“Trade, not Aid”

Issue Paper: Fair Trade

Date: 02/10/2009

LEADERSHIP AND ISSUES (BKM09GBS-09)

Professor: Prof. Dr. R. van Tulder

Group 7:

Tijana Batista 287271

Deirdre Gras 316264

Kelvin Hollebrandse 287488

Ward Ripmeester 289850

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Executive Summary

The last thing someone will be thinking about in the morning when they are drinking their first cup of

coffee is the story behind the coffee. Coffee is the second largest commodity in the world, right after oil.

For a product in that is so important all over the world, the importance of its producers, the farmers,

and their well-being are completely neglected. Currently, the global marketprice of coffee is so low that

farmers in the developed countries are not able to maintain their families anymore by just producing

their main product, coffeebeans. There is however an alternative to the “exploitation” of these famers,

its called Fair Trade. Fair trade products ensure that the farmers are getting a fair price that will make

them able to maintain a sustainable business and living for their families. However this is not just an

issue in the coffee market, but is occuring in many products that arise from agricultural activities. It

being a fact that agriculture is one of the the most important incomes for the majority of the people in

the least developed countries, its clear for us to state that Fair Trade is an important issue.

In this paper we did research in the issue of Fair Trade, main question that we asked ourselves, was how

to make Fair Trade products become mainstream. We have elaborated on what exactly Fair Trade is and

what the current trends and opinions are about this topic. In the diagnoses part we analyzed and

discussed the stakeholders and their role in the Fair Trade issue. In what way do they contribute to the

issue, can they influence other stakeholders and are they doing so. According to these analisys we have

formed our opinion on the problems’ current stage of development, where the most important

problems lie for Fair Trade products and its actors and whether we feel this is the right direction. We

have introduces some ideas about how the development of the Fair Trade market can be positively

influenced. Most of these ideas are based on partnerships between the different stakeholdergroups, we

have elaborated on all three of the stakeholder groups in order to create a good view on their part in

this problem and possible solutions in which they can play an important role in. To show examples of

methods on how to create a more mainstream market for Fair Trade products we have also included

two case studies that discuss the implementation of Fair Trade in the UK market, which was considdered

a success, thanks to succesful partnerships between the stakeholders. Finally we will give our advice on

how Fair Trade products can become mainstream succefully and mention areas that we feel should be

up for further research.

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Table of Content Executive Summary .......................................................................................................................................................1

Table of Content ............................................................................................................................................................2

1. Abbreviations and Keywords .....................................................................................................................................3

2. Introduction...............................................................................................................................................................4

3. Problem definition.....................................................................................................................................................5

3.1 What is Fair Trade?....................................................................................................................................5

3.2 Free Trade .................................................................................................................................................6

3.3 Current developments ..............................................................................................................................6

3.4 Criticism.....................................................................................................................................................7

3.5 Trend analysis: Kondratieff wave ..............................................................................................................8

4. Diagnosis....................................................................................................................................................................9

4.1 Stakeholder analysis..................................................................................................................................9

4.2 Issue Life Cycle.........................................................................................................................................12

4.3 Triple-E ....................................................................................................................................................14

4.4 Tensions...................................................................................................................................................16

5. Design/Solution .......................................................................................................................................................19

5.1 Civil society..............................................................................................................................................19

5.2 The Market ..............................................................................................................................................20

5.3 Government ............................................................................................................................................23

5.3.1 State-governance ...................................................................................................................23

5.3.2 International governance.......................................................................................................24

6. Implementation .......................................................................................................................................................26

7. Evaluation ................................................................................................................................................................29

8. Conclusion ...............................................................................................................................................................33

References ...................................................................................................................................................................34

Appendix......................................................................................................................................................................38

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1. Abbreviations and Keywords

KNCU Kilimanjaro Native Co-operative

EDD Export Development Programme

TWN Third World Network

Fair Trade –North-South - Free Trade – Ethical trading - Sweatshops – Marketing – Strategic Choice –

Trade Barriers – Sustainable Trade – FINE – Farmers – Alternative Trade – Certification – Labeling – WTO

– Partnerships – Networks – Developing countries

FINE An informal association for the four main Fair Trade Network,

consisting of FLO, NEWS!, WFTO, EFTA.

FLO Fair Trade Labeling organization

NEWS! Network of European Worldshops

WFTO World Fair Trade Organization

EFTA European Fair Trade Association

WTO World Trade Organization

MNE Multinational Enterprises

CSR Corporate Social Responsibilities

FTF Fair Trade Federation

IFAT International Federation of Alternative Trade

BRIC Brazil, Russia, India and China

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2. Introduction

It seems that the number of Fair Trade products in the mainstream supermarkets and shops are

increasing, which has increased the credibility of the Fair Trade labels on an international level. This has

been driven by a number of different influences, which A.J. Nicholls (2002) has put together into four

groups, namely political, academic, cultural, and informational (see Appendix 1). He states that these

influences interact with each other to generate a change onto the publics view to the recognition of the

importance of Fair Trade in the developed economies. Furthermore, according to the latest press

release of The Fair Trade Foundation consumer’s confidence and business support for the Fair Trade

products is still increasing. Their recent research shows that even during the economic slowdown the

awareness and spending figures have been increasing (The Fair Trade Foundation, 24 September 2009).

However, Fair Trade is still considered to be in a niche market. Recently consumers and producers have

been reaching out to each other and taking the first steps in making Fair Trade mainstream and making

it overall accepted. The question we asked ourselves is whether Fair Trade is at a maturing stage? Even

when it appears that Fair Trade is approaching maturity, it still faces challenges at both ends of the

supply chain, which we try to identify. We start by a description of the characteristics Fair Trade, where

we identify different stakeholders involved and the criticism associated with this topic.

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3. Problem definition

3.1 What is Fair Trade?

One of the current trends on the consumer platform of the developed countries is the rise in ethical

consumer behavior by purchasing products that are advertised or perceived by the consumer as ethical

(Pelmacker, 2005). Ethical consumption is when the purchase of the products involves an ethical issue,

such as environment, human or labor rights. Fair Trade products are an example of such ethical products

(Doane, 2001).

There have been many different definitions for the term Fair Trade over the years. In 2001 FINE stated

the following which is now widely accepted among the actors in the Fair Trade movement as the

definition of Fair Trade.

“Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in

international trade. It contributes to sustainable development by offering better trading conditions to, and

securing the rights of, marginalized producers and workers – especially in the South. Fair Trade organizations

(backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning

for changes in the rules and practice of conventional international trade”.(FINE, 2001)

The terms Fair Trade and ethical trade are used interchangeably; however, it is of great importance to

make a distinction between Fair Trade and ethical trade. Ethical trade is a principal of corporate social

responsibility that fits in any modern business, where Fair Trade is more product specific and sustainably

focused (Bird and Hughes, 1997). In its basic terms it represents an approach to supply chain

management where it aims at equal exchanges between the buyers-supplier transactions (Strong, 1996).

