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Jul 08

What is Fair Trade? – Fair Trade More Ethical Than Free Trade Giving Brighter Economic Future

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What is Fair Trade? - Fair Trade More Ethical Than Free Trade Giving Brighter Economic Future

What is fair trade you ask? We can use Fair trade (FT) to create a brighter future for many people around the world. Today our world is overly profit oriented and we are experiencing social and economic inequalities not witnessed since the turn of the last century. These inequalities are primarily due to greed, selfishness, and ‘it is only about me’. These inequalities leave millions of people around the world without the basic necessities such as food, water, housing, education, and health care among other things. All across the globe, there are millions of small farmers that are being dramatically and negatively affected by globalization, modern international trade policies, and third world debt and are subsequently losing their farms, livelihoods and are unable to feed their families or provide for the other basic necessities of life. Under similar circumstances are landless workers who are seeing worsening working conditions, lower pay and unsafe working environments as developing countries compete to attract foreign investment by offering the cheapest labor available. Not only is this creating worse working conditions abroad, it is also creating worse working condition’s in developed nations as jobs continue to be scarce, and conservative policies are rolling back workers rights and reforms which were fought hard for over the past century. Those are now in jeopardy as well as globalization and ‘free trade’ grows. Profit over anything, especially workers and the environment have become the new business model of this new century, not much unlike that of the turn of the last century, when labor unions were formed to combat the harsh working conditions that evolved from those business models.

FTF

FTF

In an attempt to counter some of these injustices, FT was created, which is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers, especially those in the South.

Fair Trade organizations (FTO’s) have a clear commitment to FT as the principal core of their mission. They, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade. They can be recognized by the WFTO logo.

It also consists of more than just trading: it proves that greater justice in world trade is possible. It highlights the need for change in the rules and practice of conventional trade and shows how a successful business can also put people first.

free-trade vs. fair trade

free-trade vs. fair trade

For Fair Trade Certified™ products, a base price for the commodity is set by the international Fair Trade Labeling Organization (FTL). The price attempts to cover the cost of production and a living wage to cover the basics of food, shelter, clothing, education, and medical care. Importers and retailers are then screened and certified by TransFair USA to ensure that they are paying the FT price for products. Crafts, apparel and other non-certified products are sold by members of the Fair Trade Federation, businesses committed to the principles of FT. For these crafts, a living wage is paid in the local context.

fair-trade-wall-chart

Wall Chart

world-fair-trade-day-logo

WFTD Logo

FT, fundamentally, is a response to the failure of conventional trade to deliver sustainable livelihoods and development opportunities to people in the poorest countries of the world; this is evidenced by the two billion of our fellow citizens who, despite working extremely hard, survive on less than $2 per day. Poverty and hardship limit people’s choices while market forces tend to further marginalize and exclude them. This makes them vulnerable to exploitation, whether as farmers and artisans in family-based production units (hereafter “producers”) or as hired workers (hereafter “workers”) within larger businesses.

There are currently FT designations for communities, cities, and counties. Milwaukee, WI was the first large Fair Trade City in the U.S, which followed 2 smaller towns, Media, Pennsylvania and Brattleboro, Vermont. Fair Trade Towns is a campaign which began in the UK in 2000. It is organized by both local and national Fair Trade coalitions and advocates whose mission is to support and grow the FT movement in the U.S. In 2007, Milwaukee Mayor Tom Barrett, the Milwaukee Fair Trade Coalition, with the strong support of Aldermen Tony Zielinski succeeded in passing a Common Council resolution declaring the City of Milwaukee a “Fair Trade City.”

  • 10 Principles of Fair Trade:
  • Creating Opportunities for Economically Disadvantaged Producers
    • Poverty reduction through trade forms a key part of the organization’s aims. The organization supports marginalized small producers, whether these are independent family businesses, or grouped in associations or co-operatives. It seeks to enable them to move from income insecurity and poverty to economic self-sufficiency and ownership. The organization has a plan of action to carry this out.
  • Developing Transparency and Accountability
    • The organization is transparent in its management and commercial relations. It is accountable to all its stakeholders and respects the sensitivity and confidentiality of commercial information supplied. The organization finds appropriate, participatory ways to involve employees, members and producers in its decision-making processes. It ensures that relevant information is provided to all its trading partners. The communication channels are good and open at all levels of the supply chain.
    fair-trade-addresses

