Fair Trade Principles: No 3. Fair Trading Practices
The third principle that fair trade companies follow is about implementing fair trade practices with suppliers and customers.
1. Not maximising profits at the producer’s expense
We have to take the social, economic and environmental well-being of our marginalized small producers into account in our dealing and not maximize profit at the expense of our producers. We have all heard about the problem with milk producers or farmers in the UK who are squeezed to sell their produce at less than cost price to some supermarkets. Public outrage ensued. People went to the defence of the farmers because it was grossly unfair for a producer to make a loss when the next person in the supply chain is making big profits. Producers in far away countries often suffer this fate. Fair trade can make an impact and protect the producers. Fair trading practices means the buyer should pay a fair price (the 4th principle of fair trade) because that is better for the producer’s economic and social well-being. The flipside of this means that it is very difficult to deliver cheap or bargain products for customers.
2. Delivering on contracts
Fair trade organisations must be responsible and professional in meeting our commitments in a timely manner, such as respecting contracts and delivering products on time and to the desired quality and specifications. I have to confess that this is very difficult for a fair trade importer to do. Due to the nature of dealing with underprivileged and underdeveloped producers as well as broken infrastructure, inequalities and corruption in producer countries, it is extremely difficult to get quality and timely production and to deliver on time, every time, to the customer. There will be times when goods are delayed or messed up. Despite best efforts, things will go wrong. Ask any fair trade importer.
3. Advance payments to suppliers
The next aspect of fair trading practices involves payment. Recognizing the financial disadvantages producers face, we must ensure orders are paid on receipt of documents. For handicraft items, an interest free pre-payment of at least 50 % should made on request. Did you know that? Little Trove pays 50% to 100% advances to our producers upon making an order. 3 months later, the goods are ready. 1 month later it arrives in the UK. Then out to the shops. Then retailers want 30 days credit. And then they do not pay on time. The seller has to spend more time and money chasing payment. So by this stage it will be some 6 – 7 months since we last saw our money (assuming the goods sold straightaway). Unless it’s raining money, everyone should appreciate the tremendous financial pressures a fair trade importer faces. I would also boldly say that any retailer who claims they support fair trade is signing up to this principle and should therefore pay upfront for the goods.
4. Fair resolution of supply problems
Buyers must consult with suppliers before canceling or rejecting orders. Where orders are cancelled through no fault of producers or suppliers, adequate compensation is guaranteed for work already done. Little Trove has never cancelled an order with a supplier, even when we’ve regretted our ordering or sales have reduced drastically for those products. It just didn’t seem fair, so we’ve honoured those contracts.
Also, suppliers and producers must consult with buyers if there is a problem with delivery, and ensure compensation is provided when delivered quantities and qualities do not match those invoiced. We have often encountered problems with consignments from India such as production batches not matching samples, missing labels, spelling errors on labels, short quantity and wrong colours. Even with well-established WFTO Indian producers. We’ve never received compensation for those errors. Instead we have spent extra unpaid hours fixing the problem in the UK. I have many friends to thank for helping me.
5. Long term relationships
Fair trade organisations must strive to maintain long term relationships based on solidarity, trust and mutual respect. Every year, we use the same artisans to produce new lines for us, rather than shopping around to change producers.
We must maintain effective communication with our trading partners. This is difficult when dealing with rural places with rural producers who don’t speak English. I (Ramona) have to invent ways to communicate with the different producers in a way that each of them understands. Reverse psychology with one proud producer so he thinks it’s his idea, buttering up another so he doesn’t mind a woman giving him instructions, speaking Indonesian to our Balinese producer and letting the producers use Facebook and Whatsapp to communicate easily from their phones. With world time differences, I have to accommodate phone messages at strange hours.
6. No unfair competition
Fair trade companies should work together to increase the volume of trade and income to producers. We should avoid unfair competition like for example, underpricing to drive out competitors. Furthermore, we must avoid duplicating the designs of patterns of other organisations without permission. This would be intellectual property infringement but many producers don’t realise this. In India, I see it happen all the time. When producers lack innovation skills, they copy designs. I was faced with that once. I put my lawyer hat on and lectured the producer on intellectual property rights!
Founder & Managing Director