Fairtrade, and especially the demand for fairtrade chocolate is booming. But what is fairtrade? And what does fair mean in this case for the cocoa farmers from Ghana?
Fairtrade certifications such as the Fairtrade seal have been criticized for quite some time. At the latest in 2018, after the publication of the Cocoa Barometer, this has been proven by independent institutes. Now a Ghanaian expert has also dedicated himself to the topic of "Fairtrade" and published an article on the "big question: is Fairtrade fair for cocoa farmers?
The starting point: challenges in the cocoa trade
The trade in cocoa beans originated in Central America and it wasn't until the 19th century that chocolate as we know it today developed. Ghana is one of the strongest cocoa growing countries in Africa, along with Côte d'Ivoire. According to Fountain and Huetz-Adams (2018) ,there are approximately 2,000,000 farmers in Ghana and Côte d'Ivoire, but the average income is 0.78$ per capita per day. Smallholders often live on the poverty line and child labor is not uncommon in this sector. Education for the children is usually not possible and the family needs their financial support.
Neocolonial economic structures
In addition to the rural structures, there are neocolonial structures. Cocoa beans are mainly exported and the value creation takes place in industrialized countries. At the lower end of the value chain, farmers do not have many alternative options and are dependent on the highly fluctuating world market price to sell their cocoa beans to traders.
The world market price for cocoa and its effects
In the late 1980s and especially in the late 1990s, the world market price for cocoa beans crashed. In this context, the idea of the Fairtrade label itself and the approach of paying a minimum price of (by now) 2400$/ ton was justified. However, since the early 2000s, the price of cocoa has been increasing, making the concept of the fixed minimum price of the Fairtrade organization controversial.
In Ghana and Ivory Coast, however, the cocoa price is not only composed of the world market price. The CoCoBod (Cocoa Marketing Board) in Ghana sets its own minimum price at the beginning of the harvest season, which corresponds to a certain percentage of the world market price. If there is a difference between the state minimum price and the 2400$/ton of the FairTrade seal, the price is increased to the 2400$ in case of a negative difference.
The CoCoBod supports the Ghanaian cocoa farmers in the areas of quality control, education, use of pesticides, or even the distribution of seedlings. This way, non-certified farmers can benefit from training and extra services without the fees that come with Fairtrade certification. Further explanations can be found here.
Definition: Fairtrade versus Fair trade
Fairtrade is not equal to fair trade. This is confirmed above all by a look at the Cocoa Barometer and the article by Ghanaian Kwame Asamoah Kwarteng. While Fairtrade in the sense of the Fairtrade seal mostly follows classical structures and the raw materials are exported in order to process them further, a fair traded product in the best case follows the fair chain approach and the added value remains in the country of origin. By the way, we have published a differentiated overview of Fairtrade and fair traded under this blogpost.
The idea of the Fairtrade seal is to make the supply chain of a product more transparent and fairer based on certain criteria on the areas of social, ecological and economic. The organization acts through controls, especially at the beginning of the supply chain, in the generation of raw materials by the farmers. The Fairtrade label is certified by the international certification body FLOCERT, incidentally a subsidiary of the Fair Trade Organization itself. All standards must be met before a product can carry the Fairtrade seal. The number of certified product organizations now exceeds 1400 and, according to Fairtrade, includes 1.66 million small farmers and workers.
Fairtrade seal : What criteria must be met?
The Fairtrade seal certifies different types of products or raw materials such as coffee, cotton, flowers, and also sugar or spices. Since we are interested in the effects for Ghanaian farmers, we will get an overview of the criteria for cocoa farmers.
The focus of the Fairtrade certification is on the social criteria for cocoa farmers. The certification also includes the correct handling of pesticides and hazardous substances according to the environmental standards. In addition, the farmers can organize themselves in trade unions and receive training about the organization.
Guidelines on working conditions on the plantations include protection against discrimination and forced labor as well as measures against child labor. Special features are the payment of a minimum price and a premium of 240$/ ton of cocoa beans, whether organically certified or conventional makes no difference. For Ghana and Côte d'Ivoire, different regulations apply due to the different price setting mentioned at the beginning. The above-mentioned criteria include audits that check the conditions at regular intervals. The results of the audits are to be made visible and understandable for all members. FLOCERT carries out these audits, some of which are unannounced, and has staff worldwide to act locally. Due to the Corona virus, the audits were partially suspended, but are now active again and can also be carried out as "remote" audits.
Fairtrade criticisms have been known for a long time, but often do not reach all end consumers or get lost in the seal jungle. One of the biggest Fairtrade criticisms, which plays an important role especially in Ghana, is that there is no significant difference in income between certified and non-certified cocoa farmers. In the following, criticisms are mentioned, which however only scratch the surface and arguments such as volume compensation are left out, as this would go beyond the scope of our blog post.
Certified farmers incur costs due to fees, audits and a levy to the Fairtrade organization. Only half of the premium of 240$ is paid directly to the farmers, the other half is used for the costs of the organization. "Directly" here means as a contribution to projects in the whole community. In the end, the farmers cannot decide individually about the premium. Profiteer of the premium is the whole community - whether this is fair or not can certainly be discussed.
Furthermore, the CoCoBoD gives non-certified farmers the opportunity to take advantage of quality controls and other services without having to pay additional costs to an international organization.
The Cocoa Barometer also shows that all certifications have not contributed to guaranteeing at least a living wage. Thus, smallholders remain in their structural poverty and have hardly any chance to generate a higher income.
By the way, a living income is defined and calculated differently from a living wage - in English, it is easier to distinguish between "living wage" and "living income". A living income refers to self-employed workers and not wage workers who work in a factory, for example. These are therefore mostly farmers. The calculation is done by the income for the whole household and includes all costs for a standard of living like food and housing, but also the costs for pesticides, storage or membership fees. The living wage, on the other hand, is calculated based on one week's wages and includes only living standard costs.
Another point of criticism is the pricing of the final product. This is not in the hands of the farmers, and ultimately, the production factory, the chocolate bar sellers and international companies profit from a high final price. The direct link to individual farmers is mostly obscure due to middlemen, and the money remains outside the country. And although a Fairtrade seal makes it possible to set a higher price for end consumers, according to a study by the University of Bonn the willingness to pay is 38,6% higher with a seal. In this study , brain stimulations of potential customers to labels such as Fairtrade were measured and evaluated.
So how fair is the Fairtrade seal for the Ghanaian cocoa farmers? If we look again at the criteria and success points of the Fairtrade Germany seal, it becomes clear that the local farmers have to meet many standards in order to be certified. This supports the social aspect of the supply chain and promotes better working conditions to counteract forced labor, for example. However, in the end, hardly anything of the premium remains for the farmers and even the minimum price paid by Fairtrade does not help to pay a fair living wage. The last point, in particular, shows why Kwame Asamoah Kwarteng is skeptical about the Fairtrade label and does not see any added value for his countrymen. Just like us, he would like to see more transparency and a rethinking of trade structures instead of marketing campaigns and "fairwashing".