Case study of Trade Aid importers. 1. Introduction

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1742-2043.htm Seeking to maintain the integrity of the fair trade model: a case study of Trade Aid importers Christina Stringer Department of Management and International Business, The University of Auckland, Auckland, New Zealand Case study of Trade Aid importers 295 Abstract Purpose The movement of profit-orientated corporations into the fair trade value chain has caused some socially orientated fair trade organizations to question the direction the movement is taking. One organization at the forefront of the debate is Trade Aid (NZ), Inc. (hereafter Trade Aid), a New Zealand based socially orientated fair trade organization actively engaged in fair trade since the 1970s. This paper seeks to evaluate how Trade Aid is seeking to reformulate fair trade s vision of empowerment and partnership constructively. Design/methodology/approach A single case study approach is undertaken to examine how a socially orientated organization is adhering to and seeking to advance fair trade values. This research draws from the global value chain literature, which analyses how industries are governed. The relational co-ordination or governance mode, which is characteristic of mutual dependency between supplier and buyer firms, is used as a framework for investigating the fair trade industry. Distinction is made between the corporate and social economy variants of the relational governance mode. Findings Trade Aid s commitment to producer groups is demonstrated through various initiatives the organization is undertaking as they work both with producer groups and corporate actors to expand the fair trade market. Trade Aid is part of a worldwide socially orientated movement seeking to reformulate the vision of fair trade. Originality/value To date the fair trade literature has largely focused on socially orientated fair trade organizations in the Northern hemisphere. This research contributes to a gap in the literature in that it examines Trade Aid and the way this organization is addressing mainstreaming. Keywords Fair trade, Socially orientated organizations, Trade Aid, Relational governance, Mainstreaming, International trade, Corporate governance, Business ethics Paper type Research paper 1. Introduction The crisis in the fair trade movement... I see as a positive crisis because now you have to rethink and you have to redo and make it a lot better (Franz VanderHoff Boersma, 2009a). The fair trade[1] movement seeks to align socially conscious consumers in developed countries with marginalized producers in less developed countries. The origins of fair trade lie in the alternative trade organization movements of post-world War II with efforts by church and charity organizations to empower marginalized groups in developing countries through the sale of handcrafts to developed country consumers (Low and Davenport, 2005; Taylor et al., 2005). A decline in handcraft sales in the late 1980s coupled with the coffee crisis provided a new stimulus for fair trade The author would like to thank the two anonymous referees for providing very insightful and constructive feedback. critical perspectives on international business Vol. 8 No. 4, 2012 pp. 295-308 q Emerald Group Publishing Limited 1742-2043 DOI 10.1108/17422041211274174

CPOIB 8,4 296 organizations to place greater emphasis on food products. The late 1980s saw the establishment of fair trade organizations and the development of the Max Havelaar labeling initiative, followed by the formation of the Fairtrade Labeling Organizations International (FLO) in 1997, and the movement of fair trade commodities into mainstream distribution channels (Low and Davenport, 2005; Renard, 2005). Global sales of fair trade products increased 28 percent between 2009 and 2010 to total an estimated e4.3 billion (FLO, 2011, p. 1). In recent years, the fair trade sector has been transformed from an obscure niche market to a globally recognized phenomenon (Murray and Raynolds, 2007, p. 5). This has resulted in concerns amongst some socially-orientated fair trade organizations about the direction that fair trade is taking. In particular, the presence of profit-orientated corporations in the fair trade value chain is seen to undermine fair trade s key values of transparency, empowerment, and partnership (Dolan, 2010). Moreover, the entry of corporations has led to competing forms of governance within the value chain. According to Jaffee (2010, p. 268), limited attention has been paid to the ways that social movement actors have responded to these threats and challenges in attempting to retain or reassert the original transformative character of the fair trade system. Using a single case study approach, this paper examines ways in which Trade Aid is seeking to ensure that the key fair trade values of transparency, empowerment and partnership are adhered