Brexit an opportunity for Fairtrade

Abhik is the son of a cotton farmer. He lives in south India with his wife Paval, daughter Prisha who is studying at secondary school, and his mother Riya. Abhik was taught everything about farming by his late father. He worked in the cotton fields ever since he was a little boy. Abhik’s family was well off and he had the opportunity to go to college and learn more about agriculture and business. Abhik now manages the farm.

Image credit: Fairtrade.org

How can Brexit benefit producers?

Michael Gidney, Fairtrade Foundation CEO, says ‘this could be an opportunity to make a promise to developing countries that they will be able to access UK markets in an equivalent or better way than in the EU’. Gidley is uncertain what will happen to UK trade after Brexit but they will focus on protecting farmers in developing countries ensuring that whatever is negotiated is fair.

The UK public is rallying interest in farmers and workers in developing countries to be protected. More than 23,000 people have signed a petition from the Fairtrade Foundation urging the Prime Minister to pledge that any future trade deals and business policies will continue to tackle global poverty and deliver a fair deal to farmers and workers in developing countries.

The Fair Trade Advocacy Office has called for the reform of trade rules to ensure greater market access under fair trade conditions to help lift people out of poverty. We hope the UK will continue to support this movement after Brexit to help producers sell their products and at least receive the cost of production.

Abhik had trouble generating the same revenues as his father. He knew that the economy was not like it used to be; however, as with things as they were he was concerned about losing the farm. Middlemen were putting downward pressure on prices, and he hardly received the cost of production. He understood things could not go on as they were, and needed to come up with a new plan to support his family.

What can the UK government do?

We would like to see the government push through three reforms: update its investment policy, implement tough impact assessments and guarantee quota-free access to the UK for ethically produced goods in developing nations.

The UK investment policy has not been kept up to date and the UK government must take a new approach to investment that better balances investor rights with responsibilities to contribute to sustainable development. Companies that have their production facilities in developing countries need to ensure that they are working in an ethical manner and are transparent when exporting goods from the host country to the home country. Britain passed anti-slavery legislation, the Modern Slavery Act, in 2015. This legislation encourages companies to disclose what they are doing to make sure their supply chains are free from slavery. It is important for the UK government to strengthen monitoring companies that operate in developing countries to guarantee that they are fully transparent and do not exploit vulnerable people. By ensuring the safety of their employees, the UK government can at least be certain that any goods imported from a developing nation was produced in an ethical manner and can be labelled as a fair trade good.

The UK government should put in place tougher impact assessments which consider the impact on developing countries and the UK’s ability to meet its Sustainable Development Goals. Market based solutions can be introduced, such as labelling whether a product is free from slavery, produced without impoverishing farmers, or produced without excessive environmental impact. Companies that cannot prove their goods are free from such basic requirements should carry warning labels. Consumers then have more relevant information at the time of purchase to decide whether they want to support retailers that will not confirm to basic human and environmental rights.

Guaranteed market access could help provide quota-free access to the UK for imports from developing nations that allows producers to import goods without the imposition of taxes. However, this should only be available to those companies that can show that their products are slavery-free, have paid fairly down the supply chain, and are environmentally friendly.

A few months later, Abhik approached the Fairtrade Foundation. He made a trade deal with the foundation so it uses his farm as one of their cotton producers. Abhik’s work became more complex as he had to establish and manage an internal control system to ensure compliance with Fairtrade standards, train his staff to meet these standards, and monitor projects funded by the Fairtrade premium. But the fair and stable prices he receives in exchange more than makes up for this additional burden.

What are the risks?

Theresa May said that ‘there are severe risks but also real opportunities’. There is interest in creating new deals with developing countries ‘but if it overshadows the need to negotiate good deals that would be a step backwards’. Gigney has warned of ‘profound consequences’ for poor farmers around the world once the UK leaves the EU. Though the UK may look to develop strong ties with developing nations, and indeed PM May’s recent trip to India has shown the UK’s willingness to trade with such nations, the notion of fair trade usually takes a back seat to national interests. India requires greater access for Indians to come to the UK as part of any new trade pact, something which would rankle with many of the UK’s Leavers. They don’t want to see EU migrants replaced by Indian migrants. Also, certain classes of goods are likely to be off limits. The West is particularly protective of its farmers, even though they are a small part of the economy. Developing nations, where farming is an important sector in the economy, are increasingly aggressive about pushing for open access in this market where anti-dumping rules will not apply. This again is highly unlikely. With these types of challenges, it would be difficult to see how fair trade become a priority.

Since Brexit, the pound has fallen sharply, which exasperates the trade situation. Imports have become more expensive, which is likely to stoke inflation. In these circumstances, the electorate could feel marginalized as their spending power diminishes, so handing out attractive deals to developing countries may be difficult. A silver lining may be that exports will look cheap. However, the long term situation may be very different. Once Brexit becomes a reality and the UK leaves the EU, which would give investors more certainty over the types of deals that the UK has been able to achieve, the pound is likely to recover. At that point, deals reached where exports rose and imports were expensive may be reversed. With such uncertainty, the UK government will likely want some flexibility in its negotiating position. Again, fair trade would have to take a back seat.

Since Abhik joined the Fairtrade Foundation, he noticed that his farm has become more environmentally friendly. His cotton is produced in a sustainable way and his employees receive adequate pay and respect working at the farm. He was able to raise his sales, yet there is still a long way to go.

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About the Author

Valentina is passionate in expressing her voice through her writing, which she hopes will have a social impact. She grew up as a third culture kid that always fought for what is right and achieved a BA Hons. in International Business in order to understand the business world more clearly and leave a possible mark on society. Currently she is working for an ethical start-up company called Chanzez. Chanzez has been set up to provide people with chances whether they are people who design clothes, people who work to make clothes or people who want to be able to buy ethically produced clothes.

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