Fair trade
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2008-07-10T08:25:44Z
Jihmiller
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[[WP:UNDO|Undid]] revision 224743444 by [[Special:Contributions/79.68.136.48|79.68.136.48]] ([[User talk:79.68.136.48|talk]])
{{about||the product certification system|Fairtrade certification|other uses|Fair trade (disambiguation)}}
[[Image:FairtradeQuinoa.jpg|thumb|350px|right|Certified Fair trade [[quinoa]] producers in [[Ecuador]]]]
'''Fair trade''' is an organized [[social movement]] and market-based approach to alleviating global poverty and promoting sustainability. The movement advocates the payment of a fair price as well as social and environmental standards in areas related to the production of a wide variety of [[goods]]. It focuses in particular on exports from developing countries to developed countries, most notably [[handicrafts]], [[coffee]], [[cocoa]], [[sugar]], [[tea]], [[bananas]], [[honey]], [[cotton]], [[wine]], fresh fruit, and flowers.
Fair trade's strategic intent is to deliberately work with marginalized producers and workers in order to help them move from a position of vulnerability to security and economic self-sufficiency. It also aims at empowering them to become stakeholders in their own organizations and actively play a wider role in the global arena to achieve greater equity in [[international trade]]. Fair trade proponents include a wide array of international religious, development aid, social and environmental organizations such as [[Oxfam]], [[Amnesty International]], and [[Caritas (charity)|Caritas International]].
Like most [[international development|developmental efforts]], fair trade has proven itself controversial and has drawn criticism from both ends of the [[political spectrum]]. Some economists and conservative [[think tanks]] see fair trade as a type of [[subsidy]]. Segments of the [[Left-wing politics|left]] criticize fair trade for not adequately challenging the current trading system.
In 2007, [[Fairtrade certification|Fair trade certified]] sales amounted to approximately €2.3 billion (US $3.62 billion) worldwide, a 47% year-to-year increase.<ref name="FLO2007">Fairtrade Labelling Organizations International (2008). [http://www.fairtrade.net/uploads/media/FLO_AR2007_low_res_01.pdf FLO International: Annual Report 2007]. URL accessed on June 16, 2008.</ref> While this represents a fraction of world trade in physical merchandise,<ref>[http://www.wto.org/english/res_e/statis_e/its2006_e/its06_general_overview_e.pdf] p. 3, The World Trade Organization publishes annual figures on the world trade of goods and services.</ref> fair trade products generally account for 1-20% of all sales in their product categories in Europe and North America.<ref name="FLO2007" /> In June 2008, it was estimated that over 7.5 million disadvantaged producers and their families were benefiting from fair trade funded infrastructure, technical assistance and community development projects.<ref name="FLO2007" />
==Definition of fair trade==
The currently accepted definition of Fair Trade has been agreed by [[FINE]], an informal association of four international fair trade networks ([[Fairtrade Labelling Organizations International]], [[International Fair Trade Association]], [[Network of European Worldshops]] and [[European Fair Trade Association]]):
{{bquote|Fair Trade 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 in the South. Fair Trade Organizations, 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.
Fair Trade products are produced and traded in accordance with these principles — wherever possible verified by credible, independent assurance systems.<ref>European Fair Trade Association. (2006). [http://www.eftafairtrade.org/definition.asp Definition of Fair Trade] URL accessed on August 2, 2006.</ref>
}}
==Key fair trade principles==
[[Image:Coffee beans being sorted and pulped.jpg|thumb|300px|right|Workers sorting and pulping [[coffee]] beans at a fair trade cooperative in [[Guatemala]]]]
The principles of Fair Trade are based on the practical and shared experience of Fair Trade organisations over many years and reflect the diversity of Fair Trade relationships. The most important of these are unique to Fair Trade and are integral to its developmental objectives. These include<ref>Fairtrade Labelling Organizations International & International Fair Trade Association (2008). [http://activistnotes.wordpress.com/2008/06/06/a-draft-charter-of-fair-trade-principles-flo-and-ifat/ A Charter of Fair Trade Principles.] URL accessed on August 2, 2006.</ref>:
*'''Market Access for Marginalised Producers'''-
Many producers are excluded from mainstream and added-value markets, or only access them via lengthy and inefficient trading chains. Fair trade helps producers realise the social benefits to their communities of traditional forms of production. By promoting these values (that are not generally recognised in conventional markets) it enables buyers to trade with producers who would otherwise be excluded from these markets. It also helps shorten trade chains so that producers receive more from the final selling price of their goods than is the norm in conventional trade via multiple intermediaries.
