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Episode
49

Fair Trade

First published on
May 1, 2020
Economics
-
21
minutes
Economics
Food & drink

You recognise the name. You recognise the label.

You've seen it on bananas, chocolate, coffee, and all over thousands of everyday products.

But how much do you really know about Fairtrade?

In today's episode we take a look at how it really works, who benefits, and why some companies are starting up alternatives to Fairtrade.

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Download transcript & key vocabulary pdf
Download transcript & key vocabulary pdfDownload transcript & key vocabulary pdf

Transcript

[00:00:04] Hello, hello, hello and welcome to English Learning for Curious Minds by Leonardo English, the show where you can learn fascinating things about the world and listen to interesting stories at the same time as improving your English. 

[00:00:21] I'm Alastair Budge and today we are going to be talking about 'Fairtrade'.

[00:00:29] You are probably familiar with the term, and you I'm sure would recognise the logo, but do you know what it really means, how it works and why some people think it doesn't actually work that well? 

[00:00:45] That is what today's episode is all about. 

[00:00:48] It has been a really interesting one to make and I can't wait to share it with you. 

[00:00:55] Before we get started though, I just wanted to remind you that you can get a copy of the transcript and key vocabulary over on the website, which is Leonardoenglish.com. 

[00:01:07] The transcript means that you can follow along with every word, and the key vocabulary means that you can build up your vocabulary at the same time as listening to the podcast. 

[00:01:19] So go and check that out, it is at leonardoenglish.com. 

[00:01:25] Okay then let's talk about Fairtrade. 

[00:01:29] When you hear the term Fairtrade, there are probably lots of things that come to mind. 

[00:01:36] It might conjure up positive images, happy farmers in countries you might never have been to producing things like bananas, coffee or chocolate.

[00:01:48] And for a lot of people it is a feel-good purchase - if you are in a supermarket choosing between two different products and one has that familiar Fairtrade logo on and the other doesn't, well, you might just go for the Fairtrade one because it's not that much more expensive and Fairtrade must be a good thing, right?

[00:02:14] But things aren't always quite as simple as they seem, and Fairtrade isn't without its own fair share of critics

[00:02:25] Before we talk about some of the criticisms of Fairtrade, it is important to understand what exactly it is, how it came into existence and how it works. 

[00:02:38] Let's start with quickly talking about the history of trade and why there was a push towards making it fairer.

[00:02:48] It's quite simple, really. 

[00:02:50] History shows us that trade was often very, very unfair. 

[00:02:56] From slavery to colonial exploitation by European powers, history is unfortunately filled with instances of the benefits of work and of farming not being felt by the people who actually do the work. 

[00:03:16] Of farmers and producers of the goods not being paid very much at all for what they produce, so that they live a precarious existence hovering around the poverty line. 

[00:03:30] And even into the 20th century when demand for certain goods increased as the world became more global, the price of certain products was very volatile, it moved up and down dramatically and often. 

[00:03:48] When the price was high, things were just about okay. 

[00:03:52] But when the price dropped, which it often does with things like coffee, farmers, the people who produced the goods for the world to consume, they tended to get a pretty bad deal.

[00:04:08] Farmers were paid such small amounts of money that they couldn't lift themselves out of poverty, and they were often bullied and pressurised by large buyers to accept lower prices because the small farmers had little or no negotiating power, and they weren't really aware of the true value of the goods that they were producing. 

[00:04:36] As the world continued to get more and more globalised and people in more developed countries got used to things like coffee, bananas, and chocolate being things that they could buy easily and cheaply, the people who produced these goods got paid less and less. 

[00:04:57] And for years it sort of seemed like a inevitability of the economic system - if you want cheap bananas, cheap chocolate, cheap tea, cheap coffee or whatever it was, then it was an unfortunate reality that someone somewhere needed to be paid very little to produce it for you.

[00:05:22] Or worse, actually, people just didn't really think about where these goods came from. 

[00:05:29] A banana came from somewhere. 

[00:05:31] Chocolate came from somewhere else. 

[00:05:33] There wasn't that much thought put towards the people who actually produced these goods. 

[00:05:42] But towards the end of the 20th century, things started to change.

[00:05:48] The concept of Fairtrade has been around for quite a while, but the Fairtrade movement only started in 1988 in the Netherlands with a coffee label called Max Havelaar.

[00:06:05] I mention the name because it has quite an interesting story. 

[00:06:11] Max Havelaar was the name of an anti-colonial novel from 1860 which described the terrible treatment of the locals in Indonesia at the hands of the Dutch where the local people were forced to produce sugar and coffee for export back to Europe, as opposed to producing food for their families. 

[00:06:38] The Dutch fixed the prices and the local farmers were forced to sell their produce to their colonial masters for a tiny sum, barely enough to survive. 

[00:06:52] All the profits went to the trading company, and the farmers were in effective slavery to their so-called trading partners. 

[00:07:03] So the first ethical Fairtrade coffee was named after this book, Max Havelaar. 

[00:07:10] And it was a huge success, the coffee. 

[00:07:13] Max Havelaar coffee paid its farmers more than the market price, more than the standard price they would get in the market, and importantly, it guaranteed the price. 

