Fair Trade 101

posted July 04, 2021 at 06:00 pm
by  Rhoey Lee Dakis
"The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways.—John F. Kennedy"

Farmers play an essential role in the economy, especially in an agricultural country like the Philippines, where competitive advantage, quality and consistent supply are almost synonymous with the harvest. These farmers are the backbone of food production, and without them, there will be no supply. Without a steady flow of supplies coming in to meet the demand for products, trade becomes impossible, which is detrimental to everyone involved, not just those who produce these goods but also consumers and stakeholders on every level. Unfortunately, the importance of these farmers is often overlooked, and most of the time, they are under-appreciated and exploited. To help address this injustice, Fair Trade (FT) was established.

According to Wright and Heaton, Fair Trade started in Europe in the 1960s to help Nicaraguan coffee farmers improve their living conditions. FT, unlike other programs, focuses on the farmers’ long-term welfare, so rather than providing them “fish,” they strive to educate them how to “fish,” hence the expression “trade not aid.”

The main objective of Fair Trade is to guarantee a “better deal” for farmers by providing a premium for every FT purchase. The FT premium varies depending on the commodity, market conditions, and Fair Trade certification standards. For every FT purchase, an FT premium will be paid over and beyond what each customer would typically pay for their product. Farmers can use this premium to fund various projects aimed at improving their lives and their community. Depending on their preferences, these options may include education initiatives, medical missions, or even upgrading their farm machinery. In the Philippines, some of the most common projects include feeding programs, medical missions, scholarships and financial literacy programs.

The FT movement is gaining momentum and bringing about changes for the better. The UK, US and EU are all experiencing a rise in FT sales heavily influenced by ethical consumerism focused on sustainability. Consumers who buy products certified as part of the Fair Trade initiative will be guaranteed to have purchased a product with ethical principles such as economic, social and environmental standards. In addition, the rigorous international standard ensures consumers get their money’s worth in terms of addressing global supply chain-related issues such as forced labor, child labor, unsafe working conditions, gender equality, environmental protection and unsustainable livelihoods.

Since FT’s inception, the Fair Trade following has gotten more significant from a small niche market in the EU to mainstream status in the US, EU and the UK. It began in mom-and-pop stores and eventually made its way to the shelves of some of the world’s largest retailers, including Costco, Kroger, Whole Foods, Waitrose and Tesco, to mention a few. However, despite its growth in the western hemisphere and the increasing middle-class population in the Philippines, the FT concept is still relatively new to Filipino consumers.

Unfortunately, some consumers are still skeptical of the FT program, which is probably hindering its growth in the Philippines. One of the more controversial issues people speculate about with Fair Trade is how it will affect farmers’ lives. Critics say that only a small amount of money reaches the farmer, FT would only benefit the rich, FT projects may not be as sustainable as they may seem, and many are left wondering if this program even helps at all.

Frankly speaking, I was also under the same impression, but all of those doubts have been erased when I joined an FT-certified company and witnessed the legitimacy of the program myself. Considering that not all consumers could get a chance to see the legitimacy of the FT program first hand, what can the FT community do?

In a study by Eberhardt et al., the authors investigated how trustworthiness and knowledge of FT products affect consumers’ decisions to purchase them. They discovered that lack of awareness hindered the growth of FT-certified products, which is probably the case in the Philippines; therefore, the subjective understanding of the Filipino consumers must be strengthened first by quantity, quality and consistency.

Since FT is still in its “infancy” stage in the Philippines, aggressive marketing will be necessary. The first step is to educate the market by providing essential information and education regarding the Fair Trade program and its impact on the farmers’ lives.

Work as a team and tap reputable agencies: The second step is for the FT stakeholders to work together, seek the assistance of reputable institutions such as the government agencies, consumer groups, non-profit organizations, etc. in an extensive campaign to build awareness and understanding of the FT program as well as the positive effects, legitimacy and benefits the FT products give to the community.

Location-specific marketing programs: Instead of adopting a generalized marketing program, FT marketing practitioners should adjust their marketing activities on a location-specific basis. There is no such thing as a “one size fits all” approach when it comes to consumers’ intentions to purchase FT-certified products.

The FT concept is still relatively new to Filipino consumers. Sadly, leading retailers and leading online stores do not carry FT-certified products as FT remains a small market in the Philippines. Presently, only specialty stores and a few online retailers have FT items. Given that mainstream channels are critical to Fair Trade’s success in North America and Europe, the Fair Trade community must devise a strategy to bring this noble cause to the attention of major stores and internet retailers not only in the western hemisphere but also in the Philippines.

Rhoey Lee Dakis is a Doctor of Business Administration student at the Ramon V. del Rosario College of Business, De La Salle University. He can be reached at  [email protected]

The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.

Topics: Green Light , Fair Trade 101
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