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New opportunities for fair-trade producers

02 July 2012

In May 2012, three distinct developments took place that will open up new market and investment opportunities for fair-trade producers.

The first of these was the legal clarification by the European Court of Justice ‘confirming that Fair Trade criteria can be included in public procurement’, a ruling that confirmed current practice. According to press reports, in its ruling, the Court ‘clearly states that contracting authorities can [choose] award criteria based on considerations of an environmental or social nature’, and ‘also explicitly states it is possible to refer in award criteria to “the fact that a product is of fair-trade origin”.’ However, any tenders must specify the underlying criteria to be met and not simply specify a label that meets those criteria. Labels may be used ‘as a valid means of proof of compliance with such criteria, provided that other means of proof are allowed’. The ruling has been welcomed by the European fair-trade movement. 

The second development related to the rapid expansion of fair-trade sales in South Africa. Following the establishment of Fairtrade Label South Africa (FLSA) in 2009, sales have grown from 18.4 million to 73.2 million rand (€1.75–6.95 million), with coffee and wine accounting for the largest share of sales. A recent commercial breakthrough was the decision of the Woolworth’s chain of coffee shops to serve fair-trade coffee. However, South African supermarket chains have not to date been major purchasers of fair-trade products. For coffee in South Africa, the hospitality industry is currently the dominant purchaser. This contrasts sharply with markets such as those in the UK and Ireland where, for example, all the coffee sold in Marks & Spencer is now fair-trade. 

The third of the developments was the announcement by Fairtrade Africa of the the Fairtrade Access Fund, which is being launched by a consortium of Fairtrade International, Incofin Investment Management and the Grameen Foundation. The Fund aims to provide loans for investment in fair-trade production, technical assistance and support services (including information services on fair-trade certification practices, crop management and localised market information). While the Fund is initially to provide loans and support services in Latin America, it will be extended to Africa and Asia in a second phase. 

Editorial comment

Clarification of the legal position regarding the treatment of fair-trade products under public procurement policies could potentially open up major new markets for fair-trade producers in the EU. In certain sectors, like the banana sector, where transport and logistical changes are taking place, this could facilitate closer contacts between fair-trade producers and end-consumers of fair-trade products.

In ACP countries, however, clearer and more consistent government policies would appear to be required for the promotion of both fair-trade and organic forms of agricultural production (particularly given the consumer trend towards dual-certified products). This needs to be complemented by programmes of support for the development of fair-trade producer organisations and the establishment of local certification companies, possibly at the regional level where capacities already exist and there is a growing market (e.g. in Southern Africa, building on developments in South Africa). 

Benefits could also be gained from sharing experience across the fair-trade community. Two areas stand out in this regard. First, how to make the breakthrough into sales of fair-trade products through main-stream retailers; and second, how to strengthen the functioning of supply chains, so that price premiums paid by consumers actually benefit primary producers. 


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