[00:07:27] This was shown to be very important because the year after Max Havelaar launched coffee prices around the world crashed

[00:07:39] Lots of coffee farmers had to sell their coffee for very low prices, too low to make a proper living, and it became clear to the world that a fairer system, similar to the one proposed by Max Havelaar coffee was needed.

[00:07:57] So in the years after this, in the early 1990s various groups came together, uniting around the mission to make trade fairer for farmers across the world. 

[00:08:12] To try to ensure that they were paid a fair price for the goods that they were producing and to ensure that the profits from the work that they were doing were going to them, to the farmers, and not to the middleman or large trading companies that bought the products from the farmers and then sold them in the developed world.

[00:08:38] We aren't going to go into huge detail in this episode about how Fairtrade is structured, but it is now a collection of different organisations that span large parts of the world. 

[00:08:53] And since the Fairtrade foundation was established in 1992, it has grown to over 1.7 million farmers in 75 countries producing 30,000 different products, all united around a common mission, a common goal. 

[00:09:14] And the mission of Fairtrade is pretty simple.

[00:09:20] In Fairtrade's own words, Fairtrade is about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world.

[00:09:37] How Fairtrade tries to achieve its mission is also pretty simple, on one level. 

[00:09:46] It is all structured around the economist's favourite incentive: price. 

[00:09:53] Firstly, there is a minimum price that a Fairtrade farmer gets, for the products that he or she sells. 

[00:10:02] This means that, even in times when the price of something might go very low, that farmer still receives the minimum price for the goods that they sell. 

[00:10:16] This means that they can invest for the long-term, and they don't have to constantly worry about fluctuations in the global price for their products, which as we have already mentioned, does happen a lot, there are a lot of fluctuations

[00:10:33] Secondly, there is something called a Fairtrade premium that is paid to the cooperative that the farmer belongs to, so premium means an extra price, a higher price. 

[00:10:46] The members of the cooperative can choose how this money is spent, but it has to be invested in business or community projects. 

[00:10:58] That might be building a new well for water, a school for the children, a hospital or just buying better farming equipment.

[00:11:10] What this means is that the farmers who sell through Fairtrade are guaranteed a more stable income and they can invest in their farms, and it gives them a chance to provide a better, more stable future for them and their family.

[00:11:29] These higher prices for Fairtrade are paid ultimately by consumers, by you, by me, by the people who are choosing the banana, the chocolate bar, the tea, or the coffee with the Fairtrade logo

[00:11:47] And as you probably know, the price difference between non-Fairtrade and Fairtrade is often not very large. 

[00:11:57] So you can pay a little more for your products and feel that you are supporting a farmer and an honourable mission.

[00:12:05] The farmer gets paid fairly, you get to feel that you are making an ethical purchase and you feel better about yourself, and there is a stamp from Fairtrade, so maybe it even tastes better too. 

[00:12:20] Everyone's a winner, right? 

[00:12:21] What could possibly be the issue with this? 

[00:12:25] Well, it isn't always as rosy as it seems.

[00:12:30] And while I don't think anyone is disagreeing with the fact that farmers should be paid a fair rate for their work and that everyone should have a sustainable future, there are those that say that Fairtrade actually isn't a very effective way to achieve this.

[00:12:50] Firstly, there is the complaint that it doesn't actually help that much. 

[00:12:58] There is a cost for the farmers to achieve the Fairtrade certification, both a bureaucratic and administrative cost, but also financial. 

[00:13:09] For coffee, it's estimated that it costs around 3 cents per pound.

[00:13:16] Now, that might not sound like a lot, but it does add up and for some farmers there is evidence to suggest that there is zero long-term benefit. 

[00:13:29] Secondly, there is a lack of transparency around how the Fairtrade premium is spent, how the extra money is spent by the cooperative

[00:13:43] Fairtrade, the organisation, doesn't monitor this, doesn't monitor how the money is spent and even though the funds should be allocated democratically by the members of the cooperative, they aren't always spent on the things that will have the most impact. 

[00:14:03] So from time to time, they are instead spent on buildings and salaries as opposed to schools or medical clinics. 

[00:14:13] Thirdly, which is one that I think is actually a pretty interesting criticism is that Fairtrade isn't actually a very effective way of transferring money from the people who consume the products to the people who produce them. 

[00:14:34] There was an experiment done in San Francisco where they asked people how much more they would be willing to pay for a cup of Fairtrade coffee compared to a normal one.

[00:14:48] The answer? 

[00:14:50] The average person was willing to pay an extra 50 cents per cup. 

[00:14:56] But the maximum amount of money from that same cup that a Fairtrade farmer would receive is one third of a cent. 

[00:15:06] So people are prepared to pay a lot more for Fairtrade than they actually do, meaning that the Fairtrade farmer is on one level missing out on a large amount of money that consumers are prepared to pay.

[00:15:24] As a result of these kinds of criticisms, people and companies have started looking out for alternatives, other ways of achieving the mission of Fairtrade, but with different methods. 

[00:15:40] From a trade point of view, the main alternative is direct trade. 

[00:15:47] This just means that companies buy directly from the farmer or cooperative, and they aren't governed by Fairtrade standards that may not be applicable to that farmer or that product. 

[00:16:04] The idea behind this is that they can form a long-term relationship, work on more equal terms, and it gets rid of some of the bureaucracy, costs and inefficiencies and overheads that come with Fairtrade.