    What FT addresses

    Fair trade Empowers Producers

    FT Empowers Producers

  • Fair Trading Practices
    • The organization trades with concern for the social, economic and environmental well-being of marginalized small producers and does not maximize profit at their expense. It is responsible and professional in meeting its commitments in a timely manner. Suppliers respect contracts and deliver products on time and to the desired quality and specifications.
    • Fair Trade buyers, recognizing the financial disadvantages producers and suppliers face, ensure orders are paid on receipt of documents and according to the attached guidelines. An interest free pre-payment of at least 50% is made if requested.
    • Buyers consult with suppliers before canceling or rejecting orders. Where orders are cancelled through no fault of producers or suppliers, adequate compensation is guaranteed for work already done. Suppliers and producers consult with buyers if there is a problem with delivery, and ensure compensation is provided when delivered quantities and qualities do not match those invoiced.
    • The organization maintains long term relationships based on solidarity, trust and mutual respect that contribute to the promotion and growth of Fair Trade. It maintains effective communication with its trading partners. Parties involved in a trading relationship seek to increase the volume of the trade between them and the value and diversity of their product offer as a means of growing Fair Trade for the producers in order to increase their incomes. The organization works cooperatively with the other Fair Trade Organizations in country and avoids unfair competition. It avoids duplicating the designs of patterns of other organizations without permission.
    • FT recognizes, promotes and protects the cultural identity and traditional skills of small producers as reflected in their craft designs, food products and other related services.
    World Fair Trade Organization

    World Fair Trade Organization

    Fairtrade organization

    Fairtrade organization

  • Payment of a Fair Price
    • A fair price is one that has been mutually agreed by all through dialogue and participation, which provides fair pay to the producers and can also be sustained by the market. Where FT pricing structures exist, these are used as a minimum. Fair pay means provision of socially acceptable remuneration (in the local context) considered by producers themselves to be fair and which takes into account the principle of equal pay for equal work by women and men. FT marketing and importing organizations support capacity building as required to producers, to enable them to set a fair price.
  • Ensuring no Child Labor and Forced Labor
    • The organization adheres to the UN Convention on the Rights of the Child, and national / local law on the employment of children. The organization ensures that there is no forced labor in its workforce and / or members or homeworkers.
    • Organizations who buy FT products from producer groups either directly or through intermediaries ensure that no forced labor is used in production and the producer complies with the UN Convention on the Rights of the Child, and national / local law on the employment of children. Any involvement of children in the production of FT products (including learning a traditional art or craft) is always disclosed and monitored and does not adversely affect the children’s well-being, security, educational requirements and need for play.
    fair-trade-smiles

    FT all smiles

    fair-trade-at-work

    FT at work!

  • Commitment to Non Discrimination, Gender Equity and Freedom of Association
    • The organization does not discriminate in hiring, remuneration, access to training, promotion, termination or retirement based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, HIV/Aids status or age. The organization provides opportunities for women and men to develop their skills and actively promotes applications from women for job vacancies and for leadership positions in the organization. The organization takes into account the special health and safety needs of pregnant women and breast-feeding mothers. Women fully participate in decisions concerning the use of benefits accruing from the production process.
    • The organization respects the right of all employees to form and join trade unions of their choice and to bargain collectively. Where the right to join trade unions and bargain collectively are restricted by law and/or political environment, the organization will enable means of independent and free association and bargaining for employees. The organization ensures that representatives of employees are not subject to discrimination in the workplace.
    • Organizations working directly with producers ensure that women are always paid for their contribution to the production process, and when women do the same work as men they are paid at the same rates as men. Organizations also seek to ensure that in production situations where women’s work is valued less highly than men’s work, women’s work is re- valued to equalize pay rates and women are allowed to undertake work according to their capacities.
  • Ensuring Good Working Conditions
    • The organization provides a safe and healthy working environment for employees and / or members. It complies, at a minimum, with national and local laws and ILO conventions on health and safety.
    • Working hours and conditions for employees and / or members (and any homeworkers) comply with conditions established by national and local laws and ILO conventions.
    • Fair Trade Organizations are aware of the health and safety conditions in the producer groups they buy from. They seek, on an ongoing basis, to raise awareness of health and safety issues and improve health and safety practices in producer groups.
    fair-and-unfair-trade-logos