to and further advanced. Trade Aid is a not-for-profit organization that operates as a development agency, importer, distributor and retailer. The organization is committed to taking a leadership role on the international stage and is a key member of the World Fair Trade Organization (WFTO (formerly IFAT)), which comprises over 450 member organizations committed to 100 percent fair trade (WFTO, 2011a). Recent mainstreaming initiatives have led Trade Aid to question the validity of the current model and as a result Trade Aid made the decision to remove the FLO labeling from their products. Trade Aid provides an interesting case study and contributes to the research gap that Tallontire (2009, p. 1009) identified wherein she stated: However, the changes at the social economy end of the governance chain spectrum has been discussed in less detail in the fair trade literature; in particular with respect to the way in which ATOs [Alternative Trading Organization] are evolving in the context of mainstreaming. A single case study design was chosen, (following Yin s (1984) case study method), because it is an appropriate strategy to accommodate how and why questions. A case study is a key way of incorporating the views of the actors (Tellis, 1997), to provide insight into an issue, a management situation or new theory (Ghauri, 2004, p. 109). While there has long been a debate over the methodological appropriateness of single or multiple case selection (e.g. Eisenhardt, 1989; Eisenhardt and Graebner, 2007; Dyer and Wilkins, 1991; Stake, 2005), I diverted from the multiple viewpoint methodology (see for example Piekkari and Welch, 2011; Eisenhardt, 1989) and to the single case study design in order to gain in-depth contextual insight into the dilemma Trade Aid is facing about the direction fair trade is taking. Fletcher and Plakoyiannaki (2011, p. 185) argue that in order to gain insight into the contextualization of case study evidence, a single case study approach may be adopted. In-depth semi-structured interviews were undertaken between 2009 and 2011 with key

representations at Trade Aid, including the General Manager (GM), the Coffee Manager (CM), and product development (PD) and marketing personnel. In addition to the interview data, I undertook a detailed analysis of primary documents including Annual Reports and Social Accounts, internal memos, correspondence, and publications. The paper is structured as follows. The next section discusses the entry of multinational corporations (MNCs) into the fair trade value chain and the broad implications around their involvement. The third section introduces the global value chain analysis as a framework for investigating modes of governance within the fair trade value chain. The fourth section examines the initiatives Trade Aid are undertaking in seeking to retain the original transformative character of the fair trade system ( Jaffee, 2010, p. 268) while at the same time engaging in mainstream markets in order to ensure greater benefits for producers. The paper concludes by looking at whether Trade Aid is faced with the choice of either remaining pure but probably marginal, or aligning with the mainstream and losing their soul (Moore, 2004, p. 83). Case study of Trade Aid importers 297 2. Entry of profit-orientated corporations into the fair trade value chain The fair trade movement, in part, gained credence through its critique of the practices of market driven firms, and in particular MNCs, in the coffee trade (Taylor et al., 2005). In the 1990s, MNCs in the coffee sector came under intense pressure from non-governmental organizations (NGOs) as their corporate behavior was seen to be linked to the fate of farmers, their declining income levels, poor working conditions and social situation, and to poverty in developing countries in general (Kolk, 2005, p. 229). The mainstreaming of fair trade coffee was initially facilitated by the introduction of the Max Havelaar label in 1988. This was followed by the emergence of a number of national initiatives and culminated with the establishment in 1997 of FLO (Renard, 2005; Reed, 2009). FLO, a private regulatory organization, is commissioned with the establishment and coordination of certification procedures, and labeling protocols that regulate enterprise engagement, trading relationships, and production processes within Fair Trade networks (Raynolds and Ngcwangu, 2010, p. 76). Since its establishment FLO has focused on food products but more recently has expanded into non-food products including flowers, soccer balls, and cotton. To date, FLO s certification has not extended to the handcraft sector, to all food commodities, or indeed to all geographical areas. Furthermore, some countries in Africa, Asia and Latin America have not yet established national labeling initiatives that enable them to sell FLO certified products (WFTO, 2011a). While the entry of profit-orientated