[00:16:21] Another interesting development is that retailers and companies that sell things like coffee, tea, and chocolate have started their own versions of Fairtrade. 

[00:16:34] Sainsbury's, which is one of the biggest supermarket chains in the UK, has its own label now called 'Fairly Traded'.

[00:16:47] McDonald's has its own programme for its coffee.

[00:16:51] Nestle has its own version and Starbucks has its own one and they're all different. 

[00:16:58] They are all supposedly doing this because they have decided that Fairtrade, the organisation, isn't the most effective way of them reaching their sustainability goals and that they can have more of an impact by bringing this activityin-house, by doing it themselves.

[00:17:21] Of course, people are quite sceptical about this because if there isn't any kind of external organisation that provides oversight, that reviews the terms of the trade between the company and the farmer, then we risk returning to a situation where the trade between the farmer and the buyer really isn't so fair anymore. 

[00:17:50] The other risk here is that consumers, so people like me and you, we've got so used to different terms being thrown around: Fairtrade, organic, biological, fairly treated, ethically sourced, carbon neutral, and so on that we have become numb to what they really mean.

[00:18:14] You might just see a label or logo on a chocolate bar or banana or packet of coffee and think, well, that's probably a good thing, and put it in your shopping basket without really knowing anything about what it means. 

[00:18:30] And at least with Fairtrade, it is a global body, a global organisation with recognised standards, and you know that it is deeply aligned with the farmer's interests.

[00:18:47] As we know from scandals like the Volkswagen one, when a company is in charge of monitoring its own standards, the incentives aren't aligned, and this means the company often doesn't do a very good job, to put it politely, of assessing itself. 

[00:19:08] So Fairtrade is coming under quite a bit of pressure from various different market forces and its future is slightly uncertain.

[00:19:19] It needs the buyers, it needs the companies to buy from its cooperatives, otherwise there is no Fairtrade. 

[00:19:27] And of course it needs the farmers, but it also needs the consumers to still opt for and demand Fairtrade products. 

[00:19:37] And if it can't do this, it risks becoming irrelevant.

[00:19:43] Luckily it doesn't seem like that will happen in the very near future, but it is certainly a risk for Fairtrade, for the collectives it works with, and for the farmers who have been getting a fair deal through being part of the programme. 

[00:20:01] Whatever happens to Fairtrade in the future, what is undeniable is that it has been an important force in educating consumers about the global supply chain, about where their food actually comes from. 

[00:20:17] And 'sustainability' has gone from being just a word that a company might mention in a small paragraph in their annual report to something that consumers actually do care about.

[00:20:32] So next time you reach for a banana, a bar of chocolate or your morning cup of coffee, and you see that Fairtrade label you will at least now know a little bit more about what it actually means. 

[00:20:50] Okay then that is it for today's episode. 

[00:20:54] As always, I would love to know what you thought of the show. 

[00:20:58] We actually have quite a lot of listeners in countries where a lot of Fairtrade products come from.

[00:21:05] Max Havelaar, the Dutch coffee was bought from a cooperative in Mexico, and I know we have a lot of Mexican listeners. 

[00:21:14] Similarly, countries like Colombia and Brazil, there are a lot of listeners from those places too. 

[00:21:20] So if you live in a country where there are a lot of Fairtrade producers, or even if you don't, I would love to know what you thought of the show.

[00:21:30] You can get in touch at hi@leonardoenglish.com. 

[00:21:36] And a final point, we have got quite an exciting announcement coming early next week, so keep an eye out for that one. 

[00:21:43] And if you haven't already subscribed to the podcast, hit that subscribe or follow button, then make sure you do that to get the next episode zooming into your podcast app of choice. 

[00:21:53] You've been listening to English Learning for Curious Minds by Leonardo English. 

[00:22:00] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.

[END OF PODCAST]


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[00:00:04] Hello, hello, hello and welcome to English Learning for Curious Minds by Leonardo English, the show where you can learn fascinating things about the world and listen to interesting stories at the same time as improving your English. 

[00:00:21] I'm Alastair Budge and today we are going to be talking about 'Fairtrade'.

[00:00:29] You are probably familiar with the term, and you I'm sure would recognise the logo, but do you know what it really means, how it works and why some people think it doesn't actually work that well? 

[00:00:45] That is what today's episode is all about. 

[00:00:48] It has been a really interesting one to make and I can't wait to share it with you. 

[00:00:55] Before we get started though, I just wanted to remind you that you can get a copy of the transcript and key vocabulary over on the website, which is Leonardoenglish.com. 

[00:01:07] The transcript means that you can follow along with every word, and the key vocabulary means that you can build up your vocabulary at the same time as listening to the podcast. 

[00:01:19] So go and check that out, it is at leonardoenglish.com. 

[00:01:25] Okay then let's talk about Fairtrade. 

[00:01:29] When you hear the term Fairtrade, there are probably lots of things that come to mind. 

[00:01:36] It might conjure up positive images, happy farmers in countries you might never have been to producing things like bananas, coffee or chocolate.

[00:01:48] And for a lot of people it is a feel-good purchase - if you are in a supermarket choosing between two different products and one has that familiar Fairtrade logo on and the other doesn't, well, you might just go for the Fairtrade one because it's not that much more expensive and Fairtrade must be a good thing, right?

