“Fair Trade USA Certified Clothing” pilot label launched

Fair Trade USA just launched its “Fair Trade Certified Clothing” pilot label declaring that “a full range of Fair Trade Certified (TM) clothing items is now available in the United States as part of our two-year pilot test of the program“.

But don’t we already have a „Fairtrade“ standard for clothing? Yes, we do: In Europe we can already buy clothes labelled as „Fairtrade Certified Cotton“. We can also buy clothes from companies that are member in a multi-stakeholder initiative that work on improving the working conditions. No we don’t: The MSI only look into the garmenting section of the chain, and the existing FLO label so far only certifies that cotton production complies with certain criteria. This way, the „Fairtrade Certified Cotton“ label has been confusing or even misleading consumers, who see the well-known FLO-label on a T-Shirt and think that the whole product is certified as „fair trade“, without considering the complexities of clothing supply chains.

This pilot project now closes the CMT gap in Fairtrade clothing. Like the existing „Fairtrade Certified Cotton“ label, this new „Fair Trade Certified Clothing“ label promises that “cotton farmers receive a guaranteed minimum price to protect them from price fluctuations as well as community investment premiums on every pound of cotton“. In addition, it guarantees „fairness“ at the CMT level. In the 13-pages paper “Obligations of CMT Facilities” Fairtrade USA defines some major and other criteria. The major criteria have to be fulfilled before a CMT unit can become certified. According to FT USA, the standard “has been augmented by best practice code provisions set by global, multi-stakeholder initiatives“. Some of the (major) criteria are very advanced:

  • 4.1 Major: The company should incorporate the Fair Trade concept into its policies or mission statement and take measures to introduce Fair Trade at all levels of the factory or cooperative.
  • 5.3 Major: Workers shall comprise a majority of members on the Fair Trade Committee and shall be elected democratically and independently of management influence. … 5.6 Major: The Fair Trade Committee is accountable to the workers and certification body for the administration and use of the Fair Trade Premium. Payment and distribution of the Premium must be transparent and verifiable.
  • 5.1 Buyers pay a Fair Trade Premium on all Fair Trade orders, to benefit all production workers. The Fair Trade Premium is a minimum of 1% and maximum of 10% of the FOB value of the order, depending on the wage level assessed in the factory. If the wages assessed meet the living wage benchmark, the Fair Trade Premium is 1%. … (THIS IS NOT A ‘MAJOR’, i.e. not mandatory for certification)
  • 7.1 Major: Freedom of association is critical to Fair Trade production. Factories must have an active workers’ organization, democratically elected, and an environment that is supportive of the creation of credible and functioning trade unions and/or worker committees. Conditions that demonstrate this positive environment may include: … (WHILE this is the standard in any social standards initiative, many have been criticizing that it often does not work. So the question is, how Fairtrade USA wants to ensure that it does work?)

At the moment only three factories in India, Costa Rica and Liberia are certified according to this standard, but others will follow. Fair Trade USA is piloting the project with some rather small companies, who fully embrace an ethical approach: Liberty & Justice, Good & Fair Clothing, HAE Now, Maggie’s Organics, Tompkins Point Apparel – while some further companies are working on the certificates.

This pilot project by Fair Trade USA is one of four different pilot projects the FLO is testing until end of 2011 in order to identify, if and how the FLO will in future embrace a Fair Trade certificate that guarantees fair clothing throughout the supply chain. While this approach has some benefits, it is also facing challenges:

  • The approach of paying a Fair Trade Premium into a bank account managed by the local Fair Trade Committee seems like very innovative, and it might be able to master the challenge of paying living wages. However, I wonder, why this is not a “major” requirement (i.e. mandatory). In addition, due to the problems regarding the payment of living wages, a really innovative standard would make transparent the wage ladders of each certified factory.
  • I wondered whether we need such a standard, as we already have multi-stakeholder initiatives and a FLO cotton standards. So where is the difference between this new standard and a FWF member that has some clothes certified according to “Fairtrade certified cotton”? One difference is surely that the FWF is a company approach and not a product approach, and there are pros & cons regarding a company vs. product approach. My fear is that a second Fairtrade label just adds to the label confusion we already have.
  • I am wondering whether it is possible to “certify” fair trade clothing. All multi-stakeholder approaches argue that improving standards is a process. Certification might be highly selective (only choosing the very good), but then it might be difficult to scale up.
  • The quality of the standard certainly depends on the quality of the certification. I was told that to minimize auditing for the producers, FT USA might accept SA 8000 certificates for some of the criteria. This, however, might be problematic due to the far spread critique of SA 8000 certification by trade unions and NGOs.
  • A product-related standard could allow companies like Aldi or Lidl (who might never become member in an MSI) embrace this FT. This can be seen as good or bad. However, I wonder whether according to the rules, such a buyer could actually comply with the standards’ demand that “buyers commit to sourcing plans that include longer-term business relationships and prices that help factories consistently uphold labor standards”. Basically, I think that this demand has to be operationalized in more detail and be made transparent in a certification – also see “Obligations of buyers“.

How are fair prices set?

My colleague, Juliane Reineke,  just published the article “Beyond a subjective theory of value and towards a ‘fair price’: an organizational perspective on Fairtrade minimum price setting” in Organization 17(5): 563-581. The abstract looks promising, but I haven’t yet read the article:

This article explores Fairtrade minimum price setting as an organizational formulation of a critical response to economic liberalism and its underlying notion of value—a subjective theory of value. The aim of the article is to show what happens if such meta-level philosophical debates on fairness and markets are lived out organizationally. This is achieved by using an ethnographic study of the price setting process of the Fairtrade Labelling Organizations. The case unpacks the complexities of defining a ‘fair’ price beyond the principle of marginal utility. I draw on French pragmatist sociology in order to decompose the political and moral constructions that underpin the organizational practices of minimum price setting. Challenging the assumption of free choice in neo-classical economics, Fairtrade redefines not only how value should be calculated, but also what it is it that should be valued and who values. This makes visible the political confrontation at the point of price determination, notably by providing a social arena for where conflicts of interest between opposing parties are played out. Once the producer enters price formation processes as a person and not only as the alienable owner of a commodity, the social, political and ecological and relations of production come to the fore that are otherwise concealed through the spontaneous market mechanism.

Juliane wrote her PhD on “Corporate Social Responsibility, Ethical Consumption, Moral Agency versus Market Rationality” at Judge Business School, Cambridge,