Fair Trade in Bangladesh: A Gateway to Equity

LightCastle Analytics Wing
February 6, 2020
Fair Trade in Bangladesh: A Gateway to Equity

Fair Trade is an institutional arrangement that ensures ethical consumption by ensuring better prices, decent working conditions, and a fairer deal for farmers and workers in developing and under-developed countries.[1]

Fair Trade products are usually sourced from developing or under-developed countries and are sold in developed countries. It works by charging a premium for its products which are distributed to the producers (farmers/workers). For example, Fair Trade charges an extra USD 0.50 per kilogram of Black Tea in the United Kingdom.[2] 

The producers have complete control over how they want to use the premium; be it to build schools or buy equipment.

Products that are sourced through Fair Trade practices are labeled so that ethical consumers can choose to buy their products and justify the premium compared to other products. Fair Trade activities are undertaken and certified by a number of organizations, but Fair Trade International and World Fair Trade Organization (WFTO) are the most notable ones.

FIGURE: Examples of Fair Trade Labels / Source: Fair Trade International

Fair Trade: The Choice of the Younger Generation

Changing Consumer Demographic

The younger demographic is increasing worldwide, and they are now a major portion of the consumer market.

US and European Union Population by Age Group
FIGURE: US and European Union Population by Age Group / Source: Statista and Worldometer

Not only is the share of the younger generation increasing, but they are also spending more than the previous generations. This indicates that their spending habits have significant importance in which products will be successful.

USD$ spent per trip by different generations
FIGURE: USD$ spent per trip by different generations / Source: Nielsen

Alignment of Fair Trade with Spending Habits of the Younger Generation

Fair Trade ensures the ethical sourcing of products, and that is exactly what the younger consumers are looking for. According to a study by Nielsen, 70% of millennial (born from 1977 to 1995) consumers in the US  are more likely to associate themselves with brands that work for a social cause.[3] Not only that, according to a global study of 30,000 consumers, 73% of millennials are willing to pay more for sustainable offerings which include factors like cruelty-free and environmentally friendly production processes.[4] 

Generation Z also has similar preferences as consumers and is more inclined to buy ethically-sourced products.[5]Thus, as consumers become more aware, the scope of Fair Trade products shall continue to increase globally.

Fair Trade: Making a Difference

Fair Trade has impacted globally in a wide array of sectors. The Fair Trade premium has contributed to improving the lives of the workers and farmers involved with the production of the products.

Contribution to attaining the Sustainable Development Goals (SDGs)

Fair Trade has made significant contributions to achieving the Sustainable Development Goals (SDGs). In the case of small-scale producer organizations like farmer cooperatives, the Fair Trade Premium has mainly contributed to achieving zero hunger.[6]

Fair Trade Premium use in relation to the UN Sustainable Development Goals (SDGs)
FIGURE: Fair Trade Premium use in relation to the UN Sustainable Development Goals (SDGs) – 2016/2017 (Small-Scale Producer Organizations) / Source: Fair Trade International

However, in the case of Hired Labour Organizations like large plantations, it is seen that the Fair Trade Premium is channeled more towards the workers and their families which has resulted in the improvement of the eight SDG goal which is Decent Work and Economic Growth. There has also been a significant contribution to Quality Education and Poverty Eradication.

Fair Trade Premium use in relation to the UN Sustainable Development Goals (SDGs)
FIGURE: Fair Trade Premium use in relation to the UN Sustainable Development Goals (SDGs) – 2016/2017 (Hired Labour Organizations) / Source: Fair Trade International

Contribution to Climate Action

Fair Trade workers are ever vigilant when it comes to adapting their production methods to the changing climate. In 2018, the Fair Trade Network of Asia and Pacific Producers (NAPP) launched climate schools for small-scale coffee organizations in Indonesia, Laos, India, and Vietnam, with the aim of eventually scaling up across the entire region.

A climate academy in Africa has reached 17,000 coffee farmers in Ethiopia and Kenya to train them to adapt to the changing climate. Similar actions have been taken in Latin America.[7]

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Contribution to Ensuring Women and Children’s Rights

Fair Trade International has completed activities to encourage women to take leadership roles. They have also formed schools to ensure a more gender-neutral society. Fair Trade International also works to reduce forced labour among children and ensure their rights are fulfilled.[7] 

Principles 5 and 6 of the World Fair Trade Organization (WFTO) are ensuring no child labor and forced labor and commitment to non-discrimination, gender equity, and freedom of association which directly contribute to these causes.[8]

Fair Trade in the Asia Pacific Region

A number of Fair Trade organizations already exist in this region and have been performing well. The products range from crops like coffee, and tea to clothing and pottery. India and Indonesia have been doing notably well.

