Some notes on Fair Trade from Uganda
On Thursday 19/07/07 I visited Mabale Tea Growers Factory, about 35km East of Fort Portal in Uganda. The co-operative at Mabale consists of around 2,500 small holdings run by families, each of which owns shares in the tea co-operative, which took on ownership from the Ugandan state about 12 years ago, and has been a Fair Trade (FT) certified co-operative for 5 years now. I decided to write a short report (based on personal research as well as an interview with the General Manager Kennth Kyamulesir) explaining the process, benefits and limitations of Fair Trade.
Mabale tea co-operative, Uganda
What is Fair Trade?
Tea direct packaging
FT is essentially a label, which is not awarded to the company that sells the product, but to the actual producing co-operative that must meet the criteria set by the FT Labeling Organisation (see below). The FT label appears on products when the trading company buys produce from a co-operative in the global south that has been FT Certified. Once certified by the FLO, the FT Foundation, as an overseeing body, will administer the trade between the co-operative and the company based on its strict trade terms, which stipulate a guaranteed minimum price of sale that is deemed fair (see below), as well as the potential for an extra FT Premium (see below)
How does a company get Fair Trade Certification?
FT Certification is awarded by the independent FT Labeling Organistion (FLO) based in Germany. First the company must apply in writing for the certification; if this is granted a FLO-CERT inspector will visit the company to see if the company meets the strict international FT standards.
Here are a few of the many strict standards that a producing company must meet: First, it must be a co-operative, thereby demonstrating full inclusion and participation, workers rights, collective bargaining, and full financial transparency, particularly with regard to the FT Premium Fund (see below). There must be quality training for all employees with strict health and safety measures from attire to the handling of chemicals and machinery. Child and forced labor are prohibited, as is discrimination. Adequate sick leave must be provided and the terms of contract must be fair. Although organic production is not a standard (but preferred) there are many environmental protection standards that stipulate that the co-ops must diligently record the usage of agrochemicals carefully, waste must be disposed of responsibly, wood must be taken from sustainable forestry, and all Genetically Modified Organisms are prohibited. The standards go on.
The Economics of Fair Trade at Mombassa
Mabale factory, like most other tea companies have brokers in Mombassa, Kenya, which sell their tea on their behalf onto the global market. The price for the tea fluctuates hugely as the US Dollar weakens and strengthens against the Ugandan Shilling. Almost 100% of Mabale’s tea is exported abroad but only 5% of their tea is bought at a FT price by TeaDirect in London, despite the entire co-operative being FT certified.
At the Mombassa tea auction, Mabale, at the time of writing, will receive around $1.30 per kg for its standard non FT tea. Its 5% FT tea will however carry a guaranteed minimum (agreement set by the FT Foundation) of $1.65. At the moment Mabale is however receiving around $1.85 per kilo for its FT tea from TeaDirect in London.
The farmer will of course then get paid more per kg of his tea if it’s sold at $1.65 than at $1.30. However, as is the case currently in Mombassa for Mabale, if the price for FT tea goes above the guaranteed minimum of $1.65 per kg then this surplus is called a FT Premium and will go into a collective fun held by the co-operative called the FT Premium Fund. So for every kg of tea sold at $1.85 in Mombassa, $0.20 will go Mabale’s FT Premium Fund. Over a period of time this sum of money will accumulate and enable the FT Premium Fund Committee at the factory to invest it into community projects. These projects don’t just benefit individual tea farmers, their colleagues or their families, they benefit whole communities. In Mabale community roads and houses for all the workers have been built, and health care, immunization, HIV counseling, education, water sanitation have all been provided for the community.
Kenneth told me that the demand for his FT Tea has been static for about 4years now, with only 5% of his product selling to TeaDirect. His big aim is an ambitious 50%, “it would make a huge difference to our community” he says. But there is only one way this is going to happen – demand must rise!
Why we should choose Fair Trade over Free Trade
One complaint of FT held by some consumers in the West is that the premium in price paid by
Tea pickers in uganda
the consumer is not matched by a proportionate increase in financial income by the producer. Retailers in Europe are clearly making extra money from people’s willingness to pay a premium, but that can be solved. If there were a greater number of FT products on our shelves, the added value would decrease as market competition sets in. But if there is little demand, there will be little supply and competition.
However, I believe that the argument of disproportionate premium and income increase is gravely missing the point.
- First and foremost the increase in income to a tea farmer, no matter how small it may appear to us could be extremely important. An extra $0.10 per kilo could put his child through school, provide secure housing ease any financial burdens.
- Secondly, an important part of FT is the aspect of stability, with produce receiving a guaranteed minimum at auction. A farmer selling onto the global ‘free’ market will not know how much money he will bring home next month due to the instability in the market prices. Knowing how much is coming through the door next week and next month, no matter how small is surely important.
- Thirdly, FT is not just about financial gains. As I have shown above, employers have very strict standards that they must meet; standards that enable employees to have the appropriate training and attire, fair terms of contract and so on. I was surprised with how well the factory appeared to operate; all employees, from the toilet cleaner to the wood chopper to the tea sorters had appropriate good quality gear for the job. They wore sturdy boots, face masks and hair nets, there were personal cleaning stations all around the factory, and signs were put up on every machine about the correct safety procedure. Not all non FT companies are horrors but there are real of cases of human rights and environmental abuses by corporations in the global south. Surely it is a priceless human right to be treated fairly in your place of work.
- Lastly, as I have explained the FT Premium Fund brings basic welfare to entire communities, and unlike conventional international development, this is done without any outside paternalist intervention and therefore with full local discrepancy.
Why Fair Trade needs to be improved
Fair Trade is by no-means a perfect way of doing business in the global south:
- There are concerns that Fair Trade is not benefitting the poorest of the poor, as only relatively well-funded co-operatives can afford the measures that are required to meet the FLO-CERT standards of production. This could be solved by providing interest free loans to those that cannot afford the standards.
- Environmentally, Fair Trade still encourages economies of scale which push for monoculture agriculture, and FT advocates the use of ultimately unsustainable global trade as the primary way to bring better living standards to farmers in the south. This is could be tackling by creating domestic demand for FT goods, which at present is next to nothing.
- Fair Trade is still, for the moment at least, inherently linked up to Western dominance, as the real money is still being made in the North. Companies take the tea and create huge added value for themselves in the refining, manufacturing and packaging stages, and the supermarkets of course make an extra killing on the premium. FT is still based on the colonial model of taking only the resources from the south and making the profits in the North.
This said, although FT is far from perfect, there is no-doubt that buying FT is doing more good than buying your average free-market produce. FT is not the best deal, but it is a better deal for produces in the global south.
THE FOLLOWING SHORT FILM SHOWS LIFE ON A FT TEA CO-OP IN INDIA
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The fair trade logo