The WFTO has issued 10 set principles that have to be carried out and monitored by any Fair Trade

organization:

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1. Creating opportunities for economically disadvantaged producers

2. Transparency and accountability

3. Trading practices concerning the social, economic and environmental well-being

4. Payment of a fair price

5. Child labor and Forced Labor

6. Non discrimination, gender equity and freedom of association

7. Safe and healthy working conditions

8. Capacity building

9. Promotion of Fair Trade

10. Be environmentally sustainable

Source: WFTO (2009)

3.2 Free Trade

Visions between Free Trade and Fair Trade are not comparable and are based on completely different

visions. Where as Fair Trade is based on doing business in such a way that is ethical and equitable to the

farmers, Free Traders believe that the market, in the end always corrects itself and countries, rich and

poor can benefit from having full access to each others markets. According to these Free Traders, Free

Trade is Fair Trade (Nardi, 2005). Free Trade would involve the complete elimination of all trade

barriers, quotas and tariffs, up until today no country has ever carried out such a policy (Sharman, 2005).

Trade barriers can exist in many forms, like the above mentioned quota’s or tariffs, but they can also

include language, law or culture barriers. Some countries have created a free trade area between the

partnering and, or neighboring countries, examples include the EU, NAFTA and SAFTA, partnerships like

these are usually based on geographical and cultural similarities.

3.3 Current developments

You can see a clear trend in the Fair Trade industry, multinationals have started adopting Fair Trade

products within their product lines, partnerships are being created by the multinationals and the Fair

Trade channels, including working with the Fair Trade networks and sometimes even directly with the

farmers. There are a some recent examples of these kind of partnerships between the commercial profit

oriented organizations and Fair Trade actors, one of these examples is the switch in July 2007 by one of

UK’s largest supermarkets, Sainbury’s, to sell solely bananas that are Fair Trade. Other examples are the

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adaptation of 100% Fair Trade tea’s and coffees in the home brand of Marks & Spencer. Dunkin Donuts

is currently only serving Fair Trade coffee to its customers in the Northern America’s and Europe, the

Swedish hotel chain Skandic adopted that same approach where they only serve Fair Trade coffee. (FLO,

2007) The Dutch supermarket Albert Heijn has acknowledged the trend in Fair Trade and is adopting

more Fair Trade products in their shelves. During the Fair Trade week in 2008 they put the Fair Trade

products in the “spotlights” and during that week, average sales in Fair Trade products had doubled.

(Albert Heijn, 2008) Very recently Starbucks made a statement that they want to convert all their coffee

into Fair Trade coffee in the European market. (Food Holland, 2009) We will be elaborating on

partnerships and show examples of successes through case studies further on the research.

3.4 Criticism

Certification fee: An issue that receives criticism is the fact that producers have to pay an initial

certification fee of 2000 Euro and 500 Euro every year in order to be able to use the certification. This is

a huge barrier to many farmers, who before selling their products at market prices; barely made enough

money to provide for themselves and their family, let alone save this hard earned money for the

certification fees. This method immediately excludes the poorest famers from participating in the Fair

Trade movement as most of the farmers have no or only very limited access to credit. (World Centric,

2009)

Social-greenwashing: Most of the Fair Trade products are being represented by one of the FINE

networks, those manufacturers are relatively small and produce 100% Fair Trade products. While most

of the multinationals only carry a fraction of what is officially Fair Trade, however with the Fair Trade

labelling, these companies are now seen as ethical by the public. This is a very controversial approach as

critics claim that these manufacturers are only adopting these products for an increase of good

reputation and “social-greenwashing” purposes. (World Centric) (Reiber, 2004)

Transparency: Currently there is still a lack of transparency, importers may claim that they are selling

products that are “fairly traded”, while in reality they are not and do not carry the official Fair Trade

certification, however, consumers might believe that they are buying Fair Trade products, due to the

misleading advertisement as fairly traded. The products that are traded with the official certification

have set prices, however that does not take into account the disparities within the different parts of the

world. Fairly Traded products can be bought for any price as they are not obliged to this set price (World

Centric).

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Gap: All of the above stated criticisms have most likely contributed to the fact that in reality only small

fraction of the consumer buys Fair Trade products. There is a gap between the willingness of the

consumers and their commercial buying attitude. Co-op (2000) has publicized that more than 50% of the

customers have stated that they would purchase Fair Trade products, while less than 1% of their buying

behavior consists of Fair Trade products. This perception gap is worth exploring it into more detail.

Trade Barriers: Farmers who would like to export their products to western economies will find another

hurdle as soon as they want to cross the border. In any country that these farmers want to export to,

they will find trade barriers that will keep them from entering the market unless the home country of

the farmer and the country of the potential “market” have trade agreements, the farmer is able to pay

the fees or have partnerships with national companies of that particular country. Countries want to

maintain the trade barriers in order to protect their own market and not create too much of a

competitive environment that might hurt national organizations. With the WTO being one of the most

important legislative institutions around the world, they can be a very important factor in opening up

markets and create a better competitive environment for the exporting farmers.

3.5 Trend analysis: Kondratieff wave

Fair Trade has been existing for over 60 years and is well established in its own niche market, but with

its current rising popularity and trying to tap into the mainstream markets more people are aware and

want to know more about the Fair Trade. With the information that is available today due to the

technologies and the proactive attitude of consumers, there is a need for more grounded, objective and

legitimate theories and information about the subject. A large number of research have been

conducted, but that does not eliminate the need for more. Currently we are living on the turning point

of the fifth Kondratieff wave, a time period focusing and synonym for Internet, bio-technologies, mobile

technologies, soon there will be a need for a new trends that will start of the beginning of the 6th

wave.

Nefiodow (2006) claims that we already at the beginning of the 6th

wave, a wave that will be

representing a time focusing on life sciences and health which includes topics such as mental, physical

and social health and further bio-technologies (See appendix 2). It is believed that there will be a radical

change in the competences needed in order to create a competitive advantage (Nefiodow, 2006). This

well seems like an era that will use a more social approach in ways of doing business , a time were as

CSR and more specifically more ethical trading would be placed perfectly in the context. In this case, Fair

Trade is making its debut on the shelves of the mainstream supermarkets at exactly the right time.

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4. Diagnosis

4.1 Stakeholder analysis

The issue of Fair Trade mainly exists between governments and companies, because of the difference in

perspectives on how international trade should be dealt with (see Figure 1). Companies are profit

oriented and want to be able to import resources and export goods with the least amount of trade

barriers like import taxes or restrictions. Free Trade would be the optimal solution for multinationals or

companies that are oriented on international trade. This way all goods and recourses can be distributed

to any country in the world without additional expenses. National governments do not always see this

as the optimal solution and are usually not willing to open their borders to all forms of trade.

Governments want to protect the local companies from excessive competition from abroad. Local

companies need this kind of protection, because in many cases multinationals or foreign producers can

produce the same goods under lower costs. This can lead to economic disadvantages for the local

companies.

Figure 1: Position of the issue in the triangle

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The WTO, who consists of 153 member states, manages these trade barriers and every participating

government has a representative. WTO rules are resulting from negotiations between governments,

ratified by members’ parliaments and are made in consensus between the participating members.