[00:02:14] But things aren't always quite as simple as they seem, and Fairtrade isn't without its own fair share of critics

[00:02:25] Before we talk about some of the criticisms of Fairtrade, it is important to understand what exactly it is, how it came into existence and how it works. 

[00:02:38] Let's start with quickly talking about the history of trade and why there was a push towards making it fairer.

[00:02:48] It's quite simple, really. 

[00:02:50] History shows us that trade was often very, very unfair. 

[00:02:56] From slavery to colonial exploitation by European powers, history is unfortunately filled with instances of the benefits of work and of farming not being felt by the people who actually do the work. 

[00:03:16] Of farmers and producers of the goods not being paid very much at all for what they produce, so that they live a precarious existence hovering around the poverty line. 

[00:03:30] And even into the 20th century when demand for certain goods increased as the world became more global, the price of certain products was very volatile, it moved up and down dramatically and often. 

[00:03:48] When the price was high, things were just about okay. 

[00:03:52] But when the price dropped, which it often does with things like coffee, farmers, the people who produced the goods for the world to consume, they tended to get a pretty bad deal.

[00:04:08] Farmers were paid such small amounts of money that they couldn't lift themselves out of poverty, and they were often bullied and pressurised by large buyers to accept lower prices because the small farmers had little or no negotiating power, and they weren't really aware of the true value of the goods that they were producing. 

[00:04:36] As the world continued to get more and more globalised and people in more developed countries got used to things like coffee, bananas, and chocolate being things that they could buy easily and cheaply, the people who produced these goods got paid less and less. 

[00:04:57] And for years it sort of seemed like a inevitability of the economic system - if you want cheap bananas, cheap chocolate, cheap tea, cheap coffee or whatever it was, then it was an unfortunate reality that someone somewhere needed to be paid very little to produce it for you.

[00:05:22] Or worse, actually, people just didn't really think about where these goods came from. 

[00:05:29] A banana came from somewhere. 

[00:05:31] Chocolate came from somewhere else. 

[00:05:33] There wasn't that much thought put towards the people who actually produced these goods. 

[00:05:42] But towards the end of the 20th century, things started to change.

[00:05:48] The concept of Fairtrade has been around for quite a while, but the Fairtrade movement only started in 1988 in the Netherlands with a coffee label called Max Havelaar.

[00:06:05] I mention the name because it has quite an interesting story. 

[00:06:11] Max Havelaar was the name of an anti-colonial novel from 1860 which described the terrible treatment of the locals in Indonesia at the hands of the Dutch where the local people were forced to produce sugar and coffee for export back to Europe, as opposed to producing food for their families. 

[00:06:38] The Dutch fixed the prices and the local farmers were forced to sell their produce to their colonial masters for a tiny sum, barely enough to survive. 

[00:06:52] All the profits went to the trading company, and the farmers were in effective slavery to their so-called trading partners. 

[00:07:03] So the first ethical Fairtrade coffee was named after this book, Max Havelaar. 

[00:07:10] And it was a huge success, the coffee. 

[00:07:13] Max Havelaar coffee paid its farmers more than the market price, more than the standard price they would get in the market, and importantly, it guaranteed the price. 

[00:07:27] This was shown to be very important because the year after Max Havelaar launched coffee prices around the world crashed

[00:07:39] Lots of coffee farmers had to sell their coffee for very low prices, too low to make a proper living, and it became clear to the world that a fairer system, similar to the one proposed by Max Havelaar coffee was needed.

[00:07:57] So in the years after this, in the early 1990s various groups came together, uniting around the mission to make trade fairer for farmers across the world. 

[00:08:12] To try to ensure that they were paid a fair price for the goods that they were producing and to ensure that the profits from the work that they were doing were going to them, to the farmers, and not to the middleman or large trading companies that bought the products from the farmers and then sold them in the developed world.

[00:08:38] We aren't going to go into huge detail in this episode about how Fairtrade is structured, but it is now a collection of different organisations that span large parts of the world. 

[00:08:53] And since the Fairtrade foundation was established in 1992, it has grown to over 1.7 million farmers in 75 countries producing 30,000 different products, all united around a common mission, a common goal. 

[00:09:14] And the mission of Fairtrade is pretty simple.

[00:09:20] In Fairtrade's own words, Fairtrade is about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world.

[00:09:37] How Fairtrade tries to achieve its mission is also pretty simple, on one level. 

[00:09:46] It is all structured around the economist's favourite incentive: price. 

[00:09:53] Firstly, there is a minimum price that a Fairtrade farmer gets, for the products that he or she sells. 

[00:10:02] This means that, even in times when the price of something might go very low, that farmer still receives the minimum price for the goods that they sell. 

[00:10:16] This means that they can invest for the long-term, and they don't have to constantly worry about fluctuations in the global price for their products, which as we have already mentioned, does happen a lot, there are a lot of fluctuations

[00:10:33] Secondly, there is something called a Fairtrade premium that is paid to the cooperative that the farmer belongs to, so premium means an extra price, a higher price. 

[00:10:46] The members of the cooperative can choose how this money is spent, but it has to be invested in business or community projects. 

