How Do Ethical and Fair Trade Schemes Affect Poor Producers? Do We Need a New ‘Good for Development’ Label?

According to this article, agricultural exports, crucial for growth and employment in many developing countries, could be labelled to describe their development impact in order to inform consumers who want to use their purchasing power to help people in economically poor countries lift themselves out of poverty. This could contribute to ethical trade initiatives. The article describes results of a study which reviewed a range of existing ethical standards and labels, examining their objectives, scope, and scale of coverage, their impact on participating farmers, compliance costs, and broader development impacts.


The study included examining schemes which have the intent of providing a better deal to producers (e.g. fair trade), improving environmental and labour standards (e.g. Rainforest Alliance), and encouraging good agricultural practices (e.g. GlobalGAP). It looked at various certifications associated with the schemes, the cost of complying with certification standards, and the constraints to growth imposed by the costs of complying with certification standards. According to the study, "the focus of ethical and fair trade labelling schemes on improving standards gives the impression that other developing country exports are 'unethical' or 'unfair'. This is reflected in market research showing that consumers are concerned about the potential exploitation of developing country producers. However, most conventional agricultural exports are of significant benefit to developing country producers and represent a crucial source of income, jobs, and export earnings, though they may not be explicitly recognised as such, as they may not qualify for any of the existing ethical labelling schemes."


The findings provide support of a labelling scheme proposed by Overseas Development Institute (ODI) called the 'Good for Development' label, which would indicate the positive development impacts associated with a product purchase (rather than impose standards for certification).


The study concludes that: "Providing this information in the form of a bronze, silver or gold 'Good for Development' label would enable consumers to compare at a glance, the development contribution made by competing suppliers and products at the point of purchase. It could, therefore, contribute to increased sales for those companies making the greatest efforts to improve their development contribution, boosting their profitability as well as their reputation, and helping to offset any associated costs. By turning development performance into a competitive advantage for the retailer/importer, it could increase the willingness of companies to invest the necessary time and resources to make genuine improvements in their development impact."