corporations into the fair trade arena has increased the visibility and availability of fair trade products in mainstream markets, some socially-orientated fair trade organizations are concerned about this involvement (Taylor et al., 2005; Reed, 2009) as it is seen to be undermining the fair trade values. In particular, a number of MNCs have a history of particularly questionable practices in developing countries (Reed, 2009, p. 13). This section addresses four key concerns around the involvement of profit-orientated corporations in the fair trade value chain. First, the lowering of requirements by some FLO members (for example, Fair Trade USA[2] a national certifier for FLO) to allow profit-orientated corporations to enter the fair trade value chain meant that corporations can obtain FLO certification despite their purchases of fair trade coffee beans being under the 5 percent threshold

CPOIB 8,4 298 requirement ( Jaffee, 2010; Fridell, 2009). For example, Starbucks was granted the fair trade seal in exchange for designating only 1 percent of their total coffee bean purchases to fair trade; this percentage has subsequently increased to 6 percent (Jaffee and Howard, 2010). The designation of only a small percentage of purchases to fair trade by profit-oriented corporations, while promoting themselves as being a fair trader has been aptly termed fair-washing ( Jaffe, 2010; Jaffe and Howard, 2010; see also Raynolds, 2009). Second, profit-orientated corporations are not seen to be particularly committed to fair trade values and will act in the best interests of the company rather than those of marginalized producers (Fridell, 2009; Murray et al., 2006; Raynolds, 2009; Murray and Raynolds, 2007; Reed, 2009). For example, they are unlikely to undertake initiatives to empower producers and encourage them to move up the value chain (Fridell, 2007). Some will only meet FLO s minimum requirement; compared to some socially-orientated fair trade organizations, who exceed the minimum requirements in order to provide producers with the opportunity to diversify and develop other aspects of the local economy (Reed, 2009, p. 13). Third, the movement towards increased certification of plantation agriculture by FLO digresses from the original purpose of the fair trade system, which was established to support small, marginalized producers. Last, some profit-orientated corporations advocate that FLO s Fairtrade scheme should be just one of a number of certification schemes, all of which are equal, thus placing additional pressure on FLO to further lower standards (Fridell et al., 2008). Some firms are circumventing FLO through the development of in-house schemes, whereby they can pass products off as fair trade without actually paying the full costs of certification (Reed, 2009, p. 14) or alternatively are engaging with rival third-party certification bodies (Reed, 2009; Renard, 2005). Indeed, Franz VanderHoff Boersma, one of the founders of Max Havelaar, is of the opinion that those in charge of the fair trade market...often seem to focus on selling products at almost any cost. In doing so they sometimes paternalistically make decisions for the good of small producers to which small producers are totally opposed (VanderHoff Boersma, 2009b, p. 58). 3. Governance of fair trade value chains The global value chain analysis provides a useful tool for examining governance relationships between different actors within the fair trade sector and in particular what the entry of profit-orientated corporations into the fair trade value chain might mean for producers and socially-orientated fair trade organizations. Governance is identified with the form of coordination characterizing the inter-firm exchange at a specific node in the chain...the theory s emphasis is firmly on the industry or process characteristics that shape this governance relation (Gibbon et al., 2008, p. 323). Central to governance is how global leaders of a particular value chain provide opportunities for local producers to upgrade in the global market place (Giuliani et al., 2005). Of importance to the discussion in this paper is the role of governance or internal relationships among actors along fair trade value chains. In his initial work on global value chains Gereffi (1994) identified two key governance models: producer-driven and buyer-driven. The governance concept has been debated and refined several times (Clancy, 1998; Gereffi et al., 2005; Henderson et al., 2002; Humphrey and Schmitz, 2000) to now comprise five types of value chain co-ordination based on the complexity of transactions, the degree to which this

