Fair Trade

The modern fair trade movement evolved in Europe during the 1960s as an outgrowth of leftist student organizations protesting multinational corporations' “exploitative” trade relationships with producers in economically vulnerable developing countries. In 1968 the United Nations Conference on Trade and Development adopted “Trade not Aid” as its mantra, and focused its transnational organizational efforts on establishing a commercial fair trade framework between multinational corporations (“importers”) and economically developing nations (“exporters”).

Since 1994 the European Union (EU) has been on record supporting fair trade, with the European Parliament passing the Resolution on Fair Trade in 1998, and the European Commission in 1999 adopting the Communication from the Commission to the Council on Fair Trade. On July 6, 2006, the European Parliament unanimously passed “Fair Trade and Development,” a resolution suggesting the development of an EU-wide policy on fair trade.

Fair trade advocates argue that there is both a market failure associated with the present international trade system and a long-term commodity crisis adversely affecting developing-country producers. Addressing the former criticism, Oxford University professor Alex Nicholls and Charlotte Opal, director of product development, Transfair USA, argue that the present international trade system results in market failure, as

Furthermore, concerning the latter criticism, as a result of unregulated competition in global commodity markets since the 1970s, prices for many agricultural developing-country exports, including cocoa, coffee, cotton, and sugar, have fallen by 30 to 60 percent. Fair trade advocates do not believe that current market prices for many agricultural commodities reflect the actual costs of production, including environmental and social costs absorbed by producers, and therefore recommend a stable minimum price system remedy.

According to a definition developed in December 2001 by an informal group of four major international fair trade import federations, which include the Fairtrade Labelling Organizations International, International Fair Trade Association, Network of European Workshops, and the European Fair Trade Association, popularly referred to by the acronym FINE:

The fair trade principles referred to in the above FINE definition include the following guidelines:

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Sorting fair trade coffee in Guatemala. The International Fairtrade Certification was in use in 58 developing countries by 2007.

• Fair Price. Farm and handcraft cooperatives are guaranteed a “floor” price from importers (referred to as a “Fair Trade Minimum”); in addition to this minimum guaranteed price, a premium price (referred to as a “Fair Trade Premium”) is added by importers for the sale of certified organic farm products, for example.
• Fair Labor. Agricultural and handcraft workers are entitled, when they deem necessary, to the freedom to associate (i.e., the opportunity to join a labor union), equal employment opportunities, safe working conditions, and to receive living wages. Also, no forced labor or exploitative child labor is employed in the production process.
• Market Access and Sustainable Trading Relationships. Importers will make every effort to develop long-term, direct purchasing relationships with agricultural and handcraft cooperatives, thereby eliminating so-called middlemen in the supply chain; increasing profit margins for producers; and further developing farmers and crafts peoples' knowledge base and business skills, thus allowing them to effectively compete in the global marketplace.
• Democratic Cooperative Organizations and Community Development. In free association, farmers and craft workers democratically, and transparently, decide how to invest fair trade revenue in sustainable business operations and, with their Fair Trade Premium revenue, community social, economic, and environmental development projects.
• Environmental Sustainability. Farmers utilize environmentally safe and sustainable agricultural production methods that protect owner/employee health and preserve the ecosystem for future cultivation.
• Consumer Awareness. By informing consumers of the need for social justice and trade opportunities, fair trade organizations advocate for developing country producers to acquire consumer support for reform of international trade rules, leading to an equitable international trade system (as the current system of international trade is “unfair”).

When discussing fair trade, there are generally two complementary approaches to trading/marketing agricultural and craft products to consumers:

• Integrated Supply Chain. Fair trade organizations, also referred to as alternative trading organizations, employ their marketing expertise (including public awareness campaigns) to import and/or distribute their clientele's products to consumers.
• Product Certification. Products complying with established fair trade international standards are formally certified, utilizing a consumer-friendly labeling “mark,” to have been produced, traded, processed, and packaged according to the applicable specifications listed in the international standards.

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