Trade, Fair

In the rapidly-expanding alternative trade movement known as fair trade, consumers in more developed regions of the globe subsidize the livelihoods of small-scale, marginalized farmers in poor countries by paying a premium for their goods. This new and more direct ethical relationships between rich consumers and poor producers contributes to the social, economic, and community development of fair trade growers. Fair trade has been characterized as “working in the market but not of it.” The multi-million dollar fair trade market has become serious business; it is now defined by its moves into mainstream retailers as much as by its alternative economic model, new markets, and novel development opportunities for third world farmers.

Begun in the 1970s with the importation of handicrafts, fair trade was developed by European and American aid organizations with social justice underpinnings. Early activist groups include Max Havelaar (Netherlands), Oxfam and Traidcraft (United Kingdom [UK]), Ten Thousand Villages (United States), and GEPA (Germany). The idea has long been to develop trading relationships that give poor farmers opportunities to enter markets under [Page 1757]favorable conditions and move out of poverty. Current arguments put forth fair trade as an antidote to the excesses of “free trade” globalization with its control of markets by multinational corporations and wildly fluctuating or plummeting prices for coffee, cocoa, sugar, bananas, and other tropical crops. For example, the world price for coffee is at its lowest in decades, and, of the average price paid at a café, less than 1 percent of the value of a cup of coffee is captured by growers.

As the market has grown, a formalized regulatory system has developed. Currently, the Fairtrade Labelling Organizations International (FLO), created as an umbrella organization of 17 Euro-American labeling groups, maintains the standards for the Fairtrade logo. International production standards work to stimulate demand through consumer trust in the fair trade market.

Generalizing across products, fair trade standards involve: (1) A guaranteed price floor for all commodities—the minimum price for a pound of coffee is $1.21, which covers the cost of production and producers' livelihood support; (2) a “social premium” of 10 percent or more ($.05 for coffee) is tacked on to pay for community development such as new schools; (3) transparent and long-term trading contracts so communities might invest in new production techniques; (4) access to credit to smooth income streams; and (5) shorter supply chains to reduce intermediaries and permit farmers to capture more of the value of commodities.

To participate in fair trade, producers—like the long-standing Mexican coffee cooperative UCIRI—must: (1) Be a democratically-run cooperative and use the fair trade premium to the benefit of members; (2) be committed to improving the environmental conditions of production; and (3) prohibit child and slave labor. New standards have been created for workers on fair trade estate-farms and plantations.

The FLO then certifies that these and other standards are being adhered to by performing audits at each stage in the commodity chain. After this certification, the Fairtrade logo can be used on the packaging of all commodities deemed fairly traded. This logo is important as it demonstrates to consumers the “fairer” conditions under which a particular commodity was produced and differentiates these products on supermarket shelves.

...