[00:10:58] That might be building a new well for water, a school for the children, a hospital or just buying better farming equipment.

[00:11:10] What this means is that the farmers who sell through Fairtrade are guaranteed a more stable income and they can invest in their farms, and it gives them a chance to provide a better, more stable future for them and their family.

[00:11:29] These higher prices for Fairtrade are paid ultimately by consumers, by you, by me, by the people who are choosing the banana, the chocolate bar, the tea, or the coffee with the Fairtrade logo

[00:11:47] And as you probably know, the price difference between non-Fairtrade and Fairtrade is often not very large. 

[00:11:57] So you can pay a little more for your products and feel that you are supporting a farmer and an honourable mission.

[00:12:05] The farmer gets paid fairly, you get to feel that you are making an ethical purchase and you feel better about yourself, and there is a stamp from Fairtrade, so maybe it even tastes better too. 

[00:12:20] Everyone's a winner, right? 

[00:12:21] What could possibly be the issue with this? 

[00:12:25] Well, it isn't always as rosy as it seems.

[00:12:30] And while I don't think anyone is disagreeing with the fact that farmers should be paid a fair rate for their work and that everyone should have a sustainable future, there are those that say that Fairtrade actually isn't a very effective way to achieve this.

[00:12:50] Firstly, there is the complaint that it doesn't actually help that much. 

[00:12:58] There is a cost for the farmers to achieve the Fairtrade certification, both a bureaucratic and administrative cost, but also financial. 

[00:13:09] For coffee, it's estimated that it costs around 3 cents per pound.

[00:13:16] Now, that might not sound like a lot, but it does add up and for some farmers there is evidence to suggest that there is zero long-term benefit. 

[00:13:29] Secondly, there is a lack of transparency around how the Fairtrade premium is spent, how the extra money is spent by the cooperative

[00:13:43] Fairtrade, the organisation, doesn't monitor this, doesn't monitor how the money is spent and even though the funds should be allocated democratically by the members of the cooperative, they aren't always spent on the things that will have the most impact. 

[00:14:03] So from time to time, they are instead spent on buildings and salaries as opposed to schools or medical clinics. 

[00:14:13] Thirdly, which is one that I think is actually a pretty interesting criticism is that Fairtrade isn't actually a very effective way of transferring money from the people who consume the products to the people who produce them. 

[00:14:34] There was an experiment done in San Francisco where they asked people how much more they would be willing to pay for a cup of Fairtrade coffee compared to a normal one.

[00:14:48] The answer? 

[00:14:50] The average person was willing to pay an extra 50 cents per cup. 

[00:14:56] But the maximum amount of money from that same cup that a Fairtrade farmer would receive is one third of a cent. 

[00:15:06] So people are prepared to pay a lot more for Fairtrade than they actually do, meaning that the Fairtrade farmer is on one level missing out on a large amount of money that consumers are prepared to pay.

[00:15:24] As a result of these kinds of criticisms, people and companies have started looking out for alternatives, other ways of achieving the mission of Fairtrade, but with different methods. 

[00:15:40] From a trade point of view, the main alternative is direct trade. 

[00:15:47] This just means that companies buy directly from the farmer or cooperative, and they aren't governed by Fairtrade standards that may not be applicable to that farmer or that product. 

[00:16:04] The idea behind this is that they can form a long-term relationship, work on more equal terms, and it gets rid of some of the bureaucracy, costs and inefficiencies and overheads that come with Fairtrade.

[00:16:21] Another interesting development is that retailers and companies that sell things like coffee, tea, and chocolate have started their own versions of Fairtrade. 

[00:16:34] Sainsbury's, which is one of the biggest supermarket chains in the UK, has its own label now called 'Fairly Traded'.

[00:16:47] McDonald's has its own programme for its coffee.

[00:16:51] Nestle has its own version and Starbucks has its own one and they're all different. 

[00:16:58] They are all supposedly doing this because they have decided that Fairtrade, the organisation, isn't the most effective way of them reaching their sustainability goals and that they can have more of an impact by bringing this activityin-house, by doing it themselves.

[00:17:21] Of course, people are quite sceptical about this because if there isn't any kind of external organisation that provides oversight, that reviews the terms of the trade between the company and the farmer, then we risk returning to a situation where the trade between the farmer and the buyer really isn't so fair anymore. 

[00:17:50] The other risk here is that consumers, so people like me and you, we've got so used to different terms being thrown around: Fairtrade, organic, biological, fairly treated, ethically sourced, carbon neutral, and so on that we have become numb to what they really mean.

[00:18:14] You might just see a label or logo on a chocolate bar or banana or packet of coffee and think, well, that's probably a good thing, and put it in your shopping basket without really knowing anything about what it means. 

[00:18:30] And at least with Fairtrade, it is a global body, a global organisation with recognised standards, and you know that it is deeply aligned with the farmer's interests.

[00:18:47] As we know from scandals like the Volkswagen one, when a company is in charge of monitoring its own standards, the incentives aren't aligned, and this means the company often doesn't do a very good job, to put it politely, of assessing itself. 

[00:19:08] So Fairtrade is coming under quite a bit of pressure from various different market forces and its future is slightly uncertain.

[00:19:19] It needs the buyers, it needs the companies to buy from its cooperatives, otherwise there is no Fairtrade. 

