooperative attitude towards the other actors, they could also help in triggering the issue to
raise consumer awareness. As stated before, one example is the development of ‘world shops’ where
only Fair Trade products are sold. Max Havelaar for instance, launches several campaigns to enlarge the
visibility of their trademark. Awaking the consumer awareness is important, especially in correlation
with the perception gap noticed before, since they will need an external stimulus to even start thinking
about buying Fair Trade products. The challenge is to raise connectivity between farmers and
consumers. This relates to the importance of another stakeholder within civil society for solving the
issue, namely consumers and their buying power. This power has increased enormous the past years. As
Pitt et al. (2002) concluded in their research regarding the function of the internet, consumers have
access to accurate, recent, unbiased information and they can easily talk and band together with other
19
customers. Next to this, they can talk to firms in a public domain and heighten the awareness of firms
shortcomings (Pitt, et al., 2002).
Next to the NGOs and the consumers, we will consider the farmers and small producers in their way of
solving the issue. Farm workers themselves do not have a large standing ground against, for instance
labor conditions and product price. Due to the fact that they lack resources, do not have access to credit
and they are not fully aware of market information. The forming of a union or social movement could
fortify their bargaining position. However, the success of a movement of the farmers is highly depended
on outside support. Often, the farmers are not capable/are not in the possession of the right skills to
create and stabilize such movement and they might encounter resistance from governments. This
powerlessness could be overridden, if the political environment contributes resources (Jenkins &
Perrow, 1977).
Concluded, the civil society can address the issue but it highly depended on the actors from the other
spheres to produce a sustainable solution.
5.2 The Market
A starting view on the overall issue from the Markets’ perspective is that trade is and has always been
the greater engine for international development. Through export trade millions of people, for example
in China were able to pull themselves out of poverty. It is an exceptional power for development and is
something that can be facilitated by the day-to-day business of trading (RSM, 2008). This however does
not mean that companies are not responsible on how the trade is conducted. The question that
companies should ask themselves is how to maximize from trade? And at the same time have a positive
impact on their direct surroundings. This is where Fair Trade comes into play, several (clear) reasons for
firms on why to increase Fair Trade are explained briefly below.
•
To start with the most obviously one; it is a business sense to provide their customers with
choice and variation, which is the focal point of their business: selling products.
•
Next to this, is the simple matter of reputation, which increases the customer’s loyalty and leads
to repeated business.
•
Another reason is to guarantee a steady supply for in the long term. By means of investing in
their suppliers, they increase long-term relations in their supply chain. Furthermore, by
providing their suppliers with a fair price, the suppliers could not only have means to survive but
make a profit as well. Which, as a result, the producers then could use to invest in their
20
business. The firms have this opportunity as well; they could invest in stronger businesses and
better living situations in their surroundings. To have a healthy pool of local workers and
efficient plants.
•
Usually the brand owners and retailers are the core firms in the global supply chain, and this is
why the power lies in the downstream (near the end users) of the supply chain. To increase
their efficiency they should improve their supply chain, for example decreasing layers of the
supply chain by excluding the intermediates and (as stated in the previous point) invest in the
upper parts (suppliers) of the supply chain. This closer and direct means of trade will improve
the overall efficiency of the supply chain, which will eventually lead to lower costs.
According to Strong (1997) the issue of the getting the consumer to buy Fair Trade products is “the
barrier of consumer recognition of the human element of the ecological marketing agenda”. He then
categorizes it problem into three issues of (1) communication, (2) commitment and (3) getting it on the
shelves, which should be seen as the input for fundamental managerial implications.
1. Communication of the human element of sustainability
The difficulty with Fair Trade is that there is no match between the liability of the issue and its solution,
unlike other social problems where there is for example a direct link between the responsible firm, say
NIKE and the problem of child labor. From a managerial perspective, this is seen as lack of customer
knowledge of Fair Trade. To increase customer understanding, firms should focus on consumer
awareness by means of brand building and the diffusion of information about Fair Trade products (A.J.
Nicholls 2002).
2. Problems of consumer commitment to fair trade
Fair Trade products are usually sold at a higher price and the added value of these products are not that
tangible as for instance that of biological products. There is a problem of ascertaining direct gains
resulting from Fair Trade to the customers. Consumers want to see a connection between the extra
income received by the producers and the added price they pay. It is therefore crucial to clearly link
products to the producer and transmit the central aim of development and support of producers (A.J.