*'''Sustainable and Equitable Trading Relationships'''-
The economic basis of transactions within Fair Trade relationships takes account of all costs of production, both direct and indirect, including the safeguarding of natural resources and meeting future investment needs. Trading terms offered by Fair Trade buyers enable producers and workers to maintain a sustainable livelihood; that is one that not only meets day-to-day needs for economic, social and environmental wellbeing but that also enables improved conditions in the future. Prices and payment terms (including prepayment where required) are determined by assessment of these factors rather than just reference to current market conditions. There is a commitment to a long-term trading partnership that enables both sides to co-operate through information sharing and planning, and the importance of these factors in ensuring decent working conditions is recognised.
*'''Capacity Building & Empowerment'''-
Fair Trade relationships assist producer organisations to understand more about market conditions and trends and to develop knowledge, skills and resources to exert more control and influence over their lives.
*'''Consumer Awareness Raising & Advocacy'''-
Fair Trade relationships provide the basis for connecting producers with consumers and for informing consumers of the need for social justice and the opportunities for change. Consumer support enables Fair Trade Organisations to be advocates and campaigners for wider reform of international trading rules, to achieve the ultimate goal of a just and equitable global trading system.
==Approaches to Fair Trade==
All Fair Trade products originate from producers and workers committed to Fair Trade principles. However, in the subsequent supply chain, Fair Trade products are traded and marketed through two distinct but complementary channels:
*The "integrated supply chain" route whereby products are also imported and/or distributed by organisations who have Fair Trade at the core of their mission and activities (commonly referred to as [[alternative trading organization]]s), using it as a development tool to support disadvantaged producers and to reduce poverty, and combine their marketing with awareness-raising and campaigning.
*The "product certification" route whereby products complying with international standards are certified indicating that they have been produced, traded, processed and packaged in accordance with the specific requirements of the international standards.
== General structure of the movement ==
Most fair trade import organizations are members or certified by one or several national or international federations. These federations coordinate, promote, and facilitate the work of fair trade organizations. The following are the largest and most influential:
* The [[Fairtrade Labelling Organizations International]] (FLO), created in 1997, is an association of three producer networks and twenty national labeling initiatives that promote and market the [[International Fairtrade Certification Mark|Fair trade Certification Mark]] in their countries. The FLO labeling system is the largest and most widely recognized standard setting and certification body for [[Fairtrade labeling|labeled Fair trade]]. It regularly inspects and certifies producer organizations in more than 50 countries in [[Africa]], [[Asia]], and [[Latin America]].
* The [[International Fair Trade Association]] (IFTA) is a global association created in 1989 of Fair trade producer cooperatives and associations, export marketing companies, importers, retailers, national, and regional fair trade networks and fair trade support organizations. In 2004 IFAT launched the FTO Mark which identifies registered Fair Trade Organizations (as opposed to the [[FLO]] system, which labels products). IFAT has nearly 300 member organizations in over 60 countries.
* The [[Network of European Worldshops]] (NEWS), created in 1994, is the umbrella network of 15 national [[Worldshop]] associations in 13 different countries all over [[Europe]].
* The [[European Fair Trade Association]] (EFTA), created in 1990, is a network of European [[alternative trading organization]]s which import products from some 400 economically disadvantaged producer groups in Africa, Asia, and Latin America. EFTA's goal is to promote fair trade and to make fair trade importing more efficient and effective. The organization also publishes yearly various publications on the evolution of the fair trade market. EFTA currently has eleven members in nine different countries.
In 1998, these four federations created together [[FINE]], an informal association whose goal is to harmonize fair trade standards and guidelines, increase the quality and efficiency of fair trade monitoring systems, and advocate fair trade politically.
