Monday, October 20, 2008

Reason Number 5,452 of Why I Love The Internets

On Friday, I asked how fair is fair trade. Since I don't know the answer myself, I asked mostly for the sake of sparking conversation. There were some really great dialogue created, and I really appreciate how much thought people put into their answers. This is how I, and hopefully some of you, learn.

And one of the awesome things that I learned, courtesy of Neelofer, was the presence of another type of designation: Equitrade. Whereas fair trade provides a fair wage to farmers for cash crops, equitrade attempts to take this one crucial step forward, and empower local people to turn their crops into finished goods. Why is this crucial? Because as I learnt in The End of Food (review coming next week to a Bookworm near you) cash crops earn a relatively low amount of money. The "value adding" comes when the food is processed. Consequently, a breakfast cereal has a much higher value than oat, and chocolate has a much higher value than cacao beans. Futhermore, while cacao beans garner a standard, across the board, market rate, chocolate bars can vary in price depending on a number of factors. 

Generally speaking, even with fair trade products, the cash crop comes from the developing world, but the all important "value adding" happens in the developed world. Cacao beans are imported to Switzerland where they are turned into chocolate. I recently saw the documentary The End of Poverty? in which a Kenyan farmer was complaining bitterly that Westerners buy coffee beans from Kenya, but that the roasting, or the value adding process, is done in the developed world, instead of in Kenya. As the farmer points out, if the roasting of coffee continues to be done in the developed world, Kenya can never hope to see much of the immense profits garnered from coffee. Simply put, fair trade, while important, is just not enough. 

Now as far as I can tell, equitrade hasn't been around for very long, and in fact, I could only find one company, Malagasy, using the equitrade symbol. (In fact the founders of Malagasy also founded equitrade.) And equitrade isn't likely to become widespread in the future. Because fair trade involves cash crops, it can fit nicely into our current agricultural economy. Nestle can simply buy fair trade coffee beans, and still be Nestle. But since equitrade demands processing to happen in the countries where the crops are harvested, Nestle can't just "become" equitrade. As a result, equitrade is likely to remain a very, very tiny, niche market.

Still, if equitrade is able to make any advances in the niche, "foodie" market, this might have a very real impact on the economies of the developing world. So for now, I'll adopting the buying principle of giving preference to equitrade, and buying fair trade when equitrade is not available. Thanks for the tip, Neelofer!


Joyce said...

Very interesting article, Arduous. This could work for non-food items of course, as well, such as cotton goods; clothing manufactured right where the cotton is grown, etc. Hope this type of corporation proliferates.

ruchi said...

Right. Way back when, Melissa at Better Living made a distinction between fair trade of manufactured goods (ie fair trade candles, soaps, etc) versus fair trade cash crops. At the time I didn't understand it, but now I get it. So there are a lot of fair trade companies that actually practice equitrade (fair trade soap IS essentially equitrade.) Similarly, the NGO my uncle works for has a line of fair trade products (honey, organic cotton tee-shirts, bags, etc) that are sold under the NGO's fair trade brand. Essentially, that again *is* equitrade. So there are a lot of companies that practice this for their non-food items, but it would be great to see this proliferate further!

Green Bean said...

Very interesting. It never occured to me about valued added processing occurs elsewhere and that the farmers in the non-industrial world don't reap the benefits. Really makes you think twice. Thanks for shedding some light on this.

ruchi said...

Well, to be clear farmers do reap some benefits from fair trade, clearly, because they are paid fair wages. But, in the US, I believe farmers make 10 cents of ever food dollar. Most of the money goes to processing so it's important to have native processing. Having native processing is also important because it provides local people with non-farming jobs. Futhermore, local processing of local cash crops means that the economy becomes more diverse. It's not just a farming economy, now it's an economy involving farming, and processing of food. So the net benefits to the citizenry are multiplied, compared to fair trade, where the benefit is more localized to providing farmers fair wages.

Jerry Critter said...

You are right. Equitrade is more valuable to the producer than fair trade. Most of the cost of an item is the "value added" by processing the raw material.

This is one of the problems with the primarily republican philosophy of the last 30 years. We have gone from the largest exporter of finished goods (value added goods) to the largest exporter of raw materials. Along with the export of the raw materials has gone our jobs and our profits.

That as been the result of "fair trade". We need to go back to "equitrade". We didn't call it that, but that is what it was.

Anonymous said...

Really interesting! This could be seen in the art world as well. The tagua nuts I use for my tea bag tags would not be worth much in their raw form but sliced and dyed the indigenous Amazonian artists can make a living with them.

Anonymous said...

Thanks Ruchi. I did not know much about equitrade until today. Learning every day :)

Anonymous said...

Happy to have helped a great blogger from whom I'm learning quite a bit.

ruchi said...

Jerry, well having worked in Hollywood for 7 years, I can point to Hollywood films and movies as being one of critical finished product exports!! ;)

Organicneedle, yes exactly. Traditional artisinal crafts command much more money than the raw materials used to make the crafts.

Cindy W, glad to help.

Neelofer, well I'm glad that it's reciprocal!! :)

sophia said...

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