information can be codified, and the capabilities of the supplier. There is a dichotomy between open market and hierarchal governance modes, and in between lies the modular (the producer who supplies products to specifications with limited monitoring), relational (mutual dependency between supplier and buyer) and captive (small producers are dependent on processors and retailers) modes of governance (Gereffi et al., 2005). Of relevance to the fair trade value chain is the relationship based governance mode. Raynolds and Wilkinson (2007, p. 36) state that Fair Trade provides a prototype for relational chains where transactions are primarily based on trust, and go onto add Fair Trade demands a view of chain coordination that goes beyond the strategies of lead firms. Underpinning relational networks is the importance of trust and solidarity, and the balancing of power across the network (Raynolds and Wilkinson, 2007). The fair trade value chain is governed both by its formal organizational arrangements for coordination and decision-making (Taylor et al., 2005, p. 200) and distinctively its social responsibility and commitment which are shaped by strong levels of trust, obligation, partnership and shared expectations (Dolan, 2010, p. 37). Reed (2009) contends that while governance in fair trade is relational it differs significantly from the way in which Gereffi et al. (2005, p. 9) use relational governance to describe corporate dominated chains. Reed (2009) extends the relational governance definition to examine the role profit-orientated corporations play in the fair trade value chain and highlights the difference between the social economy and corporate variants of the value chain (Reed, 2009, p. 8). In so doing, he identifies four types of value chain governance coordination. The first is that of a fair trade value chain without corporate actors. The chain comprises limited profit-making nodes and focuses on dialogue and respect as well as the maximization of benefits for marginalized producers. At the other extreme is plantation production wherein whole plantations are certified and the chain dominated by profit-orientated corporations. This chain reflects a hierarchal mode of governance. While under FLO labor standards, workers have the right to decent working conditions (Smith and Barrientos, 2005), many socially-orientated fair trade organizations oppose the certification of plantations as the fair trade movement was established to help small-scale farmers gain greater equity in the international trade marketplace. In between these two governance extremes lie two other modes: corporate retail participation and fair trade with corporate licensees. The involvement of corporate actors in retail distribution networks has allowed for greater market access for fair trade products and importantly corporate actors do not significantly affect the social economy nature of the chain (Reed, 2009, p. 10). The fair trade value chain governed by corporate licensees is reflective of a modular chain where profit-orientated corporations are only likely to agree to offer fair trade products if they can do so as licensees (Reed, 2009, p. 12). Moreover, supermarkets use buying power as a means of control and often fair trade products may be treated by the supermarket as no different from any other product in a particular category (Smith and Barrientos, 2005, p. 196). At the heart of concerns about profit-orientated corporations operating in the fair trade value chain is the impact that they have on small-scale producers, and the degree to which decision making may or may not remain in the hands of the producers. Furthermore, market-driven firms often will not engage in fair trade if it means significant changes to the way they govern their value chain (Reed, 2009) and [w]hile Case study of Trade Aid importers 299

CPOIB 8,4 300 these firms are expected to uphold FLO standards in the sourcing of labeled coffee, they do not support Fair Trade norms in the majority of their sourcing or business arrangements (Raynolds, 2009, p. 1087). For example, Raynolds (2009, p. 1087) contends that For Starbucks Fair Trade is a type of coffee, not a business model, and the one certified blend is simply listed in a menu of 39 varieties. 4. Trade Aid importers Trade Aid s General Manager is increasingly concerned about the movement of profit-orientated corporations into the fair trade value chain, the practise of fair-washing, and the impact they are having on the producers whose voice and influence within the FLO system is lessening as the realities of accommodating such large companies plays out (White, 2010, p. 1). Underpinning Trade Aid s concern is the loss of transparency around the involvement of profit-orientated corporations in the fair trade value chain, it is transparency, throughout the supply chain, that allows trust to grow (Trade Aid, 2010, p. 2). Trade Aid: a brief introduction Trade Aid (NZ) Inc, a not-for-profit incorporated society, was registered in 1973 as an alternative trade organization. Today Trade Aid encompasses a development agency, an importer and distributor (Trade Aid Importers a limited liability company), and a retail arm. There are 29 Trade Aid shops throughout