THE IMPACT OF FAIR TRADE FOR POOR FARMERS Ruerd Ruben Centre for International Development Issues (CIDIN) – Radboud University Nijmegen.

THE IMPACT OF FAIR TRADEFOR POOR FARMERS

Ruerd Ruben

Centre for International Development Issues

(CIDIN) – Radboud University Nijmegen

The Development Impact of Fair Trade


Key Issues

• Un-biased impact assessment

• Control for self-selection & unobserved heterogeneity

• Micro-level + Regional analysis

• Conventional, Organic & Fair Trade production

• Life cycle effects

• Cross-country comparison

• Smallholders & plantation production


Fair Trade

• 1988: Introduction Max Havelaar label in coffee- Minimum price guarantee (set by FLO)

- Fairtrade Premium

- Environmental + Labour conditions

- Market shares: 3-8 %; annual growth 15-20%

• 1996 : Fair trade fruit; first bananas,followed by mango, pineapple & citrus. - Turnover Euro

62 mln (2006)

- Annual growth 40%, Net profit 1.5%

- Market share: 5-15 %

• 2006 : €1.6 billion, 570 organizations 900.000 families


Impact Assessment

• Impact assessment at producers’ level

- Direct Income & welfare effects

- Expenditure effects

- Organizational impact

- Gender & Environment

• Externalities & Spillovers:

- Other household activities

- Regional level (prices, wages, FT premium)

- Risk attitudes


Difference – in – Difference

Pre - treatment

A: treatment state

B: No - treatment state

C: treatment state

E: Situation bef ore program

F: situation before program

Post - treatment

D: No - treatment state

Treatment Group

Comparison Group


Research Approach

1. Focus on bananas

2. Field samples in 4 countries

3. FT (treatment) & non-FT farmers (control)

4. Organic & Conventional production

1. Questionnaire & indicators

2. Propensity Score Matching (common support)

3. Difference analysis


Sample

• Bananas in Northern Peru (N = 200)

- Organic FT

- Organic non-FT

- Conventional non-FT


Field Sites in Peru

Bananas in Piura

(Valle de Chira)

http://www.repebancjperu.org/actividades/logos/grupo_hualtaco.gif


Data

• Farm-household characteristics

• banana production (yield, prices)

• Other (non)agricultural activities

• Expenditure system (consumption)

• Wealth (assets), savings & investments

• Farmers’ Organisation

• Sustainable practices


Attitudes & Perceptions

• Past & Future life perspectives

• Organizational identification

• Organizational strength

• Organizational satisfaction

• Gender decision domains (male / female / joint)

• Willingness to invest

• Risk perceptions


Key Relationships

Household Characteristics(family size, age, gender, education, dependency rate, housing, (fe)male decision domains, etc)

Wealth & Assets(income, income composition, expenditures, durable capital, loans & savings, cattle, house improvements)

Production & Trade(yield, sales and prices by season; land & labour productivity, profits, etc)

Perceptions: fair trade welfare risk attitudes

Membership of organisationsIdentificationSatisfactionForce index

Farm characteristics(farm size, tenancy, plot quality, land-attached investments, sustainable practices, etc)


Matching

0.5

11.

52

2.5

Den

sity

0 .2 .4 .6 .8 1Propensity Score

ControlTreated

Before Matching

0.5

11.

52

Den

sity

0 .2 .4 .6 .8Propensity Score

ControlTreated

After Matching

ON-CS • OFF-CS• TotalFT 42 6 48Organic 97 6 103FT 39 9 48Conventional 30 6 36

Number of observations on Common Support


Results bananas (I): Fair Trade vs. Organic

n.s00Other crops/non-farm income

n.s00Past/future perceptions

*-+Organizational Satisfaction

n.s00Housing investmentsn.s00Land investments

*-+Risk Acceptancen.s00Female-based decisions

**-+Organizational Force

**-++Credit Access**-+Durable Assets

n.s+-Expenditures

n.s00Crop price**-++Crop yield**-+Net Household Income

sign non-FT FT Indicator


Results bananas (II): Fair Trade vs. Conventional

(*)+-Other crops/non-farm income

n.s00Past/future perceptions

*-+Organizational Satisfaction

n.s00Housing investmentsn.s00Land investments

**-++Risk Acceptance*-+Male-based decisions

*- +Organizational Force

**-++Credit Access*-+Durable Assets

*-+Expenditures

***-+Crop pricen.s+-Crop yield*0+Net Household Income

sign non-FT FT Indicator


FT Premium

• Community Investments

• Social Services: Education, Health, Child Care

• Infrastructure: Roads, Electricity, Water

• Upgrading: Banana renovation, microcredit


Summary findings

- higher income due to:

- household durables + credit access effect

- stronger organisation

- more risk acceptance

higer yield (compared to organic)

higher price (compared to conventional)


Externalities

0

10

20

30

40

50

60

7019

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

FT market share

Regional prices


Policy Implications

• Modest direct FT income effects

• Strong assets & credit-access effect (wealth)

• Clear behavioral changes (risk, gender, organization)

• Large externalities (through prices, wages)

• Limited spillovers

• FT ownership feelings

• Strong regional multipliers

Banana market (13,000,000 tonnes)

• 85,000; 11 years (0,6%)

• 270,000; 8 years (2,1%)

• 600,000; 3-5 years (4,6%)

• 12,130,000 (92,7%)

OKÉ

Roundtable for Responsible Bananas

Fairtrade/organic

CSR

Without sustainability program



Outlook & Challenges

• Mainstreaming FT

FT emphasis not only on prices, more on volume

• Broadstreaming FT

FT premium generates substantial externalities

• Deepening FT

Co-ownership & Empowerment

• Multiplying FT

Local linkages with finance & community organizations


Thanks for your attention

THE IMPACT OF FAIR TRADE FOR POOR FARMERS Ruerd Ruben Centre for International Development Issues (CIDIN) – Radboud University Nijmegen.

Documents

fair trade fruit

organic ftorganic

countriesft treatment

treatment statee

treatment stateb

treatment statec

female decision domains

common supportresults