[00:19:27] And of course it needs the farmers, but it also needs the consumers to still opt for and demand Fairtrade products. 

[00:19:37] And if it can't do this, it risks becoming irrelevant.

[00:19:43] Luckily it doesn't seem like that will happen in the very near future, but it is certainly a risk for Fairtrade, for the collectives it works with, and for the farmers who have been getting a fair deal through being part of the programme. 

[00:20:01] Whatever happens to Fairtrade in the future, what is undeniable is that it has been an important force in educating consumers about the global supply chain, about where their food actually comes from. 

[00:20:17] And 'sustainability' has gone from being just a word that a company might mention in a small paragraph in their annual report to something that consumers actually do care about.

[00:20:32] So next time you reach for a banana, a bar of chocolate or your morning cup of coffee, and you see that Fairtrade label you will at least now know a little bit more about what it actually means. 

[00:20:50] Okay then that is it for today's episode. 

[00:20:54] As always, I would love to know what you thought of the show. 

[00:20:58] We actually have quite a lot of listeners in countries where a lot of Fairtrade products come from.

[00:21:05] Max Havelaar, the Dutch coffee was bought from a cooperative in Mexico, and I know we have a lot of Mexican listeners. 

[00:21:14] Similarly, countries like Colombia and Brazil, there are a lot of listeners from those places too. 

[00:21:20] So if you live in a country where there are a lot of Fairtrade producers, or even if you don't, I would love to know what you thought of the show.

[00:21:30] You can get in touch at hi@leonardoenglish.com. 

[00:21:36] And a final point, we have got quite an exciting announcement coming early next week, so keep an eye out for that one. 

[00:21:43] And if you haven't already subscribed to the podcast, hit that subscribe or follow button, then make sure you do that to get the next episode zooming into your podcast app of choice. 

[00:21:53] You've been listening to English Learning for Curious Minds by Leonardo English. 

[00:22:00] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.

[END OF PODCAST]


[00:00:04] Hello, hello, hello and welcome to English Learning for Curious Minds by Leonardo English, the show where you can learn fascinating things about the world and listen to interesting stories at the same time as improving your English. 

[00:00:21] I'm Alastair Budge and today we are going to be talking about 'Fairtrade'.

[00:00:29] You are probably familiar with the term, and you I'm sure would recognise the logo, but do you know what it really means, how it works and why some people think it doesn't actually work that well? 

[00:00:45] That is what today's episode is all about. 

[00:00:48] It has been a really interesting one to make and I can't wait to share it with you. 

[00:00:55] Before we get started though, I just wanted to remind you that you can get a copy of the transcript and key vocabulary over on the website, which is Leonardoenglish.com. 

[00:01:07] The transcript means that you can follow along with every word, and the key vocabulary means that you can build up your vocabulary at the same time as listening to the podcast. 

[00:01:19] So go and check that out, it is at leonardoenglish.com. 

[00:01:25] Okay then let's talk about Fairtrade. 

[00:01:29] When you hear the term Fairtrade, there are probably lots of things that come to mind. 

[00:01:36] It might conjure up positive images, happy farmers in countries you might never have been to producing things like bananas, coffee or chocolate.

[00:01:48] And for a lot of people it is a feel-good purchase - if you are in a supermarket choosing between two different products and one has that familiar Fairtrade logo on and the other doesn't, well, you might just go for the Fairtrade one because it's not that much more expensive and Fairtrade must be a good thing, right?

[00:02:14] But things aren't always quite as simple as they seem, and Fairtrade isn't without its own fair share of critics

[00:02:25] Before we talk about some of the criticisms of Fairtrade, it is important to understand what exactly it is, how it came into existence and how it works. 

[00:02:38] Let's start with quickly talking about the history of trade and why there was a push towards making it fairer.

[00:02:48] It's quite simple, really. 

[00:02:50] History shows us that trade was often very, very unfair. 

[00:02:56] From slavery to colonial exploitation by European powers, history is unfortunately filled with instances of the benefits of work and of farming not being felt by the people who actually do the work. 

[00:03:16] Of farmers and producers of the goods not being paid very much at all for what they produce, so that they live a precarious existence hovering around the poverty line. 

[00:03:30] And even into the 20th century when demand for certain goods increased as the world became more global, the price of certain products was very volatile, it moved up and down dramatically and often. 

[00:03:48] When the price was high, things were just about okay. 

[00:03:52] But when the price dropped, which it often does with things like coffee, farmers, the people who produced the goods for the world to consume, they tended to get a pretty bad deal.

[00:04:08] Farmers were paid such small amounts of money that they couldn't lift themselves out of poverty, and they were often bullied and pressurised by large buyers to accept lower prices because the small farmers had little or no negotiating power, and they weren't really aware of the true value of the goods that they were producing. 

[00:04:36] As the world continued to get more and more globalised and people in more developed countries got used to things like coffee, bananas, and chocolate being things that they could buy easily and cheaply, the people who produced these goods got paid less and less. 

[00:04:57] And for years it sort of seemed like a inevitability of the economic system - if you want cheap bananas, cheap chocolate, cheap tea, cheap coffee or whatever it was, then it was an unfortunate reality that someone somewhere needed to be paid very little to produce it for you.