Representatives of countries bargain about how the trade barriers should be. (WTO, 2009). In many

cases, local companies benefit from the trade barriers. However, in for example the agricultural sector

the trade barriers only make it more difficult for small companies, especially originating from developing

countries, to enter the global market and to make a decent profit. Farmers in developing countries are

often exploited, because further on in the supply chain, middlemen or multinationals need to pay

import taxes for the goods they bought from these farmers and all still want to maintain their marginal

profits. This can be seen in the overall profit discrepancy in the supply chain , as only a small part of the

profit that is made on the end products is distributed to them (Parrish, et al., 2005).

Fair Trade tries to deal with this exact problem. The underlying thought is that if the farmers in these

developing countries are compensated enough for their work, they have a bigger chance of escaping the

poverty trap. To elaborate more on this issue, one needs to understand who the most important

stakeholders are and what their role is in enhancing or demoting Fair Trade. Stakeholders are divided

into three main groups: state, market and civil society and are elaborated on below.

The rise of Fair Trade was established without any form of governmental interaction. Fair Trade started

as a small niche within the global market to supply those consumers that had the opinion that not

enough development aid was given (Becchetti & Huybrechts, 2008). The fact that in the beginning

governments had no influence on the rise in demand on Fair Trade products does not imply that they

are not part of the issue, since trade barriers or boundaries are setup by governments. The WTO can be

seen as the most influential organization as a part of the Fair Trade issue, as it is in fact the only

regulatory body for international trade. They do not hold executive power by themselves, but do have

the possibility to give incentives to the member states to lower their trade barriers. Many of the least

developed countries are part of the WTO, but not all the countries in the world are member states. This

is a great disadvantage of the organization, as some of these excluded countries have no voice on the

decisions made in the context of international trade. There are is some criticism regarding the WTO,

most of these are legitimacy and transparency related. The major countries (most developed countries)

are getting the most favorable treatment when it comes to the decision making process. Resulting the

less developed countries as the “underdog”, while they could be the ones benefitting the most. Another

issue is the transparency, of lack off in this case. A lot of the meetings where decisions are being made,

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are initially informal meetings, who is attending, when and the place is often unknown to the public,

until more concrete implementation is being presented to the public. (TWN, 1999)

Multinationals, middlemen, distributors, processors and retailers are the main stakeholders from out

the market sector. They are all part of the global supply chain that makes international trade possible

and in addition makes Fair Trade possible. Many of these stakeholders have a choice to whether or not

to participate in a Fair Trade supply chain. Multinational Enterprises, for instance Sara Lee, made the

decision to implement some Fair Trade products to their product lines (Renard, 2002). Others, like some

middlemen, are just after profit and want to buy products or resources for the least amount of money

and sell them with the highest amount of profit. Supermarkets or other retailers can choose to have no

Fair Trade products at all, or next to the regular products have some Fair Trade products or solely sell

Fair Trade products. World shops are an example of retailers that only have Fair Trade products in their

product lines. In most cases, this has something to do with the demand on these products.

Within civil society, consumers can be seen as one the most important stakeholders regarding to the Fair

Trade issue. Fair Trade labeling organizations are trying to reach and improve consumer awareness and

with the consumers buying power, they can change the global market (Renard, 2002). The farmers in the

developing countries are in this case part of the civil society as well. These farmers are part of the global

supply chain, but often they are not part of an organization. Individually, these farmers are trying to

survive, rather than making a profit. Furthermore, the economic and political globalization, with its

effects of social exclusion and ecological destruction, has brought a range of new stakeholders on the

stage that could put more pressure on the issue, for example “green” activists, anarchists, unions and

other social organizations (Renard, 2002). These new stakeholders are brought together by the

introduction of the NGOs that have the goal to enhance Fair Trade. Another organization is FINE, which

a forum that brings together four international movements that support Fair Trade. (Audebrand &

Pauchant, 2009) Certified labelling organizations such as Max Havelaar and TransFair are all part of the

umbrella NGO, which is the FLO. This regulated the issue of to who and when it is possible to label

certain products as “Fair Trade products” (Hira & Ferrie, 2006).The second one, IFAT, brings together

producers and buyers, this organization consists of approximately 110 producers and 50 buyers from all

over the world. European world shops are part of an umbrella organization called NEWS!. It acts as an

over viewing organization for European shops that predominately sell Fair Trade products. And EFTA is

an association that has 12 members within 9 European countries. These members consist of importing

organizations (Moorre, 2004). Next to the international movements that are part of FINE, there are two

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more notable NGOs that deal with the issue of Fair Trade. The first one is the FTF, this is an association

of Fair Trade wholesalers, retailers and producers. In 2000 it had 84 members and foremost they are

active in the U.S. and Canada to promote the TransFair label. The second is the WFTO, it is an

organization to which companies that have a 100% Fair Trade strategy can apply for being a member.

The NGOs are brought forward by the civil society to promote Fair Trade and to be able to have a

collective influence on the world market and governments. The most influential stakeholders are part of

the market and state, but civil society has the power to create alternatives to solve these problems.

4.2 Issue Life Cycle

When we look at the typical stakeholder positions along the Issue Life Cycle stages (Van Tulder, 2008),

there are a few matters to be considered. To begin with, the issue Fair Trade is in our opinion in the

third stage of the cycle, namely the development stage. To make this assumption clear, we will take a

short view on the role of the different actors in this stage.

Within this stage, companies can be seen in their behavior as active: they are working on the

development of alternative brands, labels or codes. This phenomenon of development can be seen

concerning the Fair Trade issue, for example with company cases like Douwe Egberts (‘boerenkoffie’)

and the Jacobs company (‘Café Condor’), who developed an alternative product in order to improve

their own image (Renard, 2002). But also the example of Tony’s Chocolonely, who established an

alternative chocolate brand in an (active) way to inform consumers about the social benefits of Fair

Trade (Raijmans, 2009). The active behavior of companies in the development stage involves

formulation and implementation of codes of conduct, trademarks and certification schemes (Van Tulder,

2008). Moreover, the statement can be made, that the actors in our example are in focus of the positive

reputation mechanism, perhaps due to a strong vis-à-vis relationship with NGOs or forced by other civil

society movements. In the development stage of the Issue Life Cycle, the focus on a positive reputation

towards an issue is to be considered as more important than the negative reputation mechanism, which

occurs often in the birth of an issue (Van Tulder, 2008). There is a well-known example of the coffee

company Starbucks, that has decided to sell Fair Trade coffee and subsequently work with other NGOs,

after a confrontation with activists about human rights (Argenti, 2004).

Besides the role of companies, we can see a corresponding view on the role of NGOs, which is according

to the Issue Life Cycle to be considered as cooperative. In this view, NGOs are supporting and developing

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plans for alternatives and plea for more stringent regulation. Regarding to Fair Trade, the cooperative

form of NGOs (the umbrella bodies, like FLO, NEWS! etc.) are resembling the introduction of common

labels or so-called ‘world-shops’ (Moore, 2004). NGOs are in the process of developing certification

schemes/labels, and the birth of new Fair Trade organizations (as well as their membership to umbrella

organizations) is rising.