Share of Top Five Fair Trade Premium Earning Countries 2016-2017
FIGURE: Share of Top Five Fair Trade Premium Earning Countries 2016-2017 / Source: Fair Trade International

Despite 94% of the workers in the Asia and Pacific producing Tea, the highest amount of premium is earned from coffee with India, Indonesia, and Fiji being the most notable producers.[11] This indicates that coffee is a very profitable product in Fair Trade.

Fair Trade in Asia and Pacific: Fair Trade Premium Distribution by Product 2016-2017
FIGURE: Fair Trade in Asia and Pacific: Fair Trade Premium Distribution by Product 2016-2017 / Source: Fair Trade International

Fair Trade in Bangladesh

A few Fair Trade organizations are operating in Bangladesh which include Prokritee, ECOTA Fair Trade Forum (EFTF), BaSE Bangladesh, and Grassroots. Among them, Proktitee, BaSE Bangladesh, and ECOTA are certified by the World Fair Trade Organization (WFTO), while Grassroots itself is a global Fair Trade organization.

Fair Trade products from Bangladesh usually include handicrafts of different materials like bamboo, jute, wood, cotton, etc. However, if we look at the global trends, these are not ideal products for earning a significant amount of premium which will be enough to make a difference among the producers. Thus, it is evident that Bangladesh is failing to capitalize on its Fair Trade potential. Kazi & Kazi Tea has been an exception in this regard and has attained Fair Trade Certification.[12]

Figure: Sample Fair Trade Products made in Bangladesh / Source: Prokritee, ECOTA and BaSE Bangladesh Websites

Potential Industries for Fair Trade in Bangladesh

While Bangladesh is yet to make full use of the Fair Trade concept, there is a lot of potential in this sector. A few of them have been identified.

Smallholding Tea Farming

While it is more common to farm tea in large estates in hilly regions, Bangladesh has been seeing success in smallholding tea farms as well. Smallholding tea farms are farms supporting a single family. These small farms have been gaining popularity in areas like Panchagarh where the tea is planted in areas as small as four decimal.[9] 

A major advantage of such tea farming is that it does not require hilly areas and can be done on plain land.

Since these small tea farms are undertaken by individual and low-income farmers, their tea can be exported as Fair Trade products and be used to bring positive changes in their lives.

Ready Made Garments (RMG)

The RMG industry of Bangladesh is in decline, and there is a possibility that it will be in ruins after Bangladesh’s LDC graduation.[10] However, it is not necessary that attempts to revive this industry be given up.

With the growing popularity of ethical fashion among younger consumers in the West, the RMG sector can be revived by following Fair trade regulations. This will also improve the working and living conditions of garment workers. Bangladesh has already achieved remarkable improvement in Green RMG and achieving the other Fair Trade conditions is not far from possible.

Other Crops

As seen above, the majority of the Fair Trade premiums earned by other countries are through different crops. Bangladesh already boasts a big farmer workforce, and it is very possible to utilize a portion of it to follow Fair Trade regulations.

Crops like rice, sugarcane, herbs and spices, and even coffee are grown at different scales in Bangladesh. These have significant potential in the Fair Trade market and can aid in the enhancement of the lifestyles of the farmers of Bangladesh.

The world is becoming more empathetic, and people are willing to spend more to ensure their products are not produced through exploitation. From time to time, Bangladesh has been accused of not ensuring a sustainable lifestyle for its workers and farmers. Fair Trade can eradicate that problem and help build a more equitable society.

Kidwa Arif, Trainee Consultant at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected].

WRITTEN BY: LightCastle Analytics Wing

At LightCastle, we take a data-driven approach to create opportunities for growth and impact. We consult and collaborate with development partners, the public sector, and private organizations to promote inclusive economic growth that positively changes the lives of people at scale. Being a data-driven and transparent organization, we believe in democratizing knowledge and information among the stakeholders of the economy to drive inclusive growth.

For further clarifications, contact here: [email protected]

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