[00:05:22] Or worse, actually, people just didn't really think about where these goods came from. 

[00:05:29] A banana came from somewhere. 

[00:05:31] Chocolate came from somewhere else. 

[00:05:33] There wasn't that much thought put towards the people who actually produced these goods. 

[00:05:42] But towards the end of the 20th century, things started to change.

[00:05:48] The concept of Fairtrade has been around for quite a while, but the Fairtrade movement only started in 1988 in the Netherlands with a coffee label called Max Havelaar.

[00:06:05] I mention the name because it has quite an interesting story. 

[00:06:11] Max Havelaar was the name of an anti-colonial novel from 1860 which described the terrible treatment of the locals in Indonesia at the hands of the Dutch where the local people were forced to produce sugar and coffee for export back to Europe, as opposed to producing food for their families. 

[00:06:38] The Dutch fixed the prices and the local farmers were forced to sell their produce to their colonial masters for a tiny sum, barely enough to survive. 

[00:06:52] All the profits went to the trading company, and the farmers were in effective slavery to their so-called trading partners. 

[00:07:03] So the first ethical Fairtrade coffee was named after this book, Max Havelaar. 

[00:07:10] And it was a huge success, the coffee. 

[00:07:13] Max Havelaar coffee paid its farmers more than the market price, more than the standard price they would get in the market, and importantly, it guaranteed the price. 

[00:07:27] This was shown to be very important because the year after Max Havelaar launched coffee prices around the world crashed

[00:07:39] Lots of coffee farmers had to sell their coffee for very low prices, too low to make a proper living, and it became clear to the world that a fairer system, similar to the one proposed by Max Havelaar coffee was needed.

[00:07:57] So in the years after this, in the early 1990s various groups came together, uniting around the mission to make trade fairer for farmers across the world. 

[00:08:12] To try to ensure that they were paid a fair price for the goods that they were producing and to ensure that the profits from the work that they were doing were going to them, to the farmers, and not to the middleman or large trading companies that bought the products from the farmers and then sold them in the developed world.

[00:08:38] We aren't going to go into huge detail in this episode about how Fairtrade is structured, but it is now a collection of different organisations that span large parts of the world. 

[00:08:53] And since the Fairtrade foundation was established in 1992, it has grown to over 1.7 million farmers in 75 countries producing 30,000 different products, all united around a common mission, a common goal. 

[00:09:14] And the mission of Fairtrade is pretty simple.

[00:09:20] In Fairtrade's own words, Fairtrade is about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world.

[00:09:37] How Fairtrade tries to achieve its mission is also pretty simple, on one level. 

[00:09:46] It is all structured around the economist's favourite incentive: price. 

[00:09:53] Firstly, there is a minimum price that a Fairtrade farmer gets, for the products that he or she sells. 

[00:10:02] This means that, even in times when the price of something might go very low, that farmer still receives the minimum price for the goods that they sell. 

[00:10:16] This means that they can invest for the long-term, and they don't have to constantly worry about fluctuations in the global price for their products, which as we have already mentioned, does happen a lot, there are a lot of fluctuations

[00:10:33] Secondly, there is something called a Fairtrade premium that is paid to the cooperative that the farmer belongs to, so premium means an extra price, a higher price. 

[00:10:46] The members of the cooperative can choose how this money is spent, but it has to be invested in business or community projects. 

[00:10:58] That might be building a new well for water, a school for the children, a hospital or just buying better farming equipment.

[00:11:10] What this means is that the farmers who sell through Fairtrade are guaranteed a more stable income and they can invest in their farms, and it gives them a chance to provide a better, more stable future for them and their family.

[00:11:29] These higher prices for Fairtrade are paid ultimately by consumers, by you, by me, by the people who are choosing the banana, the chocolate bar, the tea, or the coffee with the Fairtrade logo

[00:11:47] And as you probably know, the price difference between non-Fairtrade and Fairtrade is often not very large. 

[00:11:57] So you can pay a little more for your products and feel that you are supporting a farmer and an honourable mission.

[00:12:05] The farmer gets paid fairly, you get to feel that you are making an ethical purchase and you feel better about yourself, and there is a stamp from Fairtrade, so maybe it even tastes better too. 

[00:12:20] Everyone's a winner, right? 

[00:12:21] What could possibly be the issue with this? 

[00:12:25] Well, it isn't always as rosy as it seems.

[00:12:30] And while I don't think anyone is disagreeing with the fact that farmers should be paid a fair rate for their work and that everyone should have a sustainable future, there are those that say that Fairtrade actually isn't a very effective way to achieve this.

[00:12:50] Firstly, there is the complaint that it doesn't actually help that much. 

[00:12:58] There is a cost for the farmers to achieve the Fairtrade certification, both a bureaucratic and administrative cost, but also financial. 

[00:13:09] For coffee, it's estimated that it costs around 3 cents per pound.

[00:13:16] Now, that might not sound like a lot, but it does add up and for some farmers there is evidence to suggest that there is zero long-term benefit. 

[00:13:29] Secondly, there is a lack of transparency around how the Fairtrade premium is spent, how the extra money is spent by the cooperative

[00:13:43] Fairtrade, the organisation, doesn't monitor this, doesn't monitor how the money is spent and even though the funds should be allocated democratically by the members of the cooperative, they aren't always spent on the things that will have the most impact. 