Aside from the typical stakeholder position in the cycle, we also want to make a remark on the

dynamism of the interaction in order to make a brief explanation on the identification and assigning on

the responsibilities of the different actors within the issue. Fair Trade can be viewed as an interface

issue, where the most involved actors do not have sole responsibility for creating the problem and thus

an interactive approach is required between the different spheres in order to establish a solution (Van

Tulder, 2006). Regarding to Fair Trade, the most involved actors that will have to cooperate in order to

bring the issue to the mature stage, are the state and the market, whereas the civil society (NGOs) can

only help in triggering the problem and could try to develop alternatives. This interface between the

different actors obviously results in challenges to solve the problem of Fair Trade. For instance, some of

the elements of the success of Fair Trade are showing aspects of good practice in conventional chains,

including longer-term relations between producer and buyer, transfer of knowledge between the two

and fair trading practices, which all will eventually result in trust (Blowfield, 2003). Governments and

firms will need to collaborate and participate to make sure that the issue of Fair Trade will develop itself

to the maturity stage, in where companies and government will go even to a pro-active role. NGOs on

their behalf, are trying to plea for more stringent regulation by the formulation of the earlier mentioned

certification schemes and labels.

At the same time the business sector is changing through the arrival of new small entrants, that are

based on ideals instead of market power, in order to identify and serve the critical consumer (for

example: Tony's Chocolonely). Consumers are, as stated before, more critical than before and have

much more access to market/product information. Furthermore, we can see a challenge in the

cooperation between NGOs and firms and/or small producers. When producers and/or firms are

attracted to be part of an umbrella organization, they will need to fulfill some necessary requirements of

standards to 'earn' their membership. Some of these standards involve topics like transparency, child

labor, working conditions, discrimination, environment and price payment (WFTO, 2007). This could

mean that firms will need to adapt or change their mission and working environment in order to find the

way to long-standing relationships and partnerships.

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4.3 Triple-E

In this part, we will try to make a correlation between the Triple-E model in consideration with Fair

Trade. The Triple-E model consists of efficiency, ethics and effectiveness, where there is a tension or

trade-off between the disciplines efficiency and ethics. The solution for this conflict should be sought in

the posing question of effectiveness (Van Tulder and Van der Zwart, 2006 - 153).

As Blowfield (2003) described, “Ethical Trade involves that a company at one part of the supply chain

(typically a brand owner, retailer or other Western company with a public profile) takes responsibility

for the social and/or environmental performance at other stages of the chain, especially for that of

primary producers”. This is a significant change from the traditional practices, as it means that a

company should take responsibility for the behavior of other parts in the supply chain, even if it does

not have any long-term formal liability for the results of that behavior.

Fair Trade involves more than just following codes of conduct and meeting the right labor standards. As

the IFAT states on their website: "Fair Trade organizations specifically seek to work in partnership with

marginalized and disadvantaged groups to try and help them overcome the serious barriers they face in

finding markets. Therefore, while a Fair Trade business must be ethical, an ethical business is not

necessarily Fair Trade" (IFAT. 2009)

The issue of Fair Trade depends for a large part on the protectionism that governments implement to

secure their local markets. To manage trade efficiently, the member states of the WTO set standard

operational conducts that are used to create a healthy trade interface (Moorre, 2004). Protectionism

does not promote a global market that is needed to make Fair Trade mainstream. In this case the

idealistic, but most efficient way to deal with trade is Free Trade. Without trade barriers, export from

developing countries to western countries would be easier to manage. Free Trade might lead to more

profitable supply chains from farmer to retailer. With Free Trade, small local firms and farmers will have

a greater chance of entering the global market and compete with companies in the western world. This

could lead to better chances for escaping the poverty trap. In addition, the quality of products might

increase, since the end consumer can decide what products are best and will buy those products.

(Chase, 2003)

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A combination between Free Trade and Ethical Trade would be the most effective way to deal with the

issue of Fair Trade. The disadvantages Free Trade could have for national firms or farmers in developing

countries would be compensated by an Ethical way of trading. Every company that is part of the supply

chain takes responsibility over social and environmental performance in other stages of the chain, while

borders are open for trade and barriers do not exist for international trade. In the Triple-E model, we

call this type of trade: “Frethic Trade”, the optimal solution for combining Free and Ethic Trade.

At this point Fair Trade generally is a combination between efficient, ethical and effective measures

taken to implement an initiative for the global market. Fair Trade can be efficient on the long run,

because it might help farmers in developing countries to alleviate from poverty.

It is related to Free Trade, because in the end markets are opened for farmers in the least developed

countries. On the other hand, some criticism about the effectiveness is in place here. Compensating

more to farmers without them putting more effort into the production process might decrease the

quality of the products (Reed,2008). Fair Trade is for a significant part dependent on Ethical Trade as

well, because partnerships between disadvantaged groups and firms that already operate in the global

market are made. Firms in the supply chain basically take responsibility over the disadvantages the

farmers have for being able to enter into the global market space. (Blowfield, 2003)

Figure 2: Triple-E model

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Figure 3: Tension, State vs. Civil Society

Whether or not Fair Trade will lead to an effective solution to overcome the contradicting opinions of

civil society, state and market as a whole, can only be experienced in the long run. In our opinion, it has

major possibilities to change the global market and it could lead to a more effective trade mechanism on

global scale.

4.4 Tensions

Issues are caused by tensions between certain stakeholders. Different ideas or initiatives from out civil

society, the market or states can lead to these tensions. Tensions can be categorized in four main

groups: Tension as a Puzzle, Tension as a Trade-off, Tension as a Dilemma and Tension as a Paradox (van

Tulder, 2009). In this part we will explain what the most important tensions are regarding the issue of

Fair Trade. The tensions will be categorized in one of the four main groups and furthermore we will

discuss the possibilities on how the tension could evolve in the future.

Free Trade and Ethical Trade are both based on an

idealistic view. Governments are creating trade

barriers to avoid the world economy to be completely

in the hands of market forces, because that would

lead to economic disadvantages and unfair

competition, which is not ethical. Ethical Trade is a

view based on the ideas of civil society, in this case

NGOs, to provide a fair chance for everyone. This can

lead to positive discrimination in some cases and can

have an effect on competition (Blowfield, 2003). With less Free Trade, more Ethical Trade will be needed

to give excluded parties a better position in the supply chain. The tension between state influences (Free

Trade) and the demand of civil society (Ethical Trade) therefore is a Trade-off.

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Figure 4: Tension, State vs. Market

On the long term, a combination between opening borders for trade and social responsibility within the

supply chains might be possible. There is room for more intervention from out the civil society, through

the voice of NGOs, with state regulations. This could be the key to eliminate this tension. Second, a

tension between state and market exists. The tension lies with the fact that Free Trade will only be

beneficial to enhance Fair Trade to certain extend. Fair Trade is an initiative introduced by the market

that makes it possible for farmers in the least

developed countries to participate on the global

market. Governments can have influence on the

competitive position of these farmers as well. By

removing trade barriers it will be made possible

for everyone to export and import without

additional expenses. This can only have a positive

influence on Fair Trade to a certain extend,

because small firms and more specific farmers in

developing countries can more easily be exploited

as well. The more economic variables are influencing markets in general, the faster resources get

depleted. (Damian & Graz, 2001)

In addition, Free Trade does not exist at this point and in a way, it is preventing the least developed

countries from being exploited. To come up with an optimal solution a mixture between Free Trade and

Fair Trade is needed. The tension therefore is a Puzzle in which one optimal solution point must be

searched for. At this time, that optimal point has not yet been found. Later on we will discuss how

market forces can give incentives to states to come closer to the solution.