* The [[Fair Trade Federation]] (FTF), created in 1994, is an association of Canadian and American fair trade wholesalers, importers, and retailers. The organization links its members to fair trade producer groups while acting as a clearinghouse for information on fair trade and providing resources and networking opportunities to its members.
*The [http://www.fairtradeaction.net Fair Trade Action Network], created in 2007, is an international fair trade volunteer web-based network. The association links volunteers from a dozen of European and North American countries, actively supports [[Fairtrade Town]] initiatives and encourages grassroots networking at the international level.
Student groups have also been increasingly active in the past years promoting fair trade products both on their campuses and their communities. Although hundreds of independent student organizations are active worldwide, most groups in North America are either affiliated with [http://www.usft.org/ United Students for Fair Trade] (USA) or the [http://www.csftn-recce.org/english/index.html Canadian Student Fair Trade Network] (Canada).
==History==
{{main|History of fair trade}}
The first attempts to commercialize fair trade goods in Northern markets were initiated in the 1940s and 1950s by religious groups and various politically oriented [[non-governmental organizations]] (NGOs). [[Ten Thousand Villages]], an NGO within the [[Mennonite Central Committee]] (MCC) and [[SERRV International]] were the first, in 1946 and 1949 respectively, to develop fair trade supply chains in developing countries.<ref>International Fair Trade Association. (2005).[http://www.ifat.org/fthistory/history3.shtml Crafts and Food]. URL accessed on August 2, 2006.</ref> The products, almost exclusively [[handicrafts]] ranging from [[jute]] goods to [[cross-stitch]] work, were mostly sold in churches or fairs. The goods themselves had often no other function than to indicate that a donation had been made.<ref>Hockerts, K. (2005). [http://www.oikos-foundation.unisg.ch/homepage/fairtrade.pdf The Fair Trade Story]. p1</ref>
===Solidarity trade===
[[Image:Fair Trade Products.jpg|thumb||left|Fair Trade goods sold in Worldshops]]The current fair trade movement was shaped in Europe in the 1960s. Fair trade during that period was often seen as a political gesture against neo-imperialism: radical student movements began targeting multinational corporations and concerns that traditional business models were fundamentally flawed started to emerge. The slogan at the time, “Trade not Aid”, gained international recognition in 1968 when it was adopted by the [[UNCTAD]] ([[United Nations Conference on Trade and Development]]) to put the emphasis on the establishment of fair trade relations with the developing world.<ref>International Fair Trade Association. (2005). [http://www.ifat.org/index.php?option=com_content&task=view&id=10&Itemid=17&limit=1&limitstart=1 Where did it all begin?] URL accessed on August 2, 2006.</ref>
The year 1965 saw the creation of the first [[Alternative Trading Organization]] (ATO): that year, [[United Kingdom|British]] [[NGO]] [[Oxfam]] launched "Helping-by-Selling", a program which sold imported handicrafts in Oxfam stores in the [[United Kingdom|UK]] and from mail-order catalogues.<ref>[http://onevillage.org/fairtrade-history.htm Fair trade history (Scott, Roy)]</ref>
In 1969, the first [[Worldshop]] opened its doors in the Netherlands. The initiative aimed at bringing the principles of fair trade to the retail sector by selling almost exclusively goods produced under fair trade terms in “underdeveloped regions”. The first shop was run by volunteers and was so successful that dozens of similar shops soon went into business in the [[Benelux]] countries, [[Germany]], and in other Western European countries.
Throughout the 1960s and 1970s, important segments of the fair trade movement worked to find markets for products from countries that were excluded from the mainstream trading channels for political reasons. Thousands of volunteers sold coffee from [[Angola]] and [[Nicaragua]] in Worldshops, in the back of churches, from their homes, and from stands in public places, using the products as a vehicle to deliver their message: give disadvantaged producers in developing countries a fair chance on the world’s market, and support their self-determined sustainable development. The alternative trade movement blossomed, if not in sales, then at least in terms of dozens of [[Alternative Trading Organization|ATOs]] being established on both sides of the Atlantic, of scores of Worldshops being set up, and of well-organized actions and campaigns attacking exploitation and foreign domination, and promoting the ideals of [[Nelson Mandela]], [[Julius Nyerere]], and the Nicaraguan [[Sandinistas]]: the right to independence and self-determination, to equitable access to the world’s markets and consumers.