New Zealand; each shop is run by an independent charitable trust. In 2010, sales of products imported by Trade Aid Importers totalled NZ$34.4 million in retail value. This reflects a sharp increase from 2007, when the value of imports was NZ$13.6 million the growth in purchases is attributable to fair trade coffee sales (Interview GM, Trade Aid, 2011). Trade Aid works with 76 trading partners[3] in over 30 less-developed countries in the handcraft and commodity sectors (Interview GM, Trade Aid, 2009a; Trade Aid, b). Relationships with some of the trading partners extend back 30 years or so. In selecting partners, priority is given to the disadvantaged and vulnerable groups, that have the potential to bring about economic and social change (Trade Aid, 2008, p. 9). In particular, Trade Aid focuses on women, marginalized and indigenous groups as well as the physically and psychologically challenged. Trade Aid is a key player in the fair trade sector in New Zealand and a licensed importer of FLO certified products. In 2010, Trade Aid was the third largest importer of green coffee into New Zealand and in the specialty coffee sector, a key importer of fair trade coffee (Interview GM, Trade Aid, 2011). Imported coffee is sold under the Trade Aid brand throughout their own network of shops and in supermarkets. They also sell green coffee by the sack to roasters and supply chain manages the importing of fair trade coffee for companies under a co-importing scheme. About 50 percent of the fair trade coffee imported by Trade Aid is supply chain managed (Trade Aid, 2009b). Trade Aid s socially driven objectives Central to Trade Aid s philosophy is the importance of building long-term relationships with trading partners. The deepening of trust relationships and the provision of empowerment opportunities translates into economic benefits for trading partners as well as Trade Aid (Interview GM, Trade Aid, 2009a, b). Empowerment is a key characteristic of the relational governance chain without corporate participation

(Reed, 2009). In contrast, as noted above, profit-orientated corporations are seen to take a minimal approach. Trade Aid works in close collaboration with trading partners, particularly those in the handcraft sector, to identify ways in which economic benefits can be maximized for trading partners. Trade Aid provides feedback to producers on product ideas and ranges, market trends and colors and works closely with them in order to ensure mistakes are corrected. Through funding from the New Zealand Ministry of Foreign Affairs and Trade, Trade Aid provides necessary tools and equipment for some producer groups. Some partners in turn build upon the initiatives undertaken by Trade Aid by taking some of our designs in a new direction, by extending, interpreting and developing them into something new (Trade Aid, 2006, p. 3). Working with the most disadvantaged, Trade Aid recognizes that there is an extra cost to the organization as it takes time for the producers to be able to produce commercially viable products (Interview PD, Trade Aid, 2009a, b). In the coffee sector, Trade Aid has established the Next Generation Coffee Fund in order to raise funds from coffee roasters in New Zealand with the goal of providing a long-term sustainable solution to coffee farmers confronted by declining coffee harvests (Interviewee CM, Trade Aid, 2009ab). Over time, coffee trees produce declining volumes of quality beans young trees produce the highest quality coffee beans, the best way to achieve this goal is to renovate the trees on a regular cycle (Trade Aid, 2009a, p. 5). Small-scale farmers are faced with a loss of income when replacing coffee trees and hence many cannot afford to replace trees. Through the New Generation Coffee Fund, Trade Aid is seeking bigger harvests, better coffee and brighter futures (Trade Aid, 2009b). The money raised is used to replace aging coffee trees through the provision of bridging finance for crop renovation and operates on a revolving credit scheme. Trade Aid also works closely with actors further along the coffee value chain. Industry personnel are invited to visit fair trade coffee farms in order to see the impact of fair trade on the lives of farmers. They organize workshops in New Zealand to provide roasters with the opportunity to sample different coffees while at the same time providing a crop-to-cup connection where information about the farmers is shared (Interview CM, Trade Aid, 2009a, b). The initiatives that Trade Aid is undertaking within the coffee sector not only builds upon the relational governance mode with trading partners but extends the relational chain to integrate other actors into the chain. Corporate roasters are given a close sense of connection to growers and thereby a shortening of the relational chain of corporate retail participants. Trade Aid uses their own funding to provide interest free pre-financing to co-operatives