The third and last tension we will discuss is the tension between civil society and the market. NGOs and

farmers have interests to gain a more ethical trading strategy. Fair Trade has some elements in common

with Ethical Trade, but this does not always count the other way around. (IFAT, 2009)

18

Figure 5: Tension, Civil Society vs. Market The stakes are different for civil society and the

market. Stakeholders within the market sphere are

profit oriented. They did introduce Fair Trade

products, which are funded on an ethical base, but

still they make profit out of this. (Renard, 2002) Civil

society wants to create chances of survival for even

the weakest and poorest. Profit is not one of their

main goals. The relationship or tension between

Ethical and Fair Trade therefore is not linear. It does

count that when the trade gets more fair, more ethics are involved too, where technically spoken the

ethics cannot get below a certain point. On the long run by making Fair Trade mainstream, ethics could

get dominant.

19

5. Design/Solution

5.1 Civil society

In our view on civil society, we have mentioned the importance of NGOs, probably the front

representative of the civil society sphere regarding Fair Trade. They have evolved from the typical role

of a watchdog (monitoring the issue and keeping it on the agenda in order to create a way to start the

discussion) to a cooperative role, demonstrated by their forming of standards and certifications

nowadays. These umbrella organizations need to collaborate intensively to coordinate and complement

their activities to reduce/avoid duplication and/or competition, which could harden the way of solving

the issue (Renard, 2002). In other words, they need to focus on consistency and similarity about their

view on Fair Trade, because this collective practice results into a network and produces identity.

Moreover, since we are dealing with an issue that involves dependency of actors from different spheres,

NGOs should invest in the development of long-term partnerships. This could be reached by lobbying

with the different partners for a set of collective principles, because NGOs do not have to power to

change laws and treaties. A good example of leadership that participates in this cooperative role can be

seen at the success pioneer organization the Max Havelaar Foundation, the world’s first labeling

organization. Its policy strives towards fair relations worldwide, sustainable production, trade and

consumption and they are cooperating with producers, companies and consumers (RSM, 2008). They

are aiming at a continuous improvement in the labeling process of products, and have a variety of

partnerships with NGOs, corporations and governments.

Besides this cooperative attitude towards the other actors, they could also help in triggering the issue to

raise consumer awareness. As stated before, one example is the development of ‘world shops’ where

only Fair Trade products are sold. Max Havelaar for instance, launches several campaigns to enlarge the

visibility of their trademark. Awaking the consumer awareness is important, especially in correlation

with the perception gap noticed before, since they will need an external stimulus to even start thinking

about buying Fair Trade products. The challenge is to raise connectivity between farmers and

consumers. This relates to the importance of another stakeholder within civil society for solving the

issue, namely consumers and their buying power. This power has increased enormous the past years. As

Pitt et al. (2002) concluded in their research regarding the function of the internet, consumers have

access to accurate, recent, unbiased information and they can easily talk and band together with other

20

customers. Next to this, they can talk to firms in a public domain and heighten the awareness of firms

shortcomings (Pitt, et al., 2002).

Next to the NGOs and the consumers, we will consider the farmers and small producers in their way of

solving the issue. Farm workers themselves do not have a large standing ground against, for instance

labor conditions and product price. Due to the fact that they lack resources, do not have access to credit

and they are not fully aware of market information. The forming of a union or social movement could

fortify their bargaining position. However, the success of a movement of the farmers is highly depended

on outside support. Often, the farmers are not capable/are not in the possession of the right skills to

create and stabilize such movement and they might encounter resistance from governments. This

powerlessness could be overridden, if the political environment contributes resources (Jenkins &

Perrow, 1977).

Concluded, the civil society can address the issue but it highly depended on the actors from the other

spheres to produce a sustainable solution.

5.2 The Market

A starting view on the overall issue from the Markets’ perspective is that trade is and has always been

the greater engine for international development. Through export trade millions of people, for example

in China were able to pull themselves out of poverty. It is an exceptional power for development and is

something that can be facilitated by the day-to-day business of trading (RSM, 2008). This however does

not mean that companies are not responsible on how the trade is conducted. The question that

companies should ask themselves is how to maximize from trade? And at the same time have a positive

impact on their direct surroundings. This is where Fair Trade comes into play, several (clear) reasons for

firms on why to increase Fair Trade are explained briefly below.

• To start with the most obviously one; it is a business sense to provide their customers with

choice and variation, which is the focal point of their business: selling products.

• Next to this, is the simple matter of reputation, which increases the customer’s loyalty and leads

to repeated business.

• Another reason is to guarantee a steady supply for in the long term. By means of investing in

their suppliers, they increase long-term relations in their supply chain. Furthermore, by

providing their suppliers with a fair price, the suppliers could not only have means to survive but

make a profit as well. Which, as a result, the producers then could use to invest in their

21

business. The firms have this opportunity as well; they could invest in stronger businesses and

better living situations in their surroundings. To have a healthy pool of local workers and

efficient plants.

• Usually the brand owners and retailers are the core firms in the global supply chain, and this is

why the power lies in the downstream (near the end users) of the supply chain. To increase

their efficiency they should improve their supply chain, for example decreasing layers of the

supply chain by excluding the intermediates and (as stated in the previous point) invest in the

upper parts (suppliers) of the supply chain. This closer and direct means of trade will improve

the overall efficiency of the supply chain, which will eventually lead to lower costs.

According to Strong (1997) the issue of the getting the consumer to buy Fair Trade products is “the

barrier of consumer recognition of the human element of the ecological marketing agenda”. He then

categorizes it problem into three issues of (1) communication, (2) commitment and (3) getting it on the

shelves, which should be seen as the input for fundamental managerial implications.

1. Communication of the human element of sustainability

The difficulty with Fair Trade is that there is no match between the liability of the issue and its solution,

unlike other social problems where there is for example a direct link between the responsible firm, say

NIKE and the problem of child labor. From a managerial perspective, this is seen as lack of customer

knowledge of Fair Trade. To increase customer understanding, firms should focus on consumer

awareness by means of brand building and the diffusion of information about Fair Trade products (A.J.

Nicholls 2002).

2. Problems of consumer commitment to fair trade

Fair Trade products are usually sold at a higher price and the added value of these products are not that

tangible as for instance that of biological products. There is a problem of ascertaining direct gains

resulting from Fair Trade to the customers. Consumers want to see a connection between the extra

income received by the producers and the added price they pay. It is therefore crucial to clearly link

products to the producer and transmit the central aim of development and support of producers (A.J.