===Handicrafts vs. agricultural goods===
In the early 1980s, Alternative Trading Organizations faced a major challenge: the novelty of some fair trade products started wearing off, demand reached a plateau, and some handicrafts began to look “tired and old fashioned” in the marketplace.<ref>Redfern A. & Snedker P. (2002) [http://www.ilo.org/dyn/empent/docs/F1057768373/WP30-2002.pdf Creating Market Opportunities for Small Enterprises: Experiences of the Fair Trade Movement]. International Labor Office. p6</ref> The decline of segments of the handicrafts market forced fair trade supporters to rethink their business model and their goals. Moreover, fair trade supporters during this period became increasingly worried by the impact of the fall of agricultural [[commodity]] prices on poor producers. Many then believed it was the movement's responsibility to address the issue and to find innovative remedies to react to the ongoing crisis in the industry.
In the subsequent years, fair trade agricultural commodities played an important role in the growth of many [[Alternative Trading Organizations|ATOs]]: successful on the market, they offered a much-needed, renewable source of income for producers and provided Alternative Trading Organizations a perfect complement to the handicrafts market. The first fair trade agricultural products were [[tea]] and [[coffee]], quickly followed by dried [[fruits]], cocoa, sugar, [[fruit juices]], [[rice]], [[spices]], and [[nut (fruit)|nuts]]. While in 1992, a sales value ratio of 80% handcrafts to 20% agricultural goods was the norm, in 2002 handcrafts amounted to 25.4% of fair trade sales while commodity food lines were up at 69.4%.<ref>Nicholls, A. & Opal, C. (2004). Fair Trade: Market-Driven Ethical Consumption. London: Sage Publications.</ref>
===Rise of labelling initiatives===
[[Image:Oldftlogos2.jpg|thumb|Early Fairtrade Certifications Marks]]<!-- FAIR USE of Oldftlogos2.jpg: see image description page at http://en.wikipedia.org/wiki/Image:Oldftlogos2.jpg for rationale -->Sales of fair trade products only really took off with the arrival of the first [[Fairtrade certification]] initiatives. Although buoyed by ever growing sales, fair trade had been generally contained to relatively small Worldshops scattered across Europe and to a lesser extent, [[North America]]. Some felt that these shops were too disconnected from the rhythm and the lifestyle of contemporary developed societies. The inconvenience of going to them to buy only a product or two was too high even for the most dedicated customers. The only way to increase sale opportunities was to start offering fair trade products where consumers normally shop, in large distribution channels.<ref>Renard, M.-C., (2003). Fair Trade: quality, market and conventions. Journal of Rural Studies, 19, 87-96.</ref> The problem was to find a way to expand distribution without compromising consumer trust in fair trade products and in their origins.
A solution was found in 1988, when the first [[Fairtrade certification]] initiative, [[Stichting Max Havelaar|Max Havelaar]], was created in the Netherlands under the initiative of [[Nico Roozen]], [[Frans Van Der Hoff]], and Dutch development NGO [[Solidaridad]]. The independent certification allowed the goods to be sold outside the Worldshops and into the mainstream, reaching a larger consumer segment and boosting fair trade sales significantly. The [[Fairtrade labelling|labeling initiative]] also allowed customers and distributors alike to track the origin of the goods to confirm that the products were really benefiting the producers at the end of the [[supply chain]].<ref>Redfern A. & Snedker P. (2002) [http://www.ilo.org/dyn/empent/docs/F1057768373/WP30-2002.pdf Creating Market Opportunities for Small Enterprises: Experiences of the Fair Trade Movement]. International Labor Office. p7</ref>
The concept caught on: in the ensuing years, similar non-profit Fairtrade labelling organizations were set up in other European countries and North America. In 1997, a process of convergence among labelling organizations – or “LIs” (for “Labelling Initiatives”) – led to the creation of [[Fairtrade Labelling Organizations International]] (FLO). FLO is an umbrella organization whose mission is to set the Fairtrade standards, support, inspect and certify disadvantaged producers, and harmonize the Fairtrade message across the movement.