of at least 50 percent of the total cost of production (Interview GM, Trade Aid, 2009a, b). Conversely, market-driven buyers often leave credit arrangements to producer associations and may refuse to buy from cooperatives that request financing, arguing that they are in the business of buying coffee, not loaning money (Raynolds, 2009, p. 1089). Additionally, Trade Aid profit share with trading partners. After allowance has been made for capital expenditure and investment in future growth, the remaining profit is shared amongst trading partners. Each producer group receives a base amount to which is added a pro-rata amount based on the percentage of purchases. The payment of a base amount ensures a degree of equity for all trading partners, regardless of the size of the group or the amount of purchases (Interview GM, Trade Aid, 2010). The rebate is used by trading partners to purchase equipment and Case study of Trade Aid importers 301

CPOIB 8,4 302 furniture, as well as for infrastructural needs. One partner wrote, Trade Aid was the only partner that transferred to us a proportion of the profit (quoted in Trade Aid, 2008, p. 45). Another producer wrote: We thank you for the support and appreciate you giving us the rebate. We will use the money to buy furnitures [sic.] for school. Most schools in our coffee co-operative do not have benches and desks for the children and they are sitting on the soil (Oromia Coffee Farmers Cooperative Union quoted in Trade Aid, 2011). The strength of the relationship between partner groups and Trade Aid is such that some trading partners have declined the rebate suggesting that Trade Aid use the additional funds to further develop the market for fair trade products in New Zealand (Interview GM, Trade Aid, 2009a b). As part of their commitment to providing opportunities to trading partners, the organization continually confronts itself with the ethical question what is a fair price?. Some socially-orientated fair trade organizations, including Trade Aid, have been approached by fair trade producers and asked to pay a higher price as the current price does not provide producers with a sustainable income. This is creating a two tier system where profit-orientated companies, who often pay close to the minimum, have a price advantage while enjoying the same market presence as higher paying 100 percent fair trade companies because the FLO system does not differentiate between profit or mission based organizations (White, 2010, p. 2; see also Raynolds, 2009). In Trade Aid s opinion this has the potential of putting even greater pressure on producers and keeping them trapped in the poverty cycle. Large profit-orientated corporations sometimes pressure co-operatives to accept less favorable contracts (Raynolds, 2009, p. 1089) resulting in the stark reality is that producers are now left dealing more and more with the very companies whose actions were the reason fair trade was established in the first place (White, 2010, pp. 2-3). While Trade Aid view themselves as surpassing the FLO industry standards (Interview GM, Trade Aid, 2009a b), they do not necessarily see themselves as paying the true cost of sustainable production for coffee due to market pricing limitations but to do so remains our objective and has led us to raising funds outside of contracts to support renovation, to channel capacity building fund to co-ops to help them build more infrastructure, and provide interest pre-financing to the greatest extent possible (Interview CM, Trade Aid, 2011). Under the current fair trade price, farmers are not able to maintain production levels and in order to maintain and increase production the price paid to farmers should be sufficient to cover crop maintenance and renovation costs (Interview CM, Trade Aid, 2011). Challenges ahead In order to assist producers more, Trade Aid is exploring ways in which producers might have ownership of higher functions along the value chain. This would extend the current partnership model and shape new governance arrangements. Underpinning their current thinking is what does a real partnership mean and who should we be partnering with?... It would send a powerful message, a real show of solidarity (Interview GM, Trade Aid, 2009a b). One of the biggest challenges Trade Aid faces is identifying ways in which to give trading partners ownership when they are engaged with 76 trading partners. Indeed Trade Aid is not the first NGO to consider sharing ownership with producer groups. Divine Chocolate Limited, owned 45

