The UK-based Institute of Development Studies has published a research report on the effectiveness of fair-trade-certified bananas in improving producer and worker incomes and working conditions. It reveals that currently ‘nearly one in three bananas sold in the UK are certified under the Fairtrade label’. Banana-growing countries reviewed in the report include Ghana, Dominican Republic and the Windward Islands, as well as Ecuador. The research highlights ‘the important role fair trade has to play in supporting farmers’ efforts to build strong collective enterprises and to secure decent returns for their bananas’. It has also helped in part to balance ‘the dominance of multinational companies and supermarkets in the banana sector’.
Among the broad conclusions of the report, it was found that:
- Fair trade helped the smallholder producers concerned to ‘improve production and access premium markets, enabling processes of capital accumulation and reinvestment’.
- Economies of scale were identified as an important factor in competitiveness, with the promotion of smallholder producer organisations being seen as critical. Smallholder producer organisations were seen as playing an important role in ‘facilitating production of high quality fruit for premium markets’, as well as promoting social and environmental improvements. In some instances, better producer organisation had enabled direct exports to be initiated, giving smallholder producers opportunities to secure a greater share of the overall value generated by the banana trade.
It noted that while net income from fair-trade bananas was higher than for conventional bananas, since 2006, this gap has narrowed as fair-trade banana producers have faced increased costs. Despite this development, it was found that in the Windward Islands and the Dominican Republic, ‘Fairtrade had played a significant role in sustaining or developing the [banana] sector’.
The report notes the important role played by UK supermarkets in the fair-trade banana market and notes that while fair-trade bananas have proved recession-proof, ‘dual certified Fairtrade organic bananas had effectively been priced out [of the market].’ UK supermarket banana ‘price wars’ have however frustrated efforts to launch broader socio-economic development processes based on fair-trade principles.
The report maintains that the reduction of EU tariffs on banana imports from Latin American suppliers ‘may threaten the position of small producers’ on fair-trade markets, particularly those from the Windward Islands. It therefore calls for greater attention to be paid to ‘distribution of value in Fairtrade value chains and the dynamics of category management, especially in relation to retail pricing and sourcing decisions’. Proposals for recommended retail price for fair-trade bananas have been rejected by the UK Fairtrade Foundation, since they could fall foul of EU competition rules.
The IDS report also calls for more support for poor and marginalised groups, and a greater focus on supporting freedom of association and collective bargaining by workers.
Recent press reports note that the value of sales of fair-trade bananas in the UK rose by 12% in 2011, with the Co-op supermarket announcing in February 2012 that it would join Sainsbury’s and Waitrose in selling exclusively fair-trade bananas.
In terms of overall fair-trade sales in the UK, sugar continues to dominate, with plans to grow sales volumes by 50% in the coming years, in large part through the expansion of the use of fair-trade sugar in value-added products such as chocolate.
The success of fair-trade bananas in breaking out of a niche market into the mainstream (with three UK supermarkets now exclusively selling fair-trade bananas) has raised questions on whether the benefits can be sustained against strong pressure to reduce costs. The IDS study shows that they can. Expansion creates new challenges which may dilute some benefits, but by reaching more producers, the overall gain is actually increased.
A key point to note, though, is that the research focused on the ethical labelling and distribution provided by the Fairtrade Foundation, which commissioned the report. This is one of a very small number of ‘ethical’ or ‘environmental’ branding schemes that actually offer premium prices to producers and other benefits. Previous work by ODI has shown that some ‘ethical’ labels actually make producers worse off since they bear all the costs of compliance without any guarantee that their output will even be bought, let alone at a premium price.
In sectors such as sugar, issues arise related to the functioning of specific sugar supply chains, given the role of multinational companies in the milling, refining and marketing of fair-trade sugar products. From October 2012, when EU minimum price guarantees for ACP sugar fall away, and in the context of increased sugar price volatility, far greater transparency will be required in the pricing arrangement for fair-trade sugar. This will be particularly the case for contracts involving elements of profit sharing, where the deductions to be made prior to determining the profits to be shared will need to be clearly stated.