    Fair and unfair trade logos

    fair-trade-vs-free-trade

    FT vs free trade

  • Providing Capacity Building
    • The organization seeks to increase positive developmental impacts for small, marginalized producers through FT.
    • The organization develops the skills and capabilities of its own employees or members. Organizations working directly with small producers develop specific activities to help these producers improve their management skills, production capabilities and access to markets – local / regional / international / FT and mainstream as appropriate. Organizations which buy Fair Trade products through FT intermediaries in the South assist these organizations to develop their capacity to support the marginalized producer groups that they work with.
  • Promoting Fair Trade
    • The organization raises awareness of the aim of FT and of the need for greater justice in world trade through FT. It advocates for the objectives and activities of FT according to the scope of the organization. The organization provides its customers with information about itself, the products it markets, and the producer organizations or members that make or harvest the products. Honest advertising and marketing techniques are always used.
    fair-trade-vs-free-trade-2

    FT vs Free trade 2

    fair-trade-and-child-labor

    Fair trade and child labor

  • Respect for the Environment
    • Organizations which produce FT products maximize the use of raw materials from sustainably managed sources in their ranges, buying locally when possible. They use production technologies that seek to reduce energy consumption and where possible use renewable energy technologies that minimize greenhouse gas emissions. They seek to minimize the impact of their waste stream on the environment. FT agricultural commodity producers minimize their environmental impacts, by using organic or low pesticide use production methods wherever possible.
    • Buyers and importers of FT products give priority to buying products made from raw materials that originate from sustainably managed sources, and have the least overall impact on the environment.
    • All organizations use recycled or easily biodegradable materials for packing to the extent possible, and goods are dispatched by sea wherever possible.
Young boy raking cocoa leaves on drying rack

Young boy raking cocoa leaves on drying rack

Consequences of unfair trade

Consequences of unfair trade

  • Common Fair Trade Myths:
  • As awareness of FT grows, so do many misconceptions about it. Below are some popular myths about FT and the realities behind them.
  • Myth: FT is about paying developed world wages in the developing world.
    • Reality: Fair wages are determined by a number of factors, including the amount of time, skill, and effort involved in production, minimum and living wages in the local context, the purchasing power in a community or area, and other costs of living in the local context. Wages are determined independently from North American wage structures and are designed to provide fair compensation based on the true cost of production.
  • Myth: FT siphons off American jobs to other countries.
    • Reality: This form of trade seeks to change the lives of the poorest of the poor who frequently lack alternative sources of income. As North American FTO’s grow, they employ more and more individuals in their communities. Most fair trade craft products stem from cultures and traditions which are not represented in North American production. Most FT commodities, such as coffee and cocoa, do not have North American-based alternatives.
  • Myth: FT is anti-globalization.
    • Reality: International exchange lies at the heart of FT. FTO’s seek to maximize the positive elements of globalization that connect people, communities, and cultures through products and ideas. At the same time, they seek to minimize the negative elements that result in lower labor, social, and environmental standards which hide the true costs of production.
  • Myth: FT is a form of charity.
    • Reality: FT promotes positive and long-term change through trade-based relationships which seek to empower producers to meet their own needs. Its success depends on independent, successfully-run organizations and businesses – not on handouts. While many FTO’s support charitable projects on top of their work in trade, the exchange of goods remains the key element of their work.
    domestic-fair-trade

    Domestic FT

    FT royalty free

    FT royalty free

  • Myth: FT results in more expensive goods for the consumer.
    • Reality: Most FT products are competitively priced in relation to their conventional counterparts. FTO’s work directly with producers, cutting out exploitative middlemen, so they can keep products affordable for consumers and return a greater percentage of the price to the producers.
  • Myth: FT production results in substandard goods for the consumer as compared to conventional production.
    • Reality: While handmade products naturally include some variation, FTO’s continuously work with their producer partners to improve quality and consistency. Through direct and long-term relationships, producers and FTO’s dialogue about consumer needs and create high quality products. Fair traders have received awards at the international Cup of Excellence and Roaster of the Year competitions, Sustainability in Design, the New York Home Textile Show, and other venues.
  • Myth: FT refers only to coffee.
    • Reality: FT encompasses a wide variety of agricultural and handcrafted goods, including baskets, clothing, cotton, footballs, furniture, jewelry, rice, toys, and wine. While coffee was the first agricultural product to be certified fair trade in 1988, fair trade handicrafts have been on sale since 1946.

