Fair Trade

Fair trade is both a system of exchange and a social movement. Its object is to bypass the structural inequalities of conventional international trade between the global South and North through direct purchase of commodities from producer groups, payment of a fair price, and ensuring that certain, commodity-specific conditions of production are met. As a system of exchange, it aims to alleviate poverty through the payment of fair prices for commodities produced in the South. As a social movement, it aims to draw attention to the inequitable relations of power that characterize conventional international trade.

Fair trade's origins stretch back more than 50 years. Church and solidarity groups based in Europe and the United States (groups such as SERRV, Ten Thousand Villages, and Oxfam GB) began direct sales of needlework and other crafts from southern producers and refugees to northern consumers. This marked the beginning of Alternative Trade Organizations (ATOs), which worked to establish direct connections between southern producers and northern consumers in an alternative trade network. They relied primarily on previously existing social networks and specialty shops for their sales. In an effort to build on these origins, fair trade organizations established relationships with southern farmers and began selling primary commodities within the alternative trade network. The effort to bring fair trade goods into mainstream distribution channels began with the first fair trade labeling initiative, Holland's Max Havelaar, in 1988. Max Havelaar was founded in response to a request from a Mexican coffee cooperative for fair coffee prices as an alternative to conventional aid. Labeling initiatives sprung up in a number of other countries, and in 1997, 17 of these separate national initiatives coalesced under the umbrella of the Bonn-based Fairtrade Labeling Organizations International (FLO). Commodities exchanged under the fair trade labels affiliated with FLO include coffee, tea, honey, fresh fruit and juice, crafts, sugar, cocoa, rice, wine, sports balls, and flowers.

Fair trade's primary goal is to improve the livelihoods of low-income producers by increasing the income derived from their products and improving other social conditions, such as access to health care and education. This involves a commitment on the part of importers to pay producers a fair price for their product, regardless of the price on the conventional world market. Purchasers agree to buy directly from producers, to pay a minimum price for goods exchanged under the fair trade label, a premium over the world market price when it is above the minimum, and to establish long-term relationships with producers. In so doing, fair trade minimizes the instability that has historically characterized the international prices of primary commodities and increases the share of the final retail price captured by primary producers. It has also given rise to critiques of the movement based on neoclassical economic principles that price floors prevent accurate market signals from reaching producers, setting up an incentive for overproduction of the commodity relative to demand and depressing prices.

The fair trade movement, however, is based on the premise that the goods exchanged under its labels are not equivalent to goods exchanged through conventional trade. Systems of generalized commodity exchange feature a tendency to reduce the heterogeneity of products in order to make them equivalent for the purposes of trade. Coffee, for example, is (except in small specialty markets) differentiated primarily by the type of bean—Arabica or Robusta. Within those categories, Arabica grown on a small farm using family labor using ecologically sustainable production practices is, if not certified and labeled as would be the case for an organic farm, no different than Arabica grown on a large-scale, pesticide-intensive, monocrop ranch. The final products are essentially the same as far as most consumers can tell, and conventional markets treat them as equivalent. However, the conditions of the environment in which the coffee is grown and the conditions of labor through which the coffee is grown are significantly different. Fair trade, as with many other labeling schemes, represents an attempt to maintain the heterogeneity of products based on just such process-based criteria. Fair trade products are differentiated from other commodities at the retail level by explicitly advertising their conditions of production.

...