Nicholls 2002). Therefore, the marketing focus of these products should be on a “making a difference”

perception. With the purpose of locking in customers loyalty, to build brand commitment and to

increase repeated buying behaviors. The “making a difference” marketing position should highlight on

22

single producers story and stress other added values of Fair Trade goods, for instance the high quality of

Ethiopian coffee, “green” banana’s or the slave free chocolate.

3. Getting fair trade products on to the supermarket shelves

According to A.J. Nicholls (2002) the reason that there are a relative small percentage of Fair Trade

products in the supermarkets is due to a limited range of fairly traded products that is offered to

customers. Due to this limited offer it hard to acquire the mainstream customers. The way that Fair

Trade products are being sourced at the moment is thus product driven (as in the case of coffee, thee,

bananas etc.) Obviously there is a need for a greater range of Fair Trade products, the market should

come with new product developments. But to reach the mainstream market the Fair Trade production

should be more consumers driven.

Let’s take a look at Starbucks, which is the largest producer of coffee in the world, with over 16,000

stores in 49 different countries (www.starbucks.com ) and can be seen as the leader in the coffee

market. In 2000, after much protest of pressure groups has Starbucks initiated a line of Fair Trade

products 3. According to Starbucks, an increase from 4.8 million pounds in 2004 to 11.5 million pounds

in 2005 in purchases of Fair Traded coffee has made them the largest buyer of Certified Fair Trade coffee

in the USA. However, although the might be one of the largest buyers of Certified Fair Trade coffee, only

approximately 6 percent of their coffee was certified as Fair Trade (The Star, 2007). This in return

triggered al sorts of reaction from the civil society and pressure groups about their Fair Trade image, to

further increase their purchases of Fair Traded products.

Only recently has Starbucks come with new initiatives, that from September 2009 all of their espresso-

based beverages in the UK and Ireland will be 100% Fair Trade. Which will according to The Fairtrade

Foundation increase the amount of Fair Trade Certified coffee sold in the UK and Ireland by 18% this

year. Starbucks also plans to expand this concept in the upcoming year, at all of their locations in Europe

with FLO as a partner (The Fairtrade Foundation,2009). This commitment will help contribute

approximately 2.5 million pounds to small-scale farmers. Another partnership that Starbucks has set up

with the FLO is the Starbucks™ Shared Planet™ together Conservation International (CI) and the African

Wildlife Foundation (AWF). Their focus here is on providing farmers access to credit, contribute to

sustainable development and improving coffee quality and profitability.

23

5.3 Government

Fair Trade can be identified as an international issue, which makes it a far more complex issue if it was

only to be controlled within borders. When we take a look at the stake of the governments in the issue

of Fair Trade, we can divide them in two parts. The state-governments (of both the developed countries

that are seen as the market and the developing countries who are producing the Fair Trade products)

and the interstate governments, represented by the WTO in the eye of trade.

It being an issue that needs to be solved on an international level, this brings extra difficult dimensions

to the issue.

1. Increasing bargaining dynamics due to larger regulatory voids

2. Increase importance of rivalry

3. Increased complexity of the issue

Due to the size and distribution of the problem among the hundreds of governments that are a

stakeholder, in the issue, it creates a lack of legal bodies that have the ability to create grounded,

objective and legitimate agreements between affected and affecting countries. The fact that we are

dealing with so many different stakeholders and all trying to manifest their own national and

geographical interest with their own view on this issue in different social and cultural context, makes it a

very difficult issue.

5.3.1 State-governance

As explained in the previous chapter, state governments have introduced trade barriers in order to

protect and maintain the competitive advantage of the national companies and national interest. The

developed countries are the ones who are actually benefitting the most from these barriers. They keep

companies who want to export their products or services to a market that has potential out of their

borders. Unless they are able to overcome the barriers, which then again is most easily done by

established MNE (usually originating from another developed country) who have the capabilities and the

resources do pay for these barriers.

An example of a trade barrier that implies the agricultural sector is the subsidies that are being given to

farmers in the developed countries by their national governments (and in the case of the EU,

intergovernmental governments). By giving these subsidies, farmers are able to sell their products at an

artificial low price, which then has a downward effect on the global market price of the specific

24

agricultural good. Farmers in developing countries who do not have these subsidies are not able to

produce these same products for that same price and therefore are now struggling to maintain their

existence. Now why would giving subsidies in one industry be such a problem? The reason is that the

majority of the people living in the developing countries are trying to survive on this particular industry.

And with this false competition, they are being pushed down in the poverty trap.

The US and the EU have previously lowered some of their tariffs regarding particular goods, such as

sugar and cotton. (Times Online. 2006) This is a good example of what might be part of the solution to

create a more mainstream market for Fair Trade product. This way many more small producers will be

able to enter the markets of the particular developing countries.

Fair trade fits perfectly into the context of social responsibilities, CSR is at this point a well-established

concept, carried out in different ways by most organizations. Governments could do that same thing on

a national lever, creating national social responsibility. Like in the corporate world, one of the difficulties

on the issue of social responsibility is that there are no ways of measuring, no set standards, which on its

turn is comparing apples to pears. It is similar to financial standards in the old days, people can measure

and report in the way that it looks best for the involving party. This is where the need for an

intergovernmental body with legislative powers is required.

5.3.2 International governance

With state governments protecting their own national interest there is a need for an overruling

institution that can protect the interest of the global markets, at a level that all countries can benefit.

For Fair Trade to be able to become a full mainstream accepted concept it will need an international

framework that reduces import barriers and tariffs that are currently in use. An issue that has been

talked about during the WTO’s Doha rounds, in which the topic of opening markets and lowering trade

barriers are centre of discussion. In the past 5 years, little of what has been set out in the rounds has

been set in progress. Most of this can be blamed on the richer and emerging countries who want to

protect their own markets.

25

With the increasing globalization and MNE operating on large scales in many different markets the

poorest countries are fall further behind when it comes to trading opportunities and prosperity

outlooks. The WTO should take greater responsibility and accountability in this issue. It should give them

the proper incentive or “hand-out” to them to be able to compete on the international markets. (Oxfam

America, 2009) Here lies a clear role for the WTO concerning the governmental approaches towards Fair

Trade. The WTO could for example introduce a new framework in which import barriers and tariffs for

the least developed countries will be eliminated. (Times Online, 2006) This way, the upcoming BRIC

countries, which at this moment are seen as a big threat by the developed countries, will less benefit

from these eliminations of trade barriers and tariffs than underdeveloped countries.

26

6. Implementation

By analyzing trends, identifying the most influential stakeholders, pointing out the position of the issue

regarding Fair Trade is in the Issue Life Cycle and elaborating the most important tensions between the

different spheres, we described the importance of making Fair Trade mainstream.

In the following chapter, two case studies will be analyzed to describe what initiatives for making Fair

Trade mainstream are implemented by different stakeholders, and examples are given on how

partnerships can lead to a sustainable corporate strategy. Furthermore, the possibility for codes of

conduct and the arenas of leadership within the market of Fair Trade products will be explored. The UK

market in specific will be used as an example for emphasizing the success of Fair Trade companies,

because the UK has the biggest market for Fair Trade products in Europe (Raynolds, et al., 2007).