What is Fair Trade

  • Fair Trade Facts:
    • How Much
      • $4.12 billion – amount of total FT sales in 2008 according to the UK’s Fairtrade Foundation
      • 102% – growth in US and Canadian sales for FT between 2004 and 2007 according to the Fair Trade Federation Interim Report on Fair Trade
      • 112% – growth in the global FT certified tea sector in 2008, according to the Fairtrade Labelling Organization. In 2008, Fair Trade Certified cotton product sales also increased by 94% and Fair Trade Certified coffee sales by 14%.
    • Who
      • 1.4 billion – estimated number of people in the world existing on less than $1.25 / day, according to Bread for the World
      • 2.7 billion – estimated number of people in the world existing on less than $2 / day, according to the World Bank
      • 30% – women in non-agricultural conventional production in developing countries in 2004, according to the United Nations
      • 76% – women engaged in non-agricultural fair trade production in 2008, according to the Fair Trade Federation’s 2009 Market Trend Report (up from 70% in 2004)
      • 284,000 – number of children in the Ivory Coast, Ghana, Nigeria and Cameroon working in hazardous tasks on conventional cocoa farms, according to a 2002 International Institute of Tropical Agriculture study directly involving 4,500+ producers.
      • 15,000 – number of children aged 9 to 12 in the Ivory Coast alone who have been sold into forced labor on conventional cotton, coffee, and cocoa plantations, according to a 2000 US State Department report
      • 7.5 million – individuals in 2008 that directly benefit from Fair Trade Certified production, according to the Fairtrade Labelling Organizations International
    • Comparing Conventional and Fair Trade in Coffee
      • 2 cents – amount farmers on conventional farms receive from the average $3 latte, according to Transfair USA
      • 10 cents – amount of social premium paid on top of the per kilo price to fair trade certified coffee farmers, according to Fairtrade Labeling Organization standards
      • 20 cents – amount of social premium paid on top of the per kilo price to fair trade certified coffee farmers for organic coffee, according to Fairtrade Labeling Organization standards
    • Other FT Facts:
      • $70 billion – amount African countries could generate if their share of world exports increased by 1% – approximately five times what the continent receives in aid – according to Oxfam International’s Make Trade Fair Report.
      • 30 cents of every $1 – amount of foreign investment that ends up back in donor countries through profit transfers, according to Oxfam International’s Make Trade Fair Report.
      • $13 billion – total amount required to provide basic education and nutrition in all developing countries, according to the 2005 UNICEF State of the World’s Children Report
      • $25 billion – amount spent annually on US farm subsidies, according to a 2007 Heritage Foundation report
      • $40-70 billion – amount required to meet all eight Millennium Development Goals by 2015, according to the United Nations
    FT vs free trade cartoon

    FT vs free trade cartoon

    Fair Trade Label

    FT Label

    Ethical Basis of Criticisms

    Consumers have been shown to be content paying higher prices for Fairtrade products, in the belief that this helps the very poor. The main ethical criticism of Fairtrade is that this premium over non-Fairtrade products does not reach the producers and is instead collected by businesses, employees of co-operatives or used for unnecessary expenses. Furthermore, research has cited the implementation of certain Fairtrade standards as a cause for greater inequalities in markets where these rigid rules are inappropriate for the specific market.

    Free trade cartoon

    Free trade cartoon

    Wall Street Greed Free Trade

    Wall Street Greed Free Trade

    Little Money Reaches the Third World

    The evidence is that little of the extra money paid by consumers reaches the farmers. The Fairtrade Foundation does not monitor how much extra retailers charge for Fairtrade goods, and retailers almost never sell identical Fairtrade and non-Fairtrade lines side by side, so it is rarely possible to determine how much extra is charged or how much reaches the producers, in spite of the Unfair Trading legislation. In four cases it has been possible to find out. One British café chain was passing on less than one percent of the extra charged to the exporting cooperative; in Finland, Valkila, Haaparanta and Niemi found that consumers paid much more for Fairtrade, and that only 11.5% reached the exporter. Kilian, Jones, Pratt and Villalobos talk of US Fairtrade coffee getting $5 per lb extra at retail, of which the exporter would have received only 2%. Mendoza and Bastiaensen calculated that in the UK only 1.6% to 18% of the extra charged for one product line reached the farmer. All these studies assume that the importers paid the full Fairtrade price, which is not necessarily the case.

    Less Money Reaches Farmers

    The Fairtrade Foundation does not monitor how much of the extra money paid to the exporting cooperatives reaches the farmer. The cooperatives incur costs in reaching the Fairtrade political standards, and these are incurred on all production, even if only a small amount is sold at Fairtrade prices. The most successful cooperatives appear to spend a third of the extra price received on this: some less successful cooperatives spend more than they gain. While this appears to be agreed by proponents and critics of Fairtrade, there is a dearth of economic studies setting out the actual revenues and what the money was spent on. FLO figures are that 40% of the money reaching the Third World is spent on ‘business and production’ which would include these costs, as well as costs incurred by any inefficiency and corruption in the cooperative or the marketing system. The rest is stated to be spent on social projects, rather than being passed on to farmers.

