Fair Trade in Processed Food Product – A New Development

Rajat K. Baisya

Sometime ago I got a call from a small business house in France that they would like to buy organic honey from Frontier Agro Industries Pvt. Ltd (FAIPL), a leading manufacturer and exporter of organic honey in India. The gentleman asked me if I could help him in this regard so that he could come to India for inspection of the processing unit as well as sourcing centres. As per his advice I organized his visit just when he told me that he has another requirement and that he wanted to meet everybody involved in the chain for production and manufacturing of honey till it was exported. And I asked him why he had that demand and he told me that he would like to ascertain that everyone associated might get their legitimate share from the value that we had created in the business. And this was a precondition for him to place an order on FAIPL. And he would do it by asking the concerned link including farmers whether they were getting the right price for him to sustain. At that of point of time I thought this party was unreasonable in his demand. But later on I realized that this was what we called fair trade practices. When I told that gentleman that if everyone had to be paid his or her legitimate dues for their goods and services then the price of the honey would not remain the same as had been quoted by FAIPL. He replied that he was willing to pay the right price (he meant fair price) but would not pay for the inefficiency of the people involved.

There are two organizations namely; Fair Trade Labeling Organization (FLO) and International Fairtrade Association (IFAT) which is now renamed as World Fairtrade Association (WFTO). These two are the main standard setting and certifying bodies for Fairtrade. Normally, fair trade standards take into account the social and economic development of small and marginal players by ensuring a fair price and a social premium on the goods traded under Fairtrade Channel. The basic objective of the fair-trade channel is capacity building for attaining sustainability in business operations, gender equity and no child labour, quality and safe working conditions, environmental safety and security including fair remuneration for their labour and services.

The products for which Fairtrade standards have been developed by FLO include food products like banana, cocoa, coffee, fresh fruits, juices, honey, nuts, oilseeds, rice, spices & herbs, sugar, tea, wine and composite food products. This is an organized movement which promotes equitable standards for international labour, social policy and environmental safety related to the production of branded and unbranded goods which may range from handicraft to agricultural commodities. This movement focuses in particular on facilitating exports from developing countries to developed countries. It can be pointed out here that Fairtrade organization and movement is focusing on where there is considerable farm labour is involved.

Exim Bank made a study titled “Fairtrade – A Fairway of Enhancing Export Value” which says that Fairtrade movement can have significant impact on the Indian export of farm produce. It talks about the role that fair-trade movement will play in enhancing the export value of certain farm produce from India and strategies that could be adopted for development of Fairtrade movement in India.

Fairtrade movement in India is in a very nascent stage. At this point of time there is no national certification body for fair-trade in India. International certification organizations such as TransFair USA, Fairtrade Foundation UK, certify fair-trade products that are traded from India currently. Agricultural products for which India has acquired Fairtrade certification that is traded under Fairtrade label include tea, rice, coffee, cashew, juice etc. India and Thailand are the two Fairtrade certified producers and suppliers of rice to the Fairtrade markets in USA

Global Fairtrade markets have grown over the past decade. As per FLO, the average growth rate of Fairtrade is about 40 % per annum since 2000. In the year 2007 USD 3 billion worth of Fairtrade labeled products were sold worldwide which is an increase of 47% over the previous year and global market for Fairtrade has been projected to become 9 billion USD by the year 2012 and is further projected to reach USD 20-25 billion by the year 2020. USA and Europe are the leading markets for Fairtrade products. During 2007 the market in USA and UK grew by 72 % and 46% respectively. In addition to UK, Switzerland, France, Germany are the other major markets in Europe for Fairtrade products. Cotton is another commodity in demand in Fairtrade. Other countries showing sign of growth include Japan (51%) Australia and NewZealand (59%). The two major countries having significant size of Fairtrade is USA with sales of 730 million Euro and UK with sales of 704 million Euro in 2007 as per the data compiled by FLO.

With very large population of small farm holding in India Fairtarde initiatives can play a very important role in the development of fair-trade export of agricultural products. In India even organic farming and export is in its infancy. There is a need to establish the certification agencies in a cost effective manner. While organic trade has already started in domestic market but no one has heard about Fairtrade as yet. Initiatives are necessary to introduce the fair-trade products in the domestic channel also and gradually build the international trade so that we can have our legitimate place in the global trade of Fairtrade products that is expected to be very significant.

Small farm holders can be trained and educated in this trade, which will fetch them a fair price for their products and farm produce. India offers good potential for oranges, other citrus fruits, mango, pineapple, litchis, coconut, grapes, apple passion fruits, banana, and spices. Also vanilla, cardamom, nuts and oilseeds such as peanuts, cashew nuts, sesame seeds, honey, flowers and ornamental plants could be brought under Fairtrade practices if we would like to encash on this new trend of global trade. This has significant impact on food and agriculture industry and we should take some action in this direction – sooner the better.