What The Label Can And Cannot Buy

AThe first fair trade label was launched in the Netherlands in 1988, and the promise printed on it has changed very little since: pay a guaranteed minimum price for a crop, add a social premium on top, and the poverty of the people who grow it will ease. By 2024 the largest certifiers between them listed some 1.9 million farmers and workers across seventy-three countries, and the labels had become ordinary furniture in European supermarkets. What has changed is the volume of evidence. Certification generates paperwork — audits, price records, membership lists — and for two decades economists have been feeding that paperwork into the kind of studies that were impossible when the movement began. The results have not settled the argument. Supporters read them as confirmation that a guaranteed floor works; opponents read the same tables as evidence that most of the money stops long before it reaches a farm.

BDiego Aaltonen, an agricultural economist at the Larchfield Institute for Rural Development, has spent much of her career measuring the distance between the label's promise and the household ledger. Between 2015 and 2021 her team followed 4,800 coffee-growing households in three East African countries, half of them members of certified cooperatives, recording harvest weights, sale prices and household expenditure twice a year. Certified households sold their beans for 13 per cent more per kilogram than their uncertified neighbours. Total household income, however, was only 4 per cent higher, and once the fees of membership had been deducted the difference narrowed again. Aaltonen's explanation is arithmetical rather than moral: coffee accounted for under a third of what these households earned, so even a healthy gain on one crop moved the total very little. Her conclusion pleases neither camp. The floor price does at the farm gate exactly what it claims to do, and what it does there is too small a part of a farming family's year to lift it out of poverty.

CThe premium is a separate matter, and Aaltonen has examined it separately. Unlike the minimum price, which is paid to whoever sells the beans, the social premium is transferred to the cooperative as a body and spent by vote on projects the members choose. In 2022 her group traced the premium paid to 64 cooperatives over four seasons. Where a cooperative published audited accounts and held contested elections, 71 per cent of the money could be matched to a completed project; where it did neither, the figure was 34 per cent, the remainder absorbed by administration or simply unaccounted for. The pattern held only for cooperatives above roughly 400 members: in smaller groups, governance made no measurable difference, because the sums involved were too slight to fund a project of any kind. Aaltonen is careful about the direction of the finding. Well-run cooperatives spend the premium better, she says, but nothing in her data shows that certification is what made them well run.

DAnders Røstad, a development economist at the Fenwick School of Government, accepts Aaltonen's numbers and rejects the use made of them. A certification scheme, he argues, should not be judged against the ideal of a fair price but against the buyer who would otherwise have arrived in the village — usually a travelling trader offering cash at the roadside and scales the farmer had no way of checking. Studying 210 villages in West Africa where certified cooperatives opened between 2016 and 2020, Røstad found that the price such traders offered to uncertified farmers in the same villages rose from 61 to 74 per cent of the world reference price, apparently because sellers now had somewhere else to go. Røstad volunteers two limitations. Cooperatives were not placed at random, so they may have opened where trading conditions were improving anyway; and he measured prices offered, not the quantities actually sold at them.

EThe dispute now has legislation attached to it. A European regulation in force since 2023 obliges large importers of cocoa and coffee to record the price paid at the first point of sale and to publish an annual summary. Røstad regards the reporting duty as the most useful part of the law, because it will create, for the first time, a public series of prices against which any scheme, certified or not, can be checked. Aaltonen, whose findings campaigners quote more often, is here the more doubtful of the two. Publishing the price paid at the first sale, she points out, says nothing about what becomes of the social premium once it has entered a cooperative's account. Both object to the habit, common in certifiers' publicity, of announcing the sum transferred to producers without saying what that sum was eventually spent on.

FWhat is emerging is a sorting of the question rather than a verdict on it. Where a crop is storable, exported whole and traded against a published world price — coffee, cocoa, cotton — a floor is easy to define, easy to audit and demonstrably reaches the farm gate. Where the product is perishable, sold locally or processed before it leaves the district, there is no reference price to sit above and the floor becomes a figure the certifier invents. Neither researcher believes the label can be carried into the second group without altering what it means. Both also note a difficulty neither has solved: a scheme that raises the price of a crop encourages farmers to plant more of it, which is the last thing a household dependent on a single export needs. Whether the movement's next twenty years belong to the countable crops or to the awkward ones is not a question the data can decide.