07.08.2014

Can commerce be ethical?

Ndongo Samba Sylla The fair trade scandal: marketing poverty to benefit the rich Pluto Press, pp208, £16

There has been very little discussion around the inadequacies of so-called ‘fair trade’ (FT). As Marxists, we know, from a theoretical standpoint, that capitalistic commodity exchange can never be ‘fair’, but how many of us can provide concrete examples of ‘fair trade’ failing those it is supposed to assist? How many of us know the cost of FT certification for producers in the global south? The answer is ‘not many’, and this work is therefore useful in providing extensive evidence on the failures of FT.

Sylla’s contribution, despite some shaky conclusions, to a debate few have participated in is invaluable and I cannot help but feel that Christine Haigh’s review, in Red Pepper, does a disservice to both Sylla and the Rosa Luxemburg Foundation, for whom he is a researcher. Haigh asserts: “Only the committed are likely to make it to the end”, as the text lacks a “narrative journey” (June-July 2014). This, however, is to misinterpret the aims of the book. Sylla’s objective is to initiate a debate and in order to do this a framework, foundations and a context upon which future debate can take place must first be established. On this score the book is successful.

Sylla, who worked as a consultant for the FairTrade Labelling Organisations (FLO) in 2010, begins his introduction by telling us that, while “the goal [of FT] is to make ‘responsible’ a global system whose peculiarity is that it does not tolerate any ethical limitation” (p1), “the new advocates of the poor unknowingly work for the rich” (p5).

In chapter 1, Sylla addresses the historical inequalities of the international trade system. This chapter is crucial, as it underpins the various reasons why fair trade protagonists are still attempting to ameliorate a system that perpetuates and exacerbates inequality. Sylla argues that the accepted belief - that free trade can address the global disparities in wealth between nations by encouraging specialisation in production - is a nonsense. He contends that ‘least developed countries’ (LDCs) are being marginalised, due to encouragement to specialise in a specific sphere of production, by “their low level of economic diversification ... and a dependency of export revenues” (p16). Forty-six of the world’s LDCs depend on primary products, such as food, oil and minerals, for at least 50% of their export revenue. This dependency becomes deeply problematic when we consider that from 1980 to 2009 the relative proportion of global trade made up by primary products dropped, from 15% to 9%, while the proportion made up by manufactured goods increased. Sylla declares: “… in relative terms, the prices of agricultural products exported by LDCs dropped by 70%” from 1961-2001 due to the relative decline in demand (p17).

He argues that the advocacy of free trade as a method of economic equalisation is both hypocritical and goes against historical evidence - which demonstrates that most economic hegemons gained their supremacy through varying degrees of protectionism. I can think of three good examples of protectionist policies adopted by the British. From 1815-46 the corn laws were employed to keep the price of corn artificially high, so as to protect the farming sector; in the 50 years following the industrial revolution the Navigation Acts were in place to guarantee a British monopoly when it came to trade with ports in the empire; and in 1705 the English passed the Alien Act, which placed an embargo on Scottish imports unless the Scots agreed to the 1707 Act of Union. These and other examples highlight the hypocrisy of developed nations, when they begin “preaching to the rest of the world the opposite of what made them successful” (p25).

Sylla states that the decrease in tariff barriers has been met with the imposition of “non-tariff barriers” (p26), such as quantitative quotas, sanitary standards, quality standards, etc. He uses the US African Growth and Opportunity Act (AGOA) as evidence that the advanced capitalist countries still avoid the free trade they claim to believe in. AGOA is supposed to ensure the free trade of a myriad of products between Africa and the US, but commodities such as milk, tobacco and sugar are excluded. The US also ensures that by subsidising its own domestic producers, to the tune of $252 billion from 2007-09, it maintains an artificial competitive edge over producers from the global south. It argues that the subsidies are designed to protect small farmers, but the truth is that 89% of them go to the 25% richest producers. Sylla concludes this chapter by informing the reader that “the United States collects more taxes on products coming from Bangladesh and Cambodia than on those from England and France” (p31). When we combine the information above with the fact that 50% of sub-Saharan Africa lives below the international poverty line of $1.25 per day, we can see why fair trade protagonists are motivated to try and change the international trade system - ‘Something must be done.’