Nicholls 2002). Therefore, the marketing focus of these products should be on a “making a difference”
perception. With the purpose of locking in customers loyalty, to build brand commitment and to
increase repeated buying behaviors. The “making a difference” marketing position should highlight on
21
single producers story and stress other added values of Fair Trade goods, for instance the high quality of
Ethiopian coffee, “green” banana’s or the slave free chocolate.
3. Getting fair trade products on to the supermarket shelves
According to A.J. Nicholls (2002) the reason that there are a relative small percentage of Fair Trade
products in the supermarkets is due to a limited range of fairly traded products that is offered to
customers. Due to this limited offer it hard to acquire the mainstream customers. The way that Fair
Trade products are being sourced at the moment is thus product driven (as in the case of coffee, thee,
bananas etc.) Obviously there is a need for a greater range of Fair Trade products, the market should
come with new product developments. But to reach the mainstream market the Fair Trade production
should be more consumers driven.
Let’s take a look at Starbucks, which is the largest producer of coffee in the world, with over 16,000
stores in 49 different countries (www.starbucks.com ) and can be seen as the leader in the coffee
market. In 2000, after much protest of pressure groups has Starbucks initiated a line of Fair Trade
products 3. According to Starbucks, an increase from 4.8 million pounds in 2004 to 11.5 million pounds
in 2005 in purchases of Fair Traded coffee has made them the largest buyer of Certified Fair Trade coffee
in the USA. However, although the might be one of the largest buyers of Certified Fair Trade coffee, only
approximately 6 percent of their coffee was certified as Fair Trade (The Star, 2007). This in return
triggered al sorts of reaction from the civil society and pressure groups about their Fair Trade image, to
further increase their purchases of Fair Traded products.
Only recently has Starbucks come with new initiatives, that from September 2009 all of their espressobased beverages in the UK and Ireland will be 100% Fair Trade. Which will according to The Fairtrade
Foundation increase the amount of Fair Trade Certified coffee sold in the UK and Ireland by 18% this
year. Starbucks also plans to expand this concept in the upcoming year, at all of their locations in Europe
with FLO as a partner (The Fairtrade Foundation,2009).
This commitment will help contribute
approximately 2.5 million pounds to small-scale farmers. Another partnership that Starbucks has set up
with the FLO is the Starbucks™ Shared Planet™ together Conservation International (CI) and the African
Wildlife Foundation (AWF). Their focus here is on providing farmers access to credit, contribute to
sustainable development and improving coffee quality and profitability.
22
5.3 Government
Fair Trade can be identified as an international issue, which makes it a far more complex issue if it was
only to be controlled within borders. When we take a look at the stake of the governments in the issue
of Fair Trade, we can divide them in two parts. The state-governments (of both the developed countries
that are seen as the market and the developing countries who are producing the Fair Trade products)
and the interstate governments, represented by the WTO in the eye of trade.
It being an issue that needs to be solved on an international level, this brings extra difficult dimensions
to the issue.
1. Increasing bargaining dynamics due to larger regulatory voids
2. Increase importance of rivalry
3. Increased complexity of the issue
Due to the size and distribution of the problem among the hundreds of governments that are a
stakeholder, in the issue, it creates a lack of legal bodies that have the ability to create grounded,
objective and legitimate agreements between affected and affecting countries. The fact that we are
dealing with so many different stakeholders and all trying to manifest their own national and
geographical interest with their own view on this issue in different social and cultural context, makes it a
very difficult issue.
5.3.1 State-governance
As explained in the previous chapter, state governments have introduced trade barriers in order to
protect and maintain the competitive advantage of the national companies and national interest. The
developed countries are the ones who are actually benefitting the most from these barriers. They keep
companies who want to export their products or services to a market that has potential out of their
borders. Unless they are able to overcome the barriers, which then again is most easily done by
established MNE (usually originating from another developed country) who have the capabilities and the
resources do pay for these barriers.