[00:14:03] So from time to time, they are instead spent on buildings and salaries as opposed to schools or medical clinics. 

[00:14:13] Thirdly, which is one that I think is actually a pretty interesting criticism is that Fairtrade isn't actually a very effective way of transferring money from the people who consume the products to the people who produce them. 

[00:14:34] There was an experiment done in San Francisco where they asked people how much more they would be willing to pay for a cup of Fairtrade coffee compared to a normal one.

[00:14:48] The answer? 

[00:14:50] The average person was willing to pay an extra 50 cents per cup. 

[00:14:56] But the maximum amount of money from that same cup that a Fairtrade farmer would receive is one third of a cent. 

[00:15:06] So people are prepared to pay a lot more for Fairtrade than they actually do, meaning that the Fairtrade farmer is on one level missing out on a large amount of money that consumers are prepared to pay.

[00:15:24] As a result of these kinds of criticisms, people and companies have started looking out for alternatives, other ways of achieving the mission of Fairtrade, but with different methods. 

[00:15:40] From a trade point of view, the main alternative is direct trade. 

[00:15:47] This just means that companies buy directly from the farmer or cooperative, and they aren't governed by Fairtrade standards that may not be applicable to that farmer or that product. 

[00:16:04] The idea behind this is that they can form a long-term relationship, work on more equal terms, and it gets rid of some of the bureaucracy, costs and inefficiencies and overheads that come with Fairtrade.

[00:16:21] Another interesting development is that retailers and companies that sell things like coffee, tea, and chocolate have started their own versions of Fairtrade. 

[00:16:34] Sainsbury's, which is one of the biggest supermarket chains in the UK, has its own label now called 'Fairly Traded'.

[00:16:47] McDonald's has its own programme for its coffee.

[00:16:51] Nestle has its own version and Starbucks has its own one and they're all different. 

[00:16:58] They are all supposedly doing this because they have decided that Fairtrade, the organisation, isn't the most effective way of them reaching their sustainability goals and that they can have more of an impact by bringing this activityin-house, by doing it themselves.

[00:17:21] Of course, people are quite sceptical about this because if there isn't any kind of external organisation that provides oversight, that reviews the terms of the trade between the company and the farmer, then we risk returning to a situation where the trade between the farmer and the buyer really isn't so fair anymore. 

[00:17:50] The other risk here is that consumers, so people like me and you, we've got so used to different terms being thrown around: Fairtrade, organic, biological, fairly treated, ethically sourced, carbon neutral, and so on that we have become numb to what they really mean.

[00:18:14] You might just see a label or logo on a chocolate bar or banana or packet of coffee and think, well, that's probably a good thing, and put it in your shopping basket without really knowing anything about what it means. 

[00:18:30] And at least with Fairtrade, it is a global body, a global organisation with recognised standards, and you know that it is deeply aligned with the farmer's interests.

[00:18:47] As we know from scandals like the Volkswagen one, when a company is in charge of monitoring its own standards, the incentives aren't aligned, and this means the company often doesn't do a very good job, to put it politely, of assessing itself. 

[00:19:08] So Fairtrade is coming under quite a bit of pressure from various different market forces and its future is slightly uncertain.

[00:19:19] It needs the buyers, it needs the companies to buy from its cooperatives, otherwise there is no Fairtrade. 

[00:19:27] And of course it needs the farmers, but it also needs the consumers to still opt for and demand Fairtrade products. 

[00:19:37] And if it can't do this, it risks becoming irrelevant.

[00:19:43] Luckily it doesn't seem like that will happen in the very near future, but it is certainly a risk for Fairtrade, for the collectives it works with, and for the farmers who have been getting a fair deal through being part of the programme. 

[00:20:01] Whatever happens to Fairtrade in the future, what is undeniable is that it has been an important force in educating consumers about the global supply chain, about where their food actually comes from. 

[00:20:17] And 'sustainability' has gone from being just a word that a company might mention in a small paragraph in their annual report to something that consumers actually do care about.

[00:20:32] So next time you reach for a banana, a bar of chocolate or your morning cup of coffee, and you see that Fairtrade label you will at least now know a little bit more about what it actually means. 

[00:20:50] Okay then that is it for today's episode. 

[00:20:54] As always, I would love to know what you thought of the show. 

[00:20:58] We actually have quite a lot of listeners in countries where a lot of Fairtrade products come from.

[00:21:05] Max Havelaar, the Dutch coffee was bought from a cooperative in Mexico, and I know we have a lot of Mexican listeners. 

[00:21:14] Similarly, countries like Colombia and Brazil, there are a lot of listeners from those places too. 

[00:21:20] So if you live in a country where there are a lot of Fairtrade producers, or even if you don't, I would love to know what you thought of the show.

[00:21:30] You can get in touch at hi@leonardoenglish.com. 

[00:21:36] And a final point, we have got quite an exciting announcement coming early next week, so keep an eye out for that one. 

[00:21:43] And if you haven't already subscribed to the podcast, hit that subscribe or follow button, then make sure you do that to get the next episode zooming into your podcast app of choice. 

[00:21:53] You've been listening to English Learning for Curious Minds by Leonardo English. 

[00:22:00] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.

[END OF PODCAST]