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Fair prices through price transparency?
Fair trade for all

Sylvain Coiplet



Consumers are interested to make a quick bargain. However, this can be at the expense of the producers. It is particularly obvious with constantly sinking incomes of farmers in developing countries. Here consumers reacted and increasingly choose Fair Trade products. There are farmers in Europe as well. Why should they not also profit from the Fair Trade?

Fair Trade principles

With given time some criteria emerged that are partially more encompassing than one would at first assume.

  • Incomes ensuring existence?
    Prices are to a large extent specified independently from world market prices.
  • Long-term contracts?
    With this security investments are also more easily possible.
  • Prepayments?
    In most cases orders are prepaid up to 50%.
  • No intermediate trade?
    Contracts are made directly by the manufacturers with the farmers or their cooperatives.

What was introduced thereby can best be called a gradual transition from the pure free-market economy to a contract economy. Different to the trusts, the higher prices for the producers are not obtained behind the back of the consumers, but in mutual agreement.

Learning from success

Fair Trade is particularly successful in Switzerland. Here a prominent supermarket chain obtains two digit market shares with Fair Trade products (orange juice 10 per cent, coffee 16 per cent, bananas 21 per cent). Those enterprises which do not want to pull along yet, get under pressure. In the meantime, there is a quite detailed justification available on the Swiss website of Nescafé, why the company does not offer Fair Trade products and also does not intend to introduce them in the future. On the corresponding German website one looks in vain for even the shortest reference to the topic. The reason is simple. In Germany, despite the more than ten times larger population, the absolute numbers of Fair Trade in Switzerland are not even reached!

Thus the world would have to learn a bit from Switzerland. In addition, Switzerland could learn from itself. The question is, how the success of Fair Trade with the developing countries can be transferred to the trade with the domestic agriculture.

If one accounts for the many farm subsidies, most European farmers would not be much better off than their colleagues in the developing countries. However, the problem with such national subsidies is that they still create larger problems on another side, as those, which they pretend to solve. In times of globalization, each mixture of national and economic interests has catastrophic consequences. Such hybrid institutions like the World Trade Organization, where political representatives negotiate about economic questions such as subsidies and tariffs, led to the escalation of the tensions between north and south. An alternative to that is a regional fair trade, where price problems between producers and consumers - which means within the economy - is solved by agreement. Then it does not play a role who has weapons of precision or mass destruction. In Germany, a quite witty name was found for the global Fair Trade: TransFair. How would it be, if we would speak about RegioFair as an addition of it?

Increasing price transparency

However, the name RegioFair alone will not be able to manage everything. European consumers would spontaneously link developing countries to poverty. They would imagine the situation of their own agriculture by far less dramatic. Here they do not so easily see the necessity not to look alone on their own interest. What if the numbers were be simply presented to them?

We consumers are already masters in price comparison. However, so far we can compare only end prices. It would be completely different, if apart from the price it was indicated which portion of it a farmer, the processing plant, which wholesale and the retail trade receive. With such a price transparency it can be examined quickly whether or not money was saved coincidentally at the expense of domestic farmers. That would be consumer education.

This is exactly important for the biological and/or biodynamic agriculture, which gradually finds access to the supermarkets. Not all brands - for instance Demeter in Switzerland - insist that they pay the same price as the other dealers, and they can sell more cheaply only by taking a smaller margin. Others can be pressurized more likely.

One can therefore imagine that the supermarkets are against price transparency. Still less enthusiastic are the small shops however, which are still strongly represented exactly in the bio business. In order to survive despite their small turnover, they must set prices higher. They would not be excited, if - for example on the packing - it is made visible that the high prices are in particular due to their quite high margins. So far, this has kept Demeter away from taking the initiative for more price transparency, although this is endorsed by both the Demeter consumers and the Demeter farmers alike - for fear of being boycotted by the small shops.

There are more prospects with bio supermarkets. Thus the German bio supermarket chain alnatura brought itself recently to publish an article by the author about price transparency in its customer magazine. It will still need some articles and many customer inquiries, until first decisive steps are made in this direction. However, a regional fair trade would have clearly better chances then.

Is the devil in the intermediate trade?

What keeps Nescafé away from taking part in the global fair trade? The most comprehensible argument probably is, that the large company rather places its bets on brokers who bring "as much goods together that transport and manufacturing pay off" instead of the direct purchase from coffee planters. If the prices sink due to overproduction, it is only forgotten too quickly that actually the trade causes price reduction. The brokers are then considered to be exploiters.

If on the part of Nescafé it is maintained that fixed prices contribute to multi-cultivation and overproduction, one asks oneself whether the people really know what they talk about. This is correct regarding nationally guaranteed prices, as it is known from the European agricultural policy. However, with the additional charge from the fair trade, the producers feel responsibility. Many invest it again, in order to reduce their dependence from coffee, and to produce coffee only if the prices are sufficiently high. Therefore they achieve more flexibility to configure the market actively.

Sylvain Coiplet

Translated into English by Matthias Hammelehle