While we are waiting to hear back, if somebody can point at a serious scientific study
of what has been the net effect of Fair Trade on the producers and their familys, let us review the architecture of international commerce in handcraft production and distribution.
The essential structure of internacional commerce does not vary from place to place,
wherever you may go in the world, there is a similar pattern with commercial margins.
Here are the basic features of tradicional business involving handcrafted merchandise:
1)Handcraft producers sell to local consolidators at a price somewhat above the cost of materials. The price is effectively set by the buyer The artisans receive cash payment for their products or in some cases IOUs.
2)The local handcraft consolidator generally re-sells at up to a 1.3 mark-up (ie Buys at 1, Sells at 1.3) You will find that these margin-numbers hold for a wide range of goods throughout the Third World Whether in Asia or IberoAmerica the exception only being consolidators selling at 1.2X or only 1.1X.
Local consolidators supply the domestic market, usually the tourist market in the capital and resorts. Local consolidators also supply the 3) internacional importer/distributors who re-sell the products in their own domestic markets at wholesale and/or retail.
Typically, these importer distributors Double to Wholesale. In other words, they take the price of the product that has been marked-up 1.3X over the cost of materials plus the fraction that the local consolidators are paying the artisans. Importer distributors will typically add to this cost-factor the costs of shipping and importation and double that total.
Thus, the importer/distributor price is 2X their cost of product (= the price of the local consolidator) The retailer typically doubles when selling to the public. The high end small independent Fair Trade Stores will at-least triple the price they pay their (Fair Trade) importer/distributor. And that is about the norm for a boutique type store or a gift shop or a beauty-parlor retailing handcraft hair combs. etc
Now what I have described is simple: the basic architecture of internacional commerce in handcrafts in terms of the profit margins of the different participants. The craftsperson makes an amount over the cost of materials. The amount the local consolidator lets him make. The local consolidator marks it up 1.3X. The international importer/distributor marks-up 2X to wholesale; the retailer then usually triples.
So, six times the price of the artisan to the local consolidator is thus a conservative rule of thumb. as the disparity between the cost of product (artisans’ price) and what the final customer will pay. This ratio holds true universally, the architecture of commerce in angloamericaeurope hardly varies.
Those who have been in the importing business will readily recognize the six-to-one figure as characteristic of normal traditional international business in a wide range of commercial products
At this juncture of my exposition, stop and realize that this does NOT mean the artisan receives one sixth of the purchase price because, the cost of materials is embedded in that Cost factor. The artisans have to buy the material inputs and pay for them with cash.
If the cost of materials were on average 50% of the price the artisan receives for the product, then the artisan would be receiving one-twelfth of the final price in return for her or her skilled labors.
There is nothing whatsoever exotic about any of this.
You need to get with an experienced exporter in these classes of goods
and learn that the typical profit margins do not change or vary much;
Of course the markets have gotten tighter and tighter over recent decades
and, consequently, the available margins have shrunk somewhat.
That the artisan receives approximately one-tweflth of the final purchase price
of the product in traditional and familiar modes of comercial intercourse, is, I think,
a fair and useful estimate, to serve as a Standard by which to measure and compare
Fair Trade margins.
Well, WHAT is the actual ratio between the amount the artisan/producers earn
and the final price paid by customers of Fair Trade? (when converted to the same currency)
HOW do the Fair Trade companies compare to ordinary commercial importer/distributor companies in terms of the percentage of gross retail sales going to the craftspeople in the form of product sales?
Fair Trade effectively markets Third World product and takes advantage of presenting the stories of artisans and and their families, emphasizing the humanitarian dimension and appeal of Fair Trade by generating interest in the goods as a function of people’s natural human solidarity and sisterhood etc.
So, what percentage of the final purchase price by a consumer does the artisan receive from Fair Trade customers? Does the producer receive as much as one-twelth of the price paid by the final consumer?
The big Fair Trade companies are capable of analyzing their cost and price structure.
These are basic trade numbers, stored in data files, by any efficient business entity.
The year-by-year avg. ratio between the artisans earning and the final consumer price
will tell you a lot about whether Fair Trade is living up to the standards of traditional savage capitalismof acquisition of saleable handcraft products for sale in the markets of the US.
Inform yourselves with experienced importers who have been envolved with handcrafted products. Can anyone be found who will attest that the artisan receiving one-twelth of the final purchase price is not an eminently reasonable estimate?
All we are looking for here is a fair estimate of this ratio.
This exercise is in order to assure the establishment of a realistic metric based upon the traditional practices of ordinary comercial business. In order to compare the equivalent ratio determined by Fair Trade in its historical dealings with the craftspeople.
This is to seek a scientific approach to the important question : how much does Fair Trade really help and benefit the village producers? Fair Traders who are, after all, are effectively certified to the public as businesses actively interested in the welfare of the artisans,
which is, after all, the very reason for the existence of the Fair Trade in the first place.