Research: Fair trade is positive but difficult

May 08, 2013 | Research/Cooperation

On Saturday, 11 May, it is Fair Trade Day and fair trade will be discussed globally. However, Mälardalen University research shows that fair trade is not entirely unproblematic, since it is based on Western ideas for application in developing countries. In addition, it is a form of business which tries to combine profit targets and non-profit work.

11 May is World Fair Trade Day. People all over the world will discuss fair trade on this day. Birgitta Schwartz, a Docent in Business Administration at Mälardalen University, has done research on fair trade, and she claims that fair trade is not entirely unproblematic.

Birgitta Schwartz has followed the fair trade entrepreneur Sandhya Randberg and her business enterprise Oria, which has offered fair trade products for more than ten years. Oria sells clothes and bags made in India which are marked as fair trade and ecological.

Provide a complex picture

– Fair trade is important for sustainable development and for fighting poverty, but we have to admit that the picture is complex. Ideas of and criteria for fair trade and other standards and marks of sustainability have been developed in the Western world, but for application in a developing country. Hence, problems may arise when our ideas are transferred to another context. One concrete example is the number of inspections that customers from Western businesses impose on suppliers in the developing countries who have adopted these sustainability standards. This practice demands great staff resources from the suppliers who make their own inspections, take part in certification inspections, and then also attend the inspections of customers, says Birgitta Schwartz.

No domestic market for the products

– Moreover, ideas such as fair trade are promoted primarily by European and American companies, which means that there is no domestic market for fair trade products, for instance in India. Paying more for products which have been produced fairly is not generally a priority when most Indians are poor and work under difficult conditions. Since the sustainability targets are connected to the export industry, there are also examples of Western companies who have left the suppliers in India as they start adapting and prices are on the way up. They move to other low-price countries where manufacturing is even less expensive, but the question is what happens then with the sustainability effort in India. My point is that our model for fair trade cannot be implemented without reflection, says Birgitta Schwartz.

A combined private and non-profit sector

Birgitta Schwartz includes fair trade in the general concept of social entrepreneurship, which involves assuming social responsibility while doing business. The challenge for social entrepreneurs is that there is a discrepancy between the target – or logic – or the private sector and the target/logic of the non-profit sector, and that they are active in both sectors. Private enterprises are based on anticipated revenue, while non-profit ones are not.

– In the case of Oria, there is a concrete example related to the maximum price of a fair trade product on the Swedish market. The product is after all more expensive to manufacture, among other things because of higher salaries, but at the same time there is a moral question involved – how much can you ask for a product which is classified as “fair”? It is possible to ask a very high price for exclusive brands, but rarely for fair trade products. This profit logic is difficult to handle since social entrepreneurs are not only heroes who make sacrifices – they are also businesspersons who must be able to make a living out of their business, says Birgitta Schwartz.