Quality label

In chapter two the author provides a history of the FT movement and describes how it is organised. It was only in the 1990s that FT made the decision to (1) integrate itself within mainstream distribution channels and (2) introduce a quality label as opposed to its own line of commodities. Prior to this, most alternative trade approaches relied upon selling ‘ethical’ products in specialised (read ‘niche’) shops. This change of approach occurred because, as the doctrine of neoliberalism was implemented across the world, governments in the global south withdrew from the immediate sphere of production, creating both the space and the imperative to introduce a new method of stabilising prices. According to Sylla, “under the influence of neoliberalism, this alternative trade project was amended and integrated into a reformist framework that no longer shies away from ... working with the other great ‘enemies’ of yesteryear” (p56).

The recent efforts to make FT accessible to ‘ordinary’ consumers, through integration into mainstream distribution channels and the implementation of large-scale sensitisation campaigns, has seen FT sales rocket. In the period 2004-11, they rose from €830 million to €4.9 billion. FT’s marketing strategy has been a huge success - so much so that new labels are now trying to jump on the FT bandwagon. Sylla informs us that there are now more than 600 labelling initiatives operating in the UK and that this has consequently led to a race to the bottom, in terms of quality, as each label wants to be seen by the large distribution channels as the cheapest and most convenient. An example of this would be the paltry standards the Rain Forest Alliance abides by when certifying coffee - only 30% of a bag of coffee has to meet RFA standards in order to be awarded certification.

A more contentious part of FT’s modus operandi is the cost incurred by producers wishing to gain certification. For an association of less than 50 producers to gain certification, a universal (and non-refundable) €1,430 must be paid. It does not matter whether you operate in Mexico or Burundi - any association of less than 50 producers must fork out. Indeed, charging a universal certification fee invariably means that the poorest producers from the poorest countries cannot afford to join the FT movement despite the fact they are the ones who are supposed to benefit from it.

Chapter 3 describes the existing controversies surrounding FT. Sylla begins by citing a report published by the Adam Smith Institute. This argues that FT exerts “moral pressure on consumers, who ... feel compelled to buy FT products” (p69). FT is all well and good if you are well paid; however, if you are on the minimum wage then you will hardly be in a position to buy commodities above market price. Another controversy surrounding FT is its willingness to cooperate with non-‘ethical’ companies. By certifying products, as opposed to distributors, FT allows for transnationals to sell a negligible number of FT commodities in order to enhance their public image. It is FT’s willingness to turn “a blind eye on the exploitation of producers and workers of the north by their ‘allies’ of large distribution and agrifood industry” (p80) which has seen it compromise some of its ‘key principles’.

In chapter 4 Sylla explains the limitations of FT. He brands it “an unsustainable response to poverty in the south, as it very much relies on the free-market logic” (p86). This opinion is evidenced by the fact that in 2002 FT’s co-founders, Nico Roozen and Frans van der Hoff, stated: “FT operates on the free market and accepts its rules” (p87). This adherence to capitalist logic has seen FT claim itself to be a “fully-fledged trade”, which “must therefore adapt to ... the market as a whole” (p88).

This leads FT - and Sylla, as we will see later - to advocate increased efficiency as a means of enriching LDC producers. It is very true that if an individual producer can manage to expend less socially necessary labour time during production, then they will make a larger profit, since their commodities will still sell at the average market price (which is set by the average expenditure of labour time necessary for the particular commodity). If everyone becomes more efficient, however, then no additional surplus value can be generated, as the commodity’s value, based on the reduced labour time expended, will inevitably fall and so will its price. This drive towards efficiency cannot tackle trade inequality; it can only give an ever changing handful of producers a short-term competitive advantage until their competitors catch up.

