Is the Fair Trade Market Extensive?


Initiatives trying to get consumers to pay attention to the treatment of farmers and workers producing what they buy are at least several decades old. One story traces the idea as far back as Quaker abolitionists promoting markets for slavery-free cotton and fruit in the late 18th century. Certification and labeling of fair trade products, which allowed them to be sold by mainstream retailers, began in 1988 in the Netherlands with the Max Havelaar Foundation label for coffee.
Activists in several other countries followed that example and several national labeling initiatives joined together a decade later to create the Fair-trade Labeling Organization (FLO). The creation of a Fair-trade label resulted in remarkable growth in the demand for certified coffee and, later, bananas and other products, though their market shares are still small in most countries. Global sales of Fair-trade certified goods were more than six times larger in 2011 than just seven years earlier, and Fair-trade coffee in particular is going mainstream.
Starbucks sold a fifth of all Fair-trade coffee in the United States in 2010 and Dunkin Donuts uses Fair-trade coffee in all their espresso drinks. Certified coffee is even available in Wal-Mart’s Sam’s Clubs. Still, the total value of all Fair-trade certified products sold globally in 2011 was just USD seven billion, a drop in the bucket of the global commodity trade.
Despite the small overall size of the market, rapid growth is raising concerns among some advocates that fair trade is losing its meaning. They wonder whether mainstreaming is compatible with basic principles of fair trade that emphasize the role of smallholder producers and the empowerment of those producers through the creation of a fundamentally changed relationship between producers and buyers. These critics point out that for most mainstream retailers offering fair trade goods, those sales are only a small share of the total and they suspect that the commitment to fair trade is just window dressing.
Paul Rice, the head of Fair Trade USA, wants to keep expanding the market to help more producers and workers and believes the scope for that is limited if mainstream retailers are not more involved. But further expansion in mainstream markets also raises the dilemma for retailers of how to respond to consumer demand for fair trade goods without implying that the conventional goods they offer are unfair. This concern could be why it is often easier to find information about fair trade on some retailers’ websites than in their stores.
Fair trade sales are still tiny overall, but they are growing rapidly and have significant market shares in a few cases, for bananas in Switzerland itis roughly half and for coffee in the United Kingdom itis about a fifth. The range of products available is also much broader now and includes tea, cocoa, a variety of fruits and vegetables, wine, and cotton, though mostly in far smaller quantities than coffee and bananas.
In 2011, the estimated retail value of Fair-trade goods sold was nearly USD Seven billion. In 2009-10, the latest year for which data is available, producer organizations reported selling 600,000 metric tons of certified products worth more than USD 700 million dollars, mostly coffee and bananas. About half of the sales were in the United States and United Kingdom, with the UK market being the largest by far. While these figures are up sharply from the early 2000s, producer revenues are still less than onepercent of the 2011 value of global exports of bananas, cocoa beans, coffee, and cane sugar.
In 2011, bananas accounted for about half the volume of Fair-trade goods sold, while nearly half the value was accounted for by coffee. Sugar has grown rapidly and the volumeof Fair-trade certified sugar sold surpassed that for coffee in 2009, but it is a bulky product and accounts for a small share of the value of sales. Cocoa accounts for about ninepercent of the market by volume and 11 percent by value, while fresh fruit (other than bananas), tea, cotton, honey, spices, cotton, and other minor products account for the remainder.
Given that the product distribution is concentrated so heavily in coffee and bananas, it is no surprise that Latin America is the location of just over half of the certified producer organizations. By 2011, however, Africa was home to almost a third of the producer organization certified for Fair-trade, while fewer than one in five were in Asia. Mexico, until recently, was home to more certified producer organizations than any other country, mostly for coffee, but it has been surpassed by Peru, Colombia, India, and Kenya, with South Africa now just behind Mexico. All the other countries with as many as 20 certified producer organizations were in Latin America.
African certified producer organizations contain just over half of all individual members globally (mostly hired workers on plantations), but reap only about a quarter of sales. Latin America has only a quarter of farmers and workers in the Fair-trade system but, with its dominance in fair-trade coffee, it earns nearly 70 percent of global sales revenues.  
On the consumption side, Europe and the United States were home to more than 80 percent of the traders and retailers licensed to use the Fair-trade mark in 2006, and these destinations account for virtually all sales.  Despite its much smaller size, the United Kingdom surpassed the United States as the largest Fair-trade market in 2008, reaching a level of USD two billion in 2011, some USD 34 per person. Per capita consumption is highest in Ireland and Switzerland, where citizens bought an average of USD 50 worth of Fair-trade goods in 2011.
The number of producer organizations certified as eligible to sell Fair-trade goods grew five-fold, while the volume sold grew sharply in the mid-2000s and then slowed duringthe recession. Over that period, bananas and coffee grew ten-fold and seven fold, respectively, and other products grew collectively by 500 percent over just five years, albeit from a much lower base.  
To put this growth in context, the FLO says that certified producer organizations represented a bit over one million producers and workers in 2011 and that benefits reached as many sixmillion people. But, like sales, this is a drop in the bucket relative to the estimated 25 million coffee producers (70 percent of them with less than 10 hectares), and 14 million plantation workers and 2.5 million smallholders producing cocoa.  
Coffee was the only product licensed to use the Fair-trade mark in the United States for the first three years after Transfair USA was launched in 1998. Tea and cocoa were introduced in 2001 and 2002, respectively, bananas in 2004, rice and sugar in 2005, and vanilla in 2006. But even with the introduction of several new products and the weight differential in favor of bananas, coffee continues to account for more than half of the US Fair-trade market even in volume terms.
In sum, there are consumers willing to pay for fair trade goods and producers willing to bear the costs of certification, which suggests they gain from it, though not necessarily in the ways usually thought. Smallholders are not held to rigorous labor standards, except for forced and child labor, and many may see relatively limited direct benefits because not all their output is sold on fair trade terms. But producers can still gain from increased information and competition provided by fair trade buyers, and from assistance in improving quality and linking to international markets.