    There is no evidence that Fairtrade farmers get higher prices on average. Anecdotes state that farmers were paid more or less by traders than by Fairtrade cooperatives. Few of these anecdotes address the problems of price reporting in Third World markets, and few appreciate the complexity of the different price packages which may or may not include credit, harvesting, transport, processing, etc. Cooperatives typically average prices over the year, so they pay less than traders at some times, more at others. Bassett (2009) is able to compare prices only where Fairtrade and non-Fairtrade farmers have to sell cotton to the same monopsonistic ginneries which pay low prices. Prices would have to be higher to compensate farmers for the increased costs they incur to produce Fairtrade. For instance, Fairtrade encouraged Nicaraguan farmers to switch to organic coffee, which resulted in a higher price per pound, but a lower net income because of higher costs and lower yields.

    Trade Justice and FT

    Segments of the trade justice movement have also criticized FT in the past years for allegedly focusing too much on individual small producer groups while stopping short of advocating immediate trade policy changes that would have a larger impact on disadvantaged producers’ lives. French author and RFI correspondent Jean-Pierre Boris championed this view in his 2005 book Commerce inéquitable.

    Political Objections

    There have been largely political criticisms of Fairtrade from the left and the right. Some believe the FT system is not radical enough. French author Christian Jacquiau, in his book Les coulisses du commerce équitable, calls for stricter FT standards and criticizes the FT movement for working within the current system (i.e., partnerships with mass retailers, multinational corporations, etc.) rather than establishing a new fairer, fully autonomous trading system. Jacquiau is also a staunch supporter of significantly higher FT prices in order to maximize the impact, as most producers only sell a portion of their crop under FT terms. It has been argued that the approach of the FairTrade system is too rooted in a Northern consumerist view of justice which Southern producers do not participate in setting. “A key issue is therefore to make explicit who possesses the power to define the terms of Fairtrade, that is who possesses the power to determine the need of an ethic in the first instance, and subsequently command a particular ethical vision as the truth.” Some of the criticisms of Fairtrade from the free market approach to economics appear to be linked to right wing political approaches, but this does not necessarily mean that their analysis in this particular case is unacceptable to mainstream economists.

    Of course, with the current political and business model for many larger corporations today being profit above all else, this alone brings to light the need for more FT, not free trade which exploits both workers and local residents resources in the name of higher profits and lower costs. Our current form of trade is highly questionable, and gives the appearance of imperialism, which is defined as “the creation and/or maintenance of an unequal economic, cultural, and territorial relationship, usually between states and often in the form of an empire, based on domination and subordination.” Imperialism, as described by Ronald John Johnston: The Dictionary of Human Geography, is primarily a Western undertaking that employs “expansionist, mercantilist policies”.

    2012 Fair Trade Federation Conference

    All are welcome to attend our 2012 FTF Conference

    The conference will be held May 21-23 (Monday through Wednesday) in beautiful Bellevue, WA, right outside of Seattle. This year’s conference will be a spirited gathering of FT business owners, students, and advocates coming together to share ideas, make connections, and be inspired.

    ISEAL Conference 2012

    • Beyond the 10 Percent:
      • Global Innovation and Partnerships to Bring Sustainably Standards to Scale

    As the global association for social and environmental standards, the ISEAL Alliance is proud to present its third annual conference, to be held May 29 to 30, 2012 in Beethovenhalle, Bonn, Germany. The annual ISEAL conference has become an important gathering place for businesses, NGOs, governments and sustainability standards systems. Besides addressing current challenges in bringing sustainability standards to scale, the conference brings together staff from all of ISEAL’s member organisations, government officials, corporate executives and NGOs under one roof; providing an excellent opportunity to network.

    The ISEAL 2012 conference will explore how businesses, governments and standards systems can create partnerships to reach sustainability goals. The conference will showcase new advances and explore how they can be strengthened and scaled-up to ensure that any commitment to sustainability is met by an adequate and equal supply response.

    The conference is open to the public on the 29-30 May and will be followed by an ISEAL Member and Affiliate Day* on the 31st.

    Real face of free trade

    Real face of free trade

    fair-trade-Virtues of Free Trade

    Virtues of Free Trade

    What is fair trade? It is not about charity. It is a holistic approach to trade and development that aims to alter the ways in which commerce is conducted, so that trade can empower the poorest of the poor. Fair Trade Organizations seek to create sustainable and positive change in developing and developed countries.

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