An example of a trade barrier that implies the agricultural sector is the subsidies that are being given to
farmers in the developed countries by their national governments (and in the case of the EU,
intergovernmental governments). By giving these subsidies, farmers are able to sell their products at an
artificial low price, which then has a downward effect on the global market price of the specific
23
agricultural good. Farmers in developing countries who do not have these subsidies are not able to
produce these same products for that same price and therefore are now struggling to maintain their
existence. Now why would giving subsidies in one industry be such a problem? The reason is that the
majority of the people living in the developing countries are trying to survive on this particular industry.
And with this false competition, they are being pushed down in the poverty trap.
The US and the EU have previously lowered some of their tariffs regarding particular goods, such as
sugar and cotton. (Times Online. 2006) This is a good example of what might be part of the solution to
create a more mainstream market for Fair Trade product. This way many more small producers will be
able to enter the markets of the particular developing countries.
Fair trade fits perfectly into the context of social responsibilities, CSR is at this point a well-established
concept, carried out in different ways by most organizations. Governments could do that same thing on
a national lever, creating national social responsibility. Like in the corporate world, one of the difficulties
on the issue of social responsibility is that there are no ways of measuring, no set standards, which on its
turn is comparing apples to pears. It is similar to financial standards in the old days, people can measure
and report in the way that it looks best for the involving party. This is where the need for an
intergovernmental body with legislative powers is required.
5.3.2 International governance
With state governments protecting their own national interest there is a need for an overruling
institution that can protect the interest of the global markets, at a level that all countries can benefit.
For Fair Trade to be able to become a full mainstream accepted concept it will need an international
framework that reduces import barriers and tariffs that are currently in use. An issue that has been
talked about during the WTO’s Doha rounds, in which the topic of opening markets and lowering trade
barriers are centre of discussion. In the past 5 years, little of what has been set out in the rounds has
been set in progress. Most of this can be blamed on the richer and emerging countries who want to
protect their own markets.
24
With the increasing globalization and MNE operating on large scales in many different markets the
poorest countries are fall further behind when it comes to trading opportunities and prosperity
outlooks. The WTO should take greater responsibility and accountability in this issue. It should give them
the proper incentive or “hand-out” to them to be able to compete on the international markets. (Oxfam
America, 2009) Here lies a clear role for the WTO concerning the governmental approaches towards Fair
Trade. The WTO could for example introduce a new framework in which import barriers and tariffs for
the least developed countries will be eliminated. (Times Online, 2006) This way, the upcoming BRIC
countries, which at this moment are seen as a big threat by the developed countries, will less benefit
from these eliminations of trade barriers and tariffs than underdeveloped countries.
25
6. Implementation
By analyzing trends, identifying the most influential stakeholders, pointing out the position of the issue
regarding Fair Trade is in the Issue Life Cycle and elaborating the most important tensions between the
different spheres, we described the importance of making Fair Trade mainstream.
In the following chapter, two case studies will be analyzed to describe what initiatives for making Fair
Trade mainstream are implemented by different stakeholders, and examples are given on how
partnerships can lead to a sustainable corporate strategy. Furthermore, the possibility for codes of
conduct and the arenas of leadership within the market of Fair Trade products will be explored. The UK
market in specific will be used as an example for emphasizing the success of Fair Trade companies,
because the UK has the biggest market for Fair Trade products in Europe (Raynolds, et al., 2007).
Cafédirect was launched in 1991 as a joint venture of four different ATOs in the UK, following the Max
Havelaar idea of using direct trade links between different parties and wanted to change their solidarity
attitude into Fair Trade (Tallontire, 2000). These ATOs are Oxfam Trading, Equal Exchange, Traidcraft
and Twin Trading. Because Twin Trading is responsible for dealing with producers and defining
partnerships, the case study focuses on the relationship between Twin Trading and KNCU. KNCU
(Kilimanjaro Native Co-operation Union) is a secondary level cooperative union representing around 90
cooperatives in the Kilimanjaro region of Tanzania. So, this study is giving an example of the
development of a long-term partnership between civil society (Twin Trading) and the market (KNCU)
and it can be seen as an interesting ‘ sustainable corporate story’, that involves benefits and challenges
of partnership .