Cafédirect was launched in 1991 as a joint venture of four different ATOs in the UK, following the Max

Havelaar idea of using direct trade links between different parties and wanted to change their solidarity

attitude into Fair Trade (Tallontire, 2000). These ATOs are Oxfam Trading, Equal Exchange, Traidcraft

and Twin Trading. Because Twin Trading is responsible for dealing with producers and defining

partnerships, the case study focuses on the relationship between Twin Trading and KNCU. KNCU

(Kilimanjaro Native Co-operation Union) is a secondary level cooperative union representing around 90

cooperatives in the Kilimanjaro region of Tanzania. So, this study is giving an example of the

development of a long-term partnership between civil society (Twin Trading) and the market (KNCU)

and it can be seen as an interesting ‘ sustainable corporate story’, that involves benefits and challenges

of partnership .

Different initiatives are designed in the partnership between Twin Trading and the KNCU. In the

beginning stage of the partnership, Twin organized a conference for small-scale producers, in order to

get information on the issues that the farmers were dealing with and what they could mean for each

other. This was the sole initiative from Twin and it has created a platform from where both parties could

start work on the quality of the long-term relationship. Soon after, Twin and KNCU together developed

the Export Development Programme (EDP), that aimed to develop the export capacity of KNCU and raise

the marketing awareness of the producers trough experience with international marketing trends. The

partnership has also stimulated the successful initiative of producer participation in the decision-making

27

process with the management of the companies/brands. Cafédirect has organized meetings with

producers to discuss about topics like supply issues, market trends and marketing strategies (Tallontire,

2000).

All these emerged activities are representing critical success factors for the development of

partnerships. Some of these factors include the involvement of primary stakeholders, the adoption of

multi-benefit objectives and the transfer of technology and knowledge (van Tulder, 2009).

Next to these initiatives, there are several interesting codes of conduct agreed on in the negotiations

between Twin and KNCU. For example, the price paid to producers is based on a minimum price with a

supplement of a ten per cent premium on market price. Furthermore, the relationship must not be

shorter than one crop cycle, which is an important aspect of a long-term relationship. This raises the

need for development and will take the threat away of partners leaving the scene when they have

earned the aimed profit. In other words, the actors are bound for the long-term.

Concluded from the view on the initiatives and the codes of conduct, it can be said that the relationship

between these actors is not only based on Fair Trade, but also on the development of both parties. The

actor that possesses the knowledge (Twin Trading) is taking the role of a consultant in giving support

and advice. Inspired by the Max Havelaar principles, the actors are trying to create a sustainable long-

term relationship, which eventually could lead to entering the commercial markets. On the other hand,

the producers are getting a more important role in the process of management decisions and they are

being involved in discussions to get more information and awareness of business trends.

In “Alliances and Networks: Creating Success in the UK Fair Trade Market” Davies (2009) describes the

influences of organizational relationships and business networks on successful adjustment of Fair Trade

companies in mature markets. By conducting three case studies and doing extensive industry interviews,

he has found qualitative proof for the positive relationship between alliances and networks in

mainstreaming Fair Trade. Next to partnerships, the importance of new initiatives taken by players in

the market is explained plus the study tells a sustainable corporate story of two companies that were

able to penetrate the market with Fair Trade products.

The significant growth of Fair Trade in the UK is closely related to the formation and maintenance of

networks. The relationships that Fair Trade companies have with Fair Trade institutions and journalists

created wide press coverage throughout the UK. Partnerships with multinationals had an impact on

gaining shelf space for Fair Trade products even in condensed markets in which multinationals have a

28

large market share in (coffee, chocolate). In many cases the markets for Fair Trade products have a

monopolistic nature, this kind of market failures can be overcome by partnerships (van Tulder, 2008).

According to Davies (2009), the initiative to form partnerships between different stakeholders has lead

to successful market penetration, as in the case of Day and Cafédirect. Day penetrated the chocolate

market by co-operating with Twin Trading for efficient supply chain management, with The Body Shop

for their great marketing expertise and Kuapa Kokoo who is producer of cocoa. Day and Cafédirect use

the same strategy to enter markets with high entry-barriers. Through partnerships with special

distributors Day and Cafédirect ensured distribution to independent retailers, that otherwise were

impossible to reach. As MNEs such as Mars and Nestlé have established trade agreements with retail

firms to exclude these shops from not selling competing products.

The case study of Day and Cafédirect shows that Fair Trade companies can have a leadership role in

opening up trade barriers and introducing Fair Trade products to the mainstream by setting up

partnerships. In the work of Davies (2009) three factors are taken into consideration in order to lead the

initiatives of partnerships to sustainable corporate success. First, a suitable partner needs to be found,

the partner needs to possess competencies the Fair Trade companies do not have internally. Second,

the partners need to be used efficiently, because often the partners do not have any association with

the market that Fair Trade companies are active in. Third, partner managing is an important factor for

creating a sustainable partnership. The trade-off between focusing on the core business within Fair

Trade companies and reaching out to a common goal together with partners in terms of effort should

efficiently be managed. In “Partnership for Development”, van Tulder (2008) explains similar success

factors. According to van Tulder (2008) partnership design, partnership commitment and partnership

relations are required for efficiently managing partnerships.

The case studies show concrete examples of leadership amongst Fair Trade companies in the UK. Davies

(2009) claims that without the forming and maintaining of networks and partnerships the significant rise

in supply and demand for Fair Trade products would not have occurred.

29

7. Evaluation

Many stakeholders and many different perspectives and opinions make the issue of Fair Trade broad

and difficult to point out exactly. Stakeholders within governments, civil society and the market have

contradicting standpoints on how to deal with the issue. The main goal to resolve the issue is to make

opportunities available for farmers in the least developed countries by enabling them to participate in

the global market. By including these farmers in the global supply chain and ensuring a Fair Trade

environment, Fair Trade products must become mainstream to help resolve the issue. The introduced

initiatives from out the market and civil society, raise awareness on the issue and their efforts are the

first steps to making Fair Trade mainstream. NGOs, the representative organizations of the civil society,

are using their informational power to bring together producers and buyers and are monitoring current

developments in Fair Trade markets. Governments have the power to change or remove trade barriers

to make it able for farmers from developing countries to export their products in larger amounts.

Together with stakeholders from out the market products can be produced on a Fair Trade basis and

end up on the shelves of retail stores. In this section the major initiatives taken by the different

stakeholders will be discussed and it will be analyzed whether or not these initiatives are sufficient to

resolve the existing issue.

The globalization effects and the fact that actors from all over the world are involved when it comes to

Fair Trade, requires change. Looking at the Cafédirect case study, change in the nature of relationships

and change in from bureaucratic growth into liberalization of the market has brought the KNCU both

opportunities and threats. By liberalization, producers can export their products and this will increase

‘value added’. However, this also results in many competing buyers and because of the years of

bureaucratic growth, the KNCU finds it difficult to provide an effective and profitable service to its

members. This market situation of the KNCU can be related to our stated tension of a puzzle between

the market and government. (Tallontire, 2000) This exactly is the reason for the WTO to establish trade

barriers, opening borders for trade can have negative affects for national firms and local farmers.