percent by the Kuapa Kokoo Co-operative in Ghana, is an example of a partnership between a co-operative and NGOs (Divine Chocolate, 2011). However, the Divine Chocolate partnership represents a single producer group alliance within a single commodity sector. Tallontire (2009, 1010) states that the evolution of these producer-centered models calls for new thinking in terms of what is seen as a fair trade value chain and also the governance of fair trade networks. In terms of governance categories, this is particularly the case for Trade Aid as the challenge they face is how to give producers ownership when they are an incorporated society: If it is a true partnership, with a shared supply chain then why don t we give them ownership of it...we need to bring the producer voice into the organization in a stronger way (Interview GM, Trade Aid, 2009a b). In 2010, Trade Aid announced that they would no longer be using the FLO label on packaged food items sold through their shops and supermarkets. They will, however, remain as a licensed importer of FLO certified products for other companies and organizations. The decision to remove the FLO label emerged as a result of a divergence in values within the Fairtrade Labeling Organization [sic] (FLO) system between profit-orientated and mission-orientated companies like Trade Aid (White, 2010, p. 1). In Trade Aid s view, FLO has become overly influenced by MNCs and the organization is concerned that, instead of being expanded the fair trade coffee market will become a niche market (Interview GM, Trade Aid, 2009a b). Trade Aid is not the first socially-orientated fair trade organization which has chosen not to use the FLO label. Other organizations include US based Equal Exchange, one of the oldest fair trade companies in the US, and Cooperative Coffees which have chosen not to use the Fair Trade USA label (Organic Consumer Association, 2011). Instead Trade Aid intends to use (when it is established) the WFTO logo on packaging. The WFTO has established a working group which is in the process of developing a Sustainable Fair Trade Management System (SFTMS) which will provide the opportunity for marginalized cooperatives and groups to be certified as fair trade. WFTO s certification system will be a combined membership, labeling and management tool and businesses will be certified and registered as fair trade organizations. Certification will be applied to the entire organizations and include all products and services (WFTO, 2011a; Interview GM, Trade Aid, 2011). Fair Trade USA recently announced its withdrawal from FLO, expressing dissatisfaction with the governing body and wider movement, which they view as being dominated by hard-liners who resisted needed change (Neuman, 2011; see also WFTO, 2011b). Fair Trade USA has for some time been at the heart of growing discontent by socially-orientated fair trade organizations for their lowering of standards and facilitation of the entry of profit-orientated corporations in the fair trade value chain. Fair Trade USA intends to make far-reaching changes in the sort of products that get its seal of approval and plans to approve the certification of large-scale banana plantations as well as products which comprise as little as 10 percent fair trade ingredients (Neuman, 2011). They see their planned initiatives will ultimately benefit more farmers and workers in developing countries. The WFTO has sharply criticized Fair Trade USA s proposal and that the changes proposed will see a shift from a relational supply chain to a conventional chain (WFTO, 2011b). In response to Fair Trade USA s announcement, the President of Equal Exchange was quoted as saying They ve lost their integrity (Neuman, 2011). Case study of Trade Aid importers 303

CPOIB 8,4 304 Trade Aid recognizes that the fair trade movement needs new direction and models and from their perspective, they need to be at the forefront of the change. Trade Aid s General Manager takes a key role in the WFTO discussions. He commented: Currently, New Zealand is the smallest country in the buying group sitting at the table and we can t be an influence on value of orders so we have to be the ones who lead these discussion on the way things can change and the way ahead. We are already being acknowledged for our role (Interview GM, Trade Aid, 2009a b). At a meeting held in October 2011 in Wuppertal, Germany, fair trade organizations including Cafedirect, Cooperative Coffees, Equal Exchange and Trade Aid discussed the establishment of a working group (Interview GM,Trade Aid, 2011) to:. identify a way in which food fair trade and farmer organizations can come together to re-benchmark best practice for fair trade; and. determine whether the WFTO is the platform under which the re-benchmarking can occur. It is envisioned that the working group will comprise five fair trade organizations and five producer organizations and that they will report back in 2012. Trade Aid sees themselves as part of a growing chorus of dissident voices questioning the assumption that market growth alone can be seen as an unqualified sign of success (Wuppertal Roundtable, 2011). They and other like-minded fair trade organizations are seeking to take a key role in what Raynolds and Murray (2007, p. 232) see as the beginning contours of a constructive reformulation of the fair trade movement. 