Different initiatives are designed in the partnership between Twin Trading and the KNCU. In the
beginning stage of the partnership, Twin organized a conference for small-scale producers, in order to
get information on the issues that the farmers were dealing with and what they could mean for each
other. This was the sole initiative from Twin and it has created a platform from where both parties could
start work on the quality of the long-term relationship. Soon after, Twin and KNCU together developed
the Export Development Programme (EDP), that aimed to develop the export capacity of KNCU and raise
the marketing awareness of the producers trough experience with international marketing trends. The
partnership has also stimulated the successful initiative of producer participation in the decision-making
26
process with the management of the companies/brands. Cafédirect has organized meetings with
producers to discuss about topics like supply issues, market trends and marketing strategies (Tallontire,
2000).
All these emerged activities are representing critical success factors for the development of
partnerships. Some of these factors include the involvement of primary stakeholders, the adoption of
multi-benefit objectives and the transfer of technology and knowledge (van Tulder, 2009).
Next to these initiatives, there are several interesting codes of conduct agreed on in the negotiations
between Twin and KNCU. For example, the price paid to producers is based on a minimum price with a
supplement of a ten per cent premium on market price. Furthermore, the relationship must not be
shorter than one crop cycle, which is an important aspect of a long-term relationship. This raises the
need for development and will take the threat away of partners leaving the scene when they have
earned the aimed profit. In other words, the actors are bound for the long-term.
Concluded from the view on the initiatives and the codes of conduct, it can be said that the relationship
between these actors is not only based on Fair Trade, but also on the development of both parties. The
actor that possesses the knowledge (Twin Trading) is taking the role of a consultant in giving support
and advice. Inspired by the Max Havelaar principles, the actors are trying to create a sustainable longterm relationship, which eventually could lead to entering the commercial markets. On the other hand,
the producers are getting a more important role in the process of management decisions and they are
being involved in discussions to get more information and awareness of business trends.
In “Alliances and Networks: Creating Success in the UK Fair Trade Market” Davies (2009) describes the
influences of organizational relationships and business networks on successful adjustment of Fair Trade
companies in mature markets. By conducting three case studies and doing extensive industry interviews,
he has found qualitative proof for the positive relationship between alliances and networks in
mainstreaming Fair Trade. Next to partnerships, the importance of new initiatives taken by players in
the market is explained plus the study tells a sustainable corporate story of two companies that were
able to penetrate the market with Fair Trade products.
The significant growth of Fair Trade in the UK is closely related to the formation and maintenance of
networks. The relationships that Fair Trade companies have with Fair Trade institutions and journalists
created wide press coverage throughout the UK. Partnerships with multinationals had an impact on
gaining shelf space for Fair Trade products even in condensed markets in which multinationals have a
27
large market share in (coffee, chocolate). In many cases the markets for Fair Trade products have a
monopolistic nature, this kind of market failures can be overcome by partnerships (van Tulder, 2008).
According to Davies (2009), the initiative to form partnerships between different stakeholders has lead
to successful market penetration, as in the case of Day and Cafédirect. Day penetrated the chocolate
market by co-operating with Twin Trading for efficient supply chain management, with The Body Shop
for their great marketing expertise and Kuapa Kokoo who is producer of cocoa. Day and Cafédirect use
the same strategy to enter markets with high entry-barriers. Through partnerships with special
distributors Day and Cafédirect ensured distribution to independent retailers, that otherwise were
impossible to reach. As MNEs such as Mars and Nestlé have established trade agreements with retail
firms to exclude these shops from not selling competing products.
The case study of Day and Cafédirect shows that Fair Trade companies can have a leadership role in
opening up trade barriers and introducing Fair Trade products to the mainstream by setting up
partnerships. In the work of Davies (2009) three factors are taken into consideration in order to lead the
initiatives of partnerships to sustainable corporate success. First, a suitable partner needs to be found,
the partner needs to possess competencies the Fair Trade companies do not have internally. Second,
the partners need to be used efficiently, because often the partners do not have any association with
the market that Fair Trade companies are active in. Third, partner managing is an important factor for
creating a sustainable partnership. The trade-off between focusing on the core business within Fair
Trade companies and reaching out to a common goal together with partners in terms of effort should
efficiently be managed. In “Partnership for Development”, van Tulder (2008) explains similar success
factors. According to van Tulder (2008) partnership design, partnership commitment and partnership
relations are required for efficiently managing partnerships.
The case studies show concrete examples of leadership amongst Fair Trade companies in the UK. Davies
(2009) claims that without the forming and maintaining of networks and partnerships the significant rise
in supply and demand for Fair Trade products would not have occurred.
