OneWorld.net (U.S.)

“Fair trade creates the opportunity for businesses to increase their profits through socially responsible business practices, for consumers to vote with every purchase for a more equitable world, and for farmers to view themselves not as an anonymous cog in the world market, but as a valuable contributor to a global society.” Paul Rice, TransFair USA’s founder and CEO

Although the sale of fair trade products has become a more prominent business in Europe than the U.S., American consumers are becoming increasingly educated about fair trade products and many have shown a willingness to pay more for goods that they know will directly support small farmers and producers in the developing world.

Today’s fair trade industry grew out of a movement that began in Europe about 40 years ago and was largely initiated by churches hoping to provide relief to refugees and other poor communities by selling their handicrafts. By the late 1970s, Alternative Trade Organizations (ATOs) had come on the scene. Primarily importing handicrafts, these organizations sold small quantities to specialized stores and to social and church groups. Because ATOs thrived on handicrafts, however, their fair trade status was not subject to independent certification.

The first fair trade label, called Max Havelaar, was subsequently developed in the late 1980s by its Dutch founder and provided a seal attesting to the fair trade nature of its products, which grew to include more food products like coffee, chocolates, and fruits.

As part of the fair trade system, many buyers began to pay producer organizations a minimum price determined by international standard-setting and monitoring bodies, including Fairtrade Labeling Organizations International (FLO). These organizations ensure that producers earn a living wage rather than being subjected to the long-term fluctuations of world market prices, which can decimate their earnings. According to FLO, the fair trade movement currently benefits over 800,000 farmers in 50 countries.

The Principles of Fair Trade

To make the fair trade system work, relationships must be established between low-income farmers and artisans in developing countries and marketers in regions like Western Europe and North America where their products are consumed. Those involved in the business of buying and selling fair trade products accept a number of basic principles, including:

• producers must receive a stable minimum price for their products;
• producers must be democratically organized;
• forced or child labor is not to be used in the production of any product;
• producers get financial and technical advice as needed;
• there is support for social and economic development projects in the given community; and
• production methods are environmentally friendly.

If standards such as these are met, international certification bodies will allow the product to carry a fair trade logo, which alerts consumers to the fact that the product meets fair trade criteria. (For more information on fair trade certification see “Fair Trade’s Future: Scaling Up Without Selling Out?”)

An additional benefit of the fair trade movement is that many producers form cooperatives, which can pool resources to improve the welfare of their own communities. These cooperatives can get access to credit through banks and, since they represent the interests of many producers, are in a stronger position to negotiate with authorities at local, regional, and national levels. The cooperatives are an example of local democracy in action as they are controlled by their members with those serving as elected representatives—such as on boards of directors—being accountable to the membership. Microenterprise projects that offer small business loans to benefit the community may also be funded through member cooperatives.

Case Study: The Coffee Market

Fair trade products can include anything from crafts to bananas to chocolate, but fair trade coffee has received particular attention. Prices for coffee have plunged over the past decade or so, reaching a 100-year inflation-adjusted low in 2002, according to the U.S. Agency for International Development. Innumerable growers have been hit hard, especially in regions like Central America and East Africa where many farmers have not even been able to cover the costs of production.

The California-based human rights organization Global Exchange says that the drastic fall in world coffee prices has “pushed millions of coffee farmers and workers into malnutrition and starvation.” To survive, to avoid crippling debt, or to forestall losing their farms, the group adds, coffee growers have sometimes been forced to sell their next crop in advance to exploitative middlemen—at far below market price.

In contrast to this scenario, growers working within the fair trade system are guaranteed a minimum price for their coffee beans—currently $1.26/pound for conventional coffee and $1.41/pound for organic coffee. These figures compare to a market price that consistently remained below 80 cents/pound between 2001 and 2004. And, though these prices have improved in 2005, they had not reached the fair trade minimum as of October 31. If, on the other hand, world market prices rise above fair trade thresholds, buyers pay producers a market price plus a premium. Because traders pass on to consumers the higher fair trade price (and/or premium) that they pay to producers, the prices for fair trade coffee are generally higher for consumers than those of their regularly traded competitors.

Fair trade coffee consumers are, however, ensured a high quality product—often organically grown—with the added benefit of knowing that they have helped small coffee growers who have been treated more fairly than they might have been in the conventional marketplace.

Indigenous Impacts

In addition to its financial benefits, the fair trade movement has also spawned valuable social and economic projects in indigenous communities. One example is the Union of Indigenous Communities of the Isthmus Region (UCIRI), a coffee cooperative in Oaxaca, Mexico, which has introduced, among others, alternative crops to produce fruit preserves. For the community as a whole over a period of some 20 years, UCIRI has instituted a public bus service, organized projects targeting women and youth, created a training and education center, and provided medical and dental clinics.

At the end of the day, however, what do indigenous producers themselves think of the fair trade movement? In an entire magazine issue devoted to fair trade and indigenous peoples—and based on extensive interviews in Guatemala—Massachusetts-based Cultural Survival reports that indigenous peoples generally believe responsible fair trade is better than the alternatives and appreciate the improvements seen in their lives as a result. But, they say, a lot of work needs to be done to help producers learn more about the business, including understanding the supply chain, diversification of products, contracts, and fair trade labeling. A lack of understanding about the system that is meant to help them, says Cultural Survival, leaves producers “at risk of continued marginalization, at only a slightly higher income.”

Among other issues, for example, some fair trade producers have asserted that they do not have the voice they would like in developing the criteria for certification. In talking about problems faced by coffee farmers, Cultural Survival notes that these farmers are not “charity recipients,” but are “business partners who need to know as much about the production and supply chain as the brokers, roasters, and labeling organizations.” Producer trips to consumer countries, buyer trips to cooperatives, and training in global marketing are all activities that do happen, but could certainly be bolstered.

But a bigger question looms. Is the fair trade system, which is still “Western” in its orientation toward contracts and sales, at odds with the underlying values of indigenous cultures and traditions that often have very different ideas about ownership and social relationships? Some would argue that, for all of the benefits of fair trade, those in the business need to ask much tougher questions about what matters most to these producers, how much input they really have in the fair trade process, and the impact of the movement on the fabric of local communities.

The Future of Fair Trade

Some researchers have pointed out that, despite consumers increasingly choosing to buy fair trade products, there is only so much that can be achieved when global economic conditions are such that small farmers in developing countries continue to have a hard time accessing global markets. It remains to be determined, for example, how much rich countries will lower their own agricultural subsidies to begin to alleviate some of these pressures. (See “Global Trade: Free or Fair?”)

In the meantime, as consumer awareness rises, the sale of fair trade products is likely to remain a growing business despite its imperfections. To overcome some of the historical North-South inequalities behind both the fair trade business and global trade in general, some in the field have called for producers themselves to take more of a role in the processing and marketing of their products. Take the Day Chocolate Company, which is partially owned by the Kuapa Kokoo cooperative. The cooperative represents more than 35,000 cocoa farmers in over 650 villages in Ghana. Teaming up with supporters in the U.K., they have launched a new fair trade chocolate bar. Similarly, AgroFair is co-owned by farmers from Africa and Latin America and it supplies high quality fair trade bananas, mangoes, pineapples, and citrus to supermarkets, smaller stores, and caterers across Europe. With a 50 percent interest in AgroFair, producers have significant decision-making powers.

Even for these companies though, reliance on Northern partners remains high. Although many producers in the global South are learning more about marketing their own products, joint collaboration is still vital and continues to be a key aspect of the growing fair trade movement.