Working in fair trade agriculture

Thanks to Simon for inviting me to contribute some thoughts to his excellent blog. As my first post I'd like to share some thoughts on my experiences to date working with the Association of Organic Producers of Sangria (AOPS)*:

For the uninitiated, Fair trade is an increasingly popular form of exchange, especially for buyers in Europe. It is managed by the Fair Trade Labelling Organization (FLO), who allow producers to display the fair trade label on their produce in return for meeting a set of standards for labour conditions, environmental performance, and most importantly distributing a premium to be paid by the clients in a way which benefits the producers as a community.

Much debate exists about whether fair trade is a form of "charity" (ie. the buyer donates to the seller a bit extra to improve their quality of life) or if it is in fact a new way for producers to compete in the international market (ie. the producer offers to guarantee certain standards to its workers in return for higher payment from the seller). The answer is of course that both are true, and thus arises the hope that fair trade may be the way to create "a market with a human face." But what is the balance in reality?

My experience in four months working as an intern in post harvest production and financial analysis amongst other things (including acting as a tour guide!) for AOPS has shown me that in the eyes of this particular Association, the "charity" side of fair trade is more important than the "market" side. In a community meeting in Mamonito, high up in the mountains of Sangria, the president of the association asked an associate (producer) "has AOPS helped you this year?" The associate replied no. Then the president explained to all the gathered village members who have worked with AOPS for 20 years how fair trade works, that AOPS is different from "the competition" which simply wants to buy the product at a price higher price in order to break the association and then reduce the price, and that every time a producer sells to AOPS they are receiving "help" because AOPS is providing a market for their produce, and is "helping" further by providing the communal funds which last year were used to provide... a trailer. The producer was again asked if they had received help. He nodded enthusiastically and illuminated smiles filled the palm thatched community building. But had the message real sunk in? And was it believed?

Producers are asked to be loyal to the association because they are receiving "help". But unfortunately for AOPS, in the four months that I have been working in their offices in Pat Pat this deal has not been selling too well. In both bananas and cocoa, producers are increasingly selling to the competition and every producer I have spoken to sees the dilemma not as a moral one (of loyalty) but an economic one- who is offering the best price? And the immediate answer is not AOPS.

In economic terms, this can be viewed as a classic "prisoners dilemma"- in the long run the associates would be better off if they sold to AOPS, maintaining the association and the fair trade premium and thus making sure everybody receives a good price as well as non price benefits such as trailers and other communal goods (a previous premium was used to purchase school grounds). But the producers have a short term incentive to "defect" and sell to the competition at a higher price. Economic theory predicts that the outcome of the "game" will depend on the degree of trust between the producers- a rational strategy to maintain the association depends on having a credible belief that others will do the same. In the case of AOPS, it appears that producers don't even know what they are supposed to be having trust in- the basic information about how the association works is not widely disseminated. Or perhaps just not believed.

I think this particular dilemma raises issues on a number of levels. The producers can hardly be criticised for being shortsighted in selling to the competition if they are genuinely unaware of the benefits AOPS is offering. But could it not also be the case that the benefits are known (if a little vague) but are simply not considered worth waiting for? What is a share in a community owned trailer worth in comparison to the possibility of having a little extra money to repair the motorbike lying in disrepair in the producer's own backyard right now? And why should the producer be made to feel like a charity case for selling the product which they have produced with all their own effort at a price which isn't even the best available?

I still believe that fair trade can work in theory. And that it can work for AOPS. But perhaps producers need to be offered a little more than a far off promise of a communal "gift" and some of the harsh economic realities of competing in the market need to be addressed for this to be possible. But if the competiton really is a on a vendetta to break the cooperative and then lower the buying price, it can only be by creating trust and communality between the associates that AOPS can survive.

*Names have been changed to preserve profesional confidentiality. But factual details are correct to best of author's knowledge.