28
7. Evaluation
Many stakeholders and many different perspectives and opinions make the issue of Fair Trade broad
and difficult to point out exactly. Stakeholders within governments, civil society and the market have
contradicting standpoints on how to deal with the issue. The main goal to resolve the issue is to make
opportunities available for farmers in the least developed countries by enabling them to participate in
the global market. By including these farmers in the global supply chain and ensuring a Fair Trade
environment, Fair Trade products must become mainstream to help resolve the issue. The introduced
initiatives from out the market and civil society, raise awareness on the issue and their efforts are the
first steps to making Fair Trade mainstream. NGOs, the representative organizations of the civil society,
are using their informational power to bring together producers and buyers and are monitoring current
developments in Fair Trade markets. Governments have the power to change or remove trade barriers
to make it able for farmers from developing countries to export their products in larger amounts.
Together with stakeholders from out the market products can be produced on a Fair Trade basis and
end up on the shelves of retail stores. In this section the major initiatives taken by the different
stakeholders will be discussed and it will be analyzed whether or not these initiatives are sufficient to
resolve the existing issue.
The globalization effects and the fact that actors from all over the world are involved when it comes to
Fair Trade, requires change. Looking at the Cafédirect case study, change in the nature of relationships
and change in from bureaucratic growth into liberalization of the market has brought the KNCU both
opportunities and threats. By liberalization, producers can export their products and this will increase
‘value added’. However, this also results in many competing buyers and because of the years of
bureaucratic growth, the KNCU finds it difficult to provide an effective and profitable service to its
members. This market situation of the KNCU can be related to our stated tension of a puzzle between
the market and government. (Tallontire, 2000) This exactly is the reason for the WTO to establish trade
barriers, opening borders for trade can have negative affects for national firms and local farmers.
The solution for making Fair Trade mainstream should not be solely searched for in terms of
government interactions related to trade. Both the case studies that Davies (2009) and Tallontire (2000)
have conducted, show proof of partnerships and networking as a solution to avoid trade barriers as a
29
significant obstacle for Fair Trade. Especially in the UK, the rise in supply and demand of Fair Trade
products could be seen as proof for implementations of partnerships in the Fair Trade industry as a
sufficient option. In the UK the reach of Fair Trade products is rather wide, the UK has the biggest
market share in Fair Trade products of Europe, in some other countries the impact of Fair Trade still is
small. Globally partnerships in the Fair Trade industry therefore are not efficient enough yet.
Tallontire (2000) is making a point of criticism towards partnerships. When it comes to contributing to
strategy or the development aspects of the agreement, the KNCU is not an active participant. They see
Fair Trade in terms of the markets that are offered by Fair Trade, rather than a process of learning and
self-help (Tallontire, 2000). This is being demonstrated by the absence of any KNCU representative at
the Max Havelaar Fair Trade meeting in Kampala, 1996. This problem of goal-alignment between
different organizations contains a substantial conflict of interest and makes it very difficult to manage
the actual partnership (van Tulder, 2009).
Triggering the need for networking to learn from others and the awareness of responsibilities
concerning philosophy or benefits, are matters to be seen as future challenges for the small-scale
producers and unions. Within this case, the critical success factors for developing a partnership are not
well established in ‘partner commitments’, which involves clarity of roles, responsibilities, goals,
commitment of core competencies and application of the same rigor and discipline (van Tulder, 2009).
The partnership between actors from different spheres and different countries possesses side problems.
When we are referring to the need of cooperation and relationships in the process of making Fair Trade
mainstream, these problems will need some necessary attention. First,
there could be a commitment problem concerning development: different producer organizations could
be involved in a different extent when it comes to strategic development. The KNCU for instance, is a
bureaucratic organization that is unused to managing change and has therefore a different level of
commitment to development, when compared to earning profit on the short-term for instance. Their
focus is active on trade aspects, but inactive on development aspects.
Next to this, there could arise a responsibility-gap in relation to achieving the goal of a partnership.