5. Discussion and conclusion In its original form, fair trade is reflective of a relational chain without corporate actors (Reed, 2009). Following the movement of profit-orientated corporations into the fair trade value chain other forms of relational governance have emerged. The entry of profit-orientated corporations is seen by some as a weakening of the standards of fair trade ( Jaffee and Howard, 2010) as mainstreaming carries with it the danger of appropriation of the more convenient elements of fair trade by the commercial sector (fair prices but little in the way of capacity building, for example), and loss of the more radical edges of fair trade... [which] will be greatly to the detriment of a movement that has always acted as both critic and conscience (Low and Davenport, 2005, p. 143). Of concern to many socially-orientated fair trade organizations is the lack of commitment by market-driven firms to empower and provide upgrading opportunities for marginalized producers. Raynolds (2009, p. 1088) contends that a nominal commitment by some firms to improvements in one area is used to burnish an entire corporation s image. Trade Aid s relationship with its trading partners is that of relational governance and is reflective of two different types of governance coordination: governance without corporate actors and corporate retail participation. They partner, not only with producers, but also with corporate actors in order to expand the fair trade market in New Zealand. Trade Aid s focus is on maximizing benefits for producers and the organization places emphasis on capacity building efforts including skill development, knowledge transfer, and technique improvement as well as profit sharing initiatives. It

is concerns associated with the weakening of standards and the loss of transparency that Trade Aid is seeking to address (Interview GM, Trade Aid, 2009a b). A key challenge is how to break away from a certification model that is simply a supply chain that is no different from a supply chain with a price barrier (Interview GM, Trade Aid, 2009a b). While they recently made the decision to remove the FLO label from packaged food commodities sold through their retail stores, they are faced with the dilemma that they are seen as an authority of fair trade in New Zealand and what this decision might mean for the fair trade movement in New Zealand. At this point it is too early to know what impact their decision might have, in particular on their food commodities for sale in supermarkets alongside products bearing the widely recognized FLO logo. Will consumers recognize the core philosophical differences or simply buy FLO labeled products due to its established symbolic capital? Instead Trade Aid has aligned itself with the WFTO, which is seeking to gain a stronger presence in the market. Trade Aid is an example of an organization that is committed to the core values of fair trade and thus is distinguishable from profit-orientated corporations. While Trade Aid has opted out of the formal labeling system that promotes a market-driven approach, they are not amongst those socially-orientated fair trade organizations totally opposed to mainstreaming. They are distinct from the ideological perspectives at one end of the continuum and the corporate participants at the other. In regard to the direction the fair trade movement needs to take, Geoff White, General Manager, is of the opinion that the outcome will be to welcome the entry of big business (our producers need the orders) but to strengthen the operating standards that they must conform to and have in place an accountable system whereby mission-driven fair trade is distinguishable from profit-driven fair trade (Trade Aid, 2010, p. 2). Indeed, Trade Aid can be seen as part of a new wave of social movement (Raynolds and Murray, 2007, p. 233) seeking to constructively reformulate fair trade s vision and practices; a vision wherein producers are part of and can shape (Tallontire, 2009, p. 1009) the direction the fair trade movement will take in the future. Case study of Trade Aid importers 305 Notes 1. Fairtrade written as one word is the trademarked term belonging to FLO. Fair Trade written as two words is the unlicensed and generic term. 2. Formerly TransFair USA. 3. Trading partners can be producer organisations or umbrella organisations which are working on behalf of producer co-operatives. References Clancy, M. (1998), Commodity chains, services and development: theory and preliminary evidence from the tourism industry, Review of International Political Economy, Vol. 5 No. 1, pp. 122-48. Divine Chocolate (2011), available at: www.divinechocolate.com/default.aspx (accessed 12 February 2011). Dolan, C. (2010), Virtual moralities: the mainstreaming of Fairtrade in Kenyan tea fields, Geoforum, Vol. 41 No. 1, pp. 33-43.

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