The solution for making Fair Trade mainstream should not be solely searched for in terms of

government interactions related to trade. Both the case studies that Davies (2009) and Tallontire (2000)

have conducted, show proof of partnerships and networking as a solution to avoid trade barriers as a

30

significant obstacle for Fair Trade. Especially in the UK, the rise in supply and demand of Fair Trade

products could be seen as proof for implementations of partnerships in the Fair Trade industry as a

sufficient option. In the UK the reach of Fair Trade products is rather wide, the UK has the biggest

market share in Fair Trade products of Europe, in some other countries the impact of Fair Trade still is

small. Globally partnerships in the Fair Trade industry therefore are not efficient enough yet.

Tallontire (2000) is making a point of criticism towards partnerships. When it comes to contributing to

strategy or the development aspects of the agreement, the KNCU is not an active participant. They see

Fair Trade in terms of the markets that are offered by Fair Trade, rather than a process of learning and

self-help (Tallontire, 2000). This is being demonstrated by the absence of any KNCU representative at

the Max Havelaar Fair Trade meeting in Kampala, 1996. This problem of goal-alignment between

different organizations contains a substantial conflict of interest and makes it very difficult to manage

the actual partnership (van Tulder, 2009).

Triggering the need for networking to learn from others and the awareness of responsibilities

concerning philosophy or benefits, are matters to be seen as future challenges for the small-scale

producers and unions. Within this case, the critical success factors for developing a partnership are not

well established in ‘partner commitments’, which involves clarity of roles, responsibilities, goals,

commitment of core competencies and application of the same rigor and discipline (van Tulder, 2009).

The partnership between actors from different spheres and different countries possesses side problems.

When we are referring to the need of cooperation and relationships in the process of making Fair Trade

mainstream, these problems will need some necessary attention. First,

there could be a commitment problem concerning development: different producer organizations could

be involved in a different extent when it comes to strategic development. The KNCU for instance, is a

bureaucratic organization that is unused to managing change and has therefore a different level of

commitment to development, when compared to earning profit on the short-term for instance. Their

focus is active on trade aspects, but inactive on development aspects.

Next to this, there could arise a responsibility-gap in relation to achieving the goal of a partnership.

Looking at the Cafédirect case, the success of the KNCU is considered in terms of profit generated in

short term, whereas Twin’s success is referring to the long term development of commercial contracts

that are not reliant on Fair Trade channels. Second, there is the threat that an NGO can be viewed by the

producers as a resource to get information from, instead of a partner. Furthermore, companies might

31

use partnerships to create marketing successes and less as an advantage in corporate strategy. Reiber

(2004) claims that MNEs adopt Fair Trade products into their product lines for reputation and “social

greenwashing” purposes. Partnerships can also be used to penetrate markets in order to exploit them

after the companies have access to the resources. To create sustainable partnerships, short-term

investments need to be taken into consideration by all involved parties to gain a long-term advantage

(Hertz, 2008).

As for the market goes, companies should not just implement Fair Traded products as a small part of

their product arrangement, as research has shown that there are several valid reasons to conduct in Fair

Trade, with associated ways on how to help to make it mainstream. Firms should try to conduct their

business and produce their products as Fair-Traded as possible. This of course cannot be done over-

night, and should be seen as gradual process. Starbucks can be seen as a great example; Starbucks

started to provide their coffee 100% Free Trade in the UK and Ireland and is planning to implement this

across Europe. It should however not end here; their next step should be to implement this in all of their

stores across the world. From the market perspective, the next issue that arises is how to lower the

prices for Fair Trade products to compete with non Fair Traded products.

At this point the issue of Fair Trade is in the development phase of the Issue Life Cycle. Only by

implementation of initiatives by multiple players in the field of Fair Trade, the issue can gain more public

interest and reach the maturity phase of the cycle (van Tulder & van der Zwart, 2006). Many initiatives

are taken as we speak, but the full effect of each initiative individually cannot be measured correctly. It

is certain that the market for Fair Trade products is rising (Raynolds, et al., 2007) and partnerships

between companies and NGOs contributed to that by reaching out to consumers (Tallontire, 2000;

Davies, 2009). Liberalization of markets does only benefit farmers in developing countries to a certain

extend, thus Free Trade is not the optimal solution (Tallontire, 2000; Reed, 2008; Blowfield, 2003;

Damian & Graz, 2001). With correctly implementing a Fair Trade strategy, supply chains will be more

ethical, which in the end meets the goal in creating more opportunities for farmers in developing

countries.

32

Further research is needed to discover the possibilities for more partnerships between stakeholders

from out the market and state or civil society and state. The role of the state in making Fair Trade

mainstream through negotiations at the WTO can be elaborated more. The WTO has regulative power,

but up till now no initiatives are shown that uses this power to address the issue of Fair Trade. In future

studies the focus could be more related to the influence at governmental level and the possibilities the

WTO has to make Fair Trade more mainstream.

33

8. Conclusion

Fair Trade is the key to include farmers in developing countries in the global market and a healthy Fair

Trade environment contributes to alleviating poverty more efficiently then development aid. Creating an

effective Fair Trade supply chain is manageable, but takes significant effort from each of the involved

players. Recent studies show a growth of Fair Trade market share in many countries, especially in

western Europe and the US. Multiple initiatives from different stakeholder groups have a positive

influence on raising consumer awareness. Partnerships are proven to be a sustainable option to

penetrate in existing markets with Fair Trade products, as in the UK. In order to make Fair Trade

mainstream, a long road is still ahead. There is room for stakeholders to work together more thoroughly

and create networks of trade. However, partnerships have some downsides to it, such as aligning the

discrepancies between the partners to reach a common goal, but when executed right, Fair Trade

partnerships can overcome many of the current issues. Market forces can put more pressure on

governments with the goal to increase cooperation between state and other stakeholders concerning

Fair Trade. The civil society must keep the Fair Trade issue on the international agenda, and where the

NGOs serve as the watch-dog over the credibility of the whole Fair Trade market. Fair Trade will only

become mainstream over time, if networks and partnerships are created throughout the whole supply

chain and governments will be involved actively.

34

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Books

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Zeitalter der Information”. 6th edition Sankt Augustin

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Second Max Havelaar Lecture. Rotterdam, 05-11-2008.

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Issue Life Cycle

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pp.17-32

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corporate responsibility and globalization (London: Routledge)

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globalization. 1st

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Oxfam America. 2004. WTO Development fails, but make Fair Trade campaign continue. [Online]

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2009) Available at:

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(Updated 19 march 2009) Available at:

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Presentations

Raijmans, E., 2009. Presentation of the company Tony’s Chocolonely. Launch World Investment Report at

Erasmus University Rotterdam 17-09-2009, Rotterdam

38

Appendix

Appendix 1. Influences on the growth of Fair Trade (A. J. Nicholls 2002)

39

Appendix 2: Long waves, basic innovations and main application areas (Nefiodow, 2006)