Looking at the Cafédirect case, the success of the KNCU is considered in terms of profit generated in
short term, whereas Twin’s success is referring to the long term development of commercial contracts
that are not reliant on Fair Trade channels. Second, there is the threat that an NGO can be viewed by the
producers as a resource to get information from, instead of a partner. Furthermore, companies might
30
use partnerships to create marketing successes and less as an advantage in corporate strategy. Reiber
(2004) claims that MNEs adopt Fair Trade products into their product lines for reputation and “social
greenwashing” purposes. Partnerships can also be used to penetrate markets in order to exploit them
after the companies have access to the resources. To create sustainable partnerships, short-term
investments need to be taken into consideration by all involved parties to gain a long-term advantage
(Hertz, 2008).
As for the market goes, companies should not just implement Fair Traded products as a small part of
their product arrangement, as research has shown that there are several valid reasons to conduct in Fair
Trade, with associated ways on how to help to make it mainstream. Firms should try to conduct their
business and produce their products as Fair-Traded as possible. This of course cannot be done overnight, and should be seen as gradual process. Starbucks can be seen as a great example; Starbucks
started to provide their coffee 100% Free Trade in the UK and Ireland and is planning to implement this
across Europe. It should however not end here; their next step should be to implement this in all of their
stores across the world. From the market perspective, the next issue that arises is how to lower the
prices for Fair Trade products to compete with non Fair Traded products.
At this point the issue of Fair Trade is in the development phase of the Issue Life Cycle. Only by
implementation of initiatives by multiple players in the field of Fair Trade, the issue can gain more public
interest and reach the maturity phase of the cycle (van Tulder & van der Zwart, 2006). Many initiatives
are taken as we speak, but the full effect of each initiative individually cannot be measured correctly. It
is certain that the market for Fair Trade products is rising (Raynolds, et al., 2007) and partnerships
between companies and NGOs contributed to that by reaching out to consumers (Tallontire, 2000;
Davies, 2009). Liberalization of markets does only benefit farmers in developing countries to a certain
extend, thus Free Trade is not the optimal solution (Tallontire, 2000; Reed, 2008; Blowfield, 2003;
Damian & Graz, 2001). With correctly implementing a Fair Trade strategy, supply chains will be more
ethical, which in the end meets the goal in creating more opportunities for farmers in developing
countries.
31
Further research is needed to discover the possibilities for more partnerships between stakeholders
from out the market and state or civil society and state. The role of the state in making Fair Trade
mainstream through negotiations at the WTO can be elaborated more. The WTO has regulative power,
but up till now no initiatives are shown that uses this power to address the issue of Fair Trade. In future
studies the focus could be more related to the influence at governmental level and the possibilities the
WTO has to make Fair Trade more mainstream.
32
8. Conclusion
Fair Trade is the key to include farmers in developing countries in the global market and a healthy Fair
Trade environment contributes to alleviating poverty more efficiently then development aid. Creating an
effective Fair Trade supply chain is manageable, but takes significant effort from each of the involved
players. Recent studies show a growth of Fair Trade market share in many countries, especially in
western Europe and the US. Multiple initiatives from different stakeholder groups have a positive
influence on raising consumer awareness. Partnerships are proven to be a sustainable option to
penetrate in existing markets with Fair Trade products, as in the UK. In order to make Fair Trade
mainstream, a long road is still ahead. There is room for stakeholders to work together more thoroughly
and create networks of trade. However, partnerships have some downsides to it, such as aligning the
discrepancies between the partners to reach a common goal, but when executed right, Fair Trade
partnerships can overcome many of the current issues. Market forces can put more pressure on
governments with the goal to increase cooperation between state and other stakeholders concerning
Fair Trade. The civil society must keep the Fair Trade issue on the international agenda, and where the
NGOs serve as the watch-dog over the credibility of the whole Fair Trade market. Fair Trade will only
become mainstream over time, if networks and partnerships are created throughout the whole supply
chain and governments will be involved actively.