Limitation

Perhaps the biggest limitation of FT is the way it calculates its ‘minimum guaranteed price’. This is, essentially, the market price of a product, plus a 15% margin to cover ‘sustainable production’ costs that the market fails to take into account, such as environmental depletion. This method abides by the logic of commodity fetishism, as it assumes all commodities have an objective inherent price, as opposed to an objective value. So the question is, ‘What determines these prices?’ The answer is that, while prices tend to be pulled towards their value in the long run, it is the market that determines them in the short term. By accepting that each production input has an objective price, FT accepts the logic of the market.

Another criticism of the minimum guaranteed price is that is assumes “all the inputs used by the producers are purchased at conditions that include no form of exploitation” (p93). Sylla argues that to assume production is “ethical” or “unproblematic” is to “crystallise specific relations of domination” (p93) and this is reflected in FT’s pricing policy. Furthermore, the FT minimum pricing method is torn between maintaining affordable products for consumers and providing a means of subsistence for producers. If the minimum price is too high it will not find buyers in the marketplace and, although it is often higher than the market price, it does not provide a sufficient income for producers attempting to escape poverty. One must also consider that if producers cannot sell 100% of their products in FT markets then they must sell them in non-FT markets and accept the market price. This is problematic, as an FT producer has higher production costs than a non-FT producer, due to the quality hoops they must jump through. FT producers may receive more income per commodity than a non-FT producer, but their costs are also higher. This leads Sylla to conclude this chapter with the statement: “FT protects producers and their families against extreme poverty rather than lifting them out of poverty” (p119).

Chapter 5 assesses the global impact of FT. It has disproportionately benefited the better-off developing countries. Due to the universal charge for FT certification, it follows that producers in less impoverished countries will be in a better position to afford certification than those in the LDCs. For example, in 2009 coffee accounted for 34% of Ethiopia’s export revenue, yet only three producer organisations held FT certification. In contrast to this, Peru had 57 FT-certified producer organisations, despite the fact that coffee accounted for only 2% of its export revenue. This leads Sylla to conclude that “Latin America enjoys a double benefit compared to Africa and Asia: namely that FT certification is less costly in its case and FT product markets are dominated by its main export products” (p131). He proceeds to declare that FT was created in a “Latin American context” (p136), in the sense that: (1) FT deals mostly with agricultural products (which account for 17.8% of Latin America’s export revenue, as opposed to 6.4% of Africa’s); (2) certification is relatively cheaper for Latin American producers; (3) big distribution channels in North America do not have to travel as far to reach Latin America as they would to reach Africa; and (4) Latin American producer organisations typically already possess the necessary organisational prerequisites to join the FT movement. Sylla states that if FT had been “born in the African context, it would probably have had a greater focus on mining or petroleum products” (p136). In other words, the main problem is an inherent anti-African bias, not the class system itself.

So what is Sylla’s alternative to FT? He argues for Africans to “(re)introduce income stabilisation mechanisms. Beyond this, enhancing agricultural productivity should generally be encouraged” in order to “ensure food sovereignty and security” (p150). He also argues that nations must “regain the use of the regulatory powers they had delegated ... to private initiatives” (p151), and that “change must be driven from within the nation” (p152). Sylla states that this “control of economic processes” is “the cornerstone on which the poorest countries will have to build themselves up, as young nations aspiring to have their say in the global concert of nations” (p152).

After reading an excellent account of the horrors of ‘free trade’ and why FT, to put it mildly, is an inadequate remedy to global poverty, the reader cannot help but feel let down by Sylla’s unambitious and nationalistic conclusions - he clearly labours under the illusion that nations can somehow become self-sufficient in an increasingly globalised economy. However, although the solutions he puts forward are highly questionable, the fact remains that this is a useful work. It brings together existing evidence and arguments, in addition to introducing some new ones.

Robert Eagleton