33
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Coffee. Journal of Consumer Affairs, 39(2), pp. 363-385
34
Pitt, L. F., Berthon, P. R. & Watson, R. T., Zinkhan, G. M., 2002. The Internet and the birth of real
consumer power. Business Horizons, 45(4), pp. 7-14
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a Value Chain Perspective. Journal of Business Ethics, 86(1), pp.3-26
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Reports
Albert Heijn. 2008. Bewust en Betrokken, ondernemen in de samenleving 2008. [Online] Available at:
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[Accessed on 30 September 2009]
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http://www.co-operativebank.co.uk/images/pdf/ethical_consumer_report_2007.pdf
[Accessed on 26 September 2009]
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http://www.fairtrade.net/uploads/media/Final_FLO_AR_2007_03.pdf
[Accessed on 30 September 2009]
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Foundation. [Online] Available at:
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Tallontire, A., et al. (2001) Ethical Consumers and Ethical Trade: A Review of Current Literature. Policy
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35
Books
Hertz, N., 2009. Partnerships Require Hope and Responsibility. RSM Erasmus University: Max Havelaar
Lectures, pp.33-41
Nefiodow, Leo. 2006. “Der sechste Kondratieff. Wege zur Produktivität und Vollbeschäftigung im
Zeitalter der Information”. 6th edition Sankt Augustin
RSM, Rotterdam School of Management, Erasmus University. 2008. Partnerships for development;
Second Max Havelaar Lecture. Rotterdam, 05-11-2008.
Van Tulder, R.J.M., 2008. Stakeholders and the Issue Life Cycle (ILC), updated version; revision on the
Issue Life Cycle
Van Tulder, R.J.M., 2009. Partnership for Development. RSM Erasmus University: Max Havelaar Lectures,
pp.17-32
Van Tulder, R.J.M., Van der Zwart, A., 2006. International Business-Society Management: Linking
corporate responsibility and globalization (London: Routledge)
Raynolds, L.T., Muray, D.L., & Wilkinson, J., 2007. Fair Trade: The challenges of transforming
globalization. 1st ed. New York: Routledge.
Websites
D. Berhanu, Oxfam America2008. Coffee growers earn a better price, protect the environment, Oxfam
America [Online] (Updated 2 june 2008) available at:
http://www.oxfamamerica.org/articles/coffee-growers-earn-a-better-price-protect-the-environment
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Available at:
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IFAT. 2009. Frequently Asked Questions: We are a commercial company which trades ethically - am I
eligible for any kind of Fair Trade recognition? [Online] (Updated 25 april 2009) Available at:
http://www.wfto.com/index.php?option=com_content&task=view&id=150&Itemid=181
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Nardi, J., IPS. 2009. WTO special: Free-Trade or Fair Trade?. [Online] (Updated 10 december 2005)
Available at:
http://ipsnews.net/news.asp?idnews=31371
[Accessed on 25 September 2009]
36
Oxfam America. 2004. WTO Development fails, but make Fair Trade campaign continue. [Online]
(Updated 05 january 2009) Available at:
http://www.oxfamamerica.org/articles/wto-development-round-fails-but-make-trade-fair-campaigncontinues
[Accessed on 28 September 2009]
Reiber, Derek. 2004. Corporate coffee greenwashing Fair Trade. Organic Consumer Association. [Online]
(Updated 21 january 2001) Available at:
http://www.organicconsumers.org/starbucks/greenwash_fairtrade.cfm
[Accessed on 30 September 2009]
Times online. 2006. WTO is key to Fair Trade but reform is crucial. [Online] (Updated 28 june 2006)
Available at:
http://business.timesonline.co.uk/tol/business/columnists/article680151.ece
[Accessed on 28 September 2009]
WFTO. 2009. 10 Standards of Fair Trade. World Fair Trade Organisation. [Online] (Updated 12 august
2009) Available at:
http://www.wfto.com/index.php?option=com_content&task=view&id=2&Itemid=14
[Accessed on 26 september 2009]
WFTO. 2007. Fair Trade Standards and their verification in brief. World Fair Trade Organization. [Online]
(Updated 19 march 2009) Available at:
http://www.wfto.com/index.php?option=com_content&task=view&id=39&Itemid=125
[Accessed on 27 september 2009]
World Centric, 2009. Fair Trade?. [Online] Available at:
http://worldcentric.org/conscious-living/actionstotake/fairtrade
[Accessed on 25 September 2009]
World Trade Organization. 2009. What is the WTO? [Online] Available at:
http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
[Accessed 25 September 2009]
Presentations
Raijmans, E., 2009. Presentation of the company Tony’s Chocolonely. Launch World Investment Report at
Erasmus University Rotterdam 17-09-2009, Rotterdam
37
Appendix
Appendix 1. Influences on the growth of Fair Trade (A. J. Nicholls 2002)
38
Appendix 2: Long waves, basic innovations and main application areas (Nefiodow, 2006)
39