In 2002, FLO launched for the first time an [[International Fairtrade Certification Mark]]. The goals of the launch were to improve the visibility of the Mark on supermarket shelves, facilitate cross border trade, and simplify procedures for both producers and importers. At present, the certification mark is used in over 50 countries and on dozens of different products, based on FLO’s certification for [[coffee]], [[tea]], [[rice]], [[banana]]s, [[mangoes]], [[cocoa]], [[cotton]], [[sugar]], [[honey]], [[fruit juices]], [[nut (fruit)|nuts]], [[fruit|fresh fruit]], [[quinoa]], [[herbs]] and [[spices]], [[wine]], [[Football (ball)|footballs]], etc.
===Fair trade today===
Global fair trade sales have soared over the past decade. The increase has been particularly spectacular among Fairtrade labelled goods: in 2007, these sales amounted to approximately €2.3 billion (US $3.62 billion) worldwide, a 47% year-to-year increase.<ref>Fairtrade Labelling Organizations International (2008). http://www.fairtrade.net/single_view.html?&cHash=d6f2e27d2c&tx_ttnews[backPid]=104&tx_ttnews[tt_news]=41. URL accessed on May 23, 2008.</ref> As per [[December 2007]], 632 producer organizations in 58 developing countries were [[FLO-CERT]] Fairtrade certified.<ref>Fairtrade Labelling Organizations International (2008). www.fairtrade.net. URL accessed on June 16, 2008.</ref>
==Fair trade product certification==
[[Image:Fairtrade.png|thumb|130px|[[International Fairtrade Certification Mark]]]][[Image:TransFair.gif|thumb|125px|[[Fair Trade Certified Mark]] ([[United States|USA]] & [[Canada]])]]<!-- FAIR USE of TransFair.gif: see image description page at http://en.wikipedia.org/wiki/Image:TransFair.gif for rationale -->{{main|Fairtrade certification}}
''Note: Customary spelling of Fairtrade is one word when referring to the FLO product labeling system''
Fairtrade labelling (usually simply Fairtrade or [[Fair Trade Certified Mark|Fair Trade Certified]] in the [[US]]) is a certification system designed to allow consumers to identify goods which meet agreed standards. Overseen by a standard-setting body ([[FLO International]]) and a certification body ([[FLO-CERT]]), the system involves independent auditing of producers and traders to ensure the agreed standards are met.
For a product to carry either the [[International Fairtrade Certification Mark]] or the [[Fair Trade Certified Mark]], it must come from [[FLO-CERT]] inspected and certified producer organizations. The crops must be grown and harvested in accordance with the international Fairtrade standards set by [[FLO International]]. The [[supply chain]] must also have been monitored by [[FLO-CERT]], to ensure the integrity of labelled products.
[[Fairtrade certification]] guarantees not only fair prices, but also the principles of [[ethical purchasing]]. These principles include adherence to [[International Labour Organization|ILO]] agreements such as those banning child and [[slave labour]], guaranteeing a safe workplace and the right to [[unionization|unionise]], adherence to the [[United Nations]] charter of [[human rights]], a fair price that covers the cost of production and facilitates social development, and protection and conservation of the environment. The Fairtrade certification system also promotes long-term business relationships between buyers and sellers, crop prefinancing, and greater transparency throughout the supply chain and more.
The [[Fairtrade certification]] system covers a growing range of products, including [[banana]]s, [[honey]], [[coffee]], [[oranges]], [[cocoa]], [[cotton]], dried and fresh fruits and vegetables, juices, nuts and oil seeds, [[quinoa]], [[rice]], [[spices]], [[sugar]], [[tea]], and [[wine]]. Companies offering products that meet the [[Fairtrade]] standards may apply for licences to use one of the Fairtrade Certification Marks for those products.
The [[International Fairtrade Certification Mark]] was launched in 2002 by [[Fairtrade Labelling Organizations International|FLO]], and replaced twelve Marks used by various Fairtrade labelling initiatives. The new Certification Mark is currently used worldwide (with the exception of Canada and the United States). The [[Fair Trade Certified Mark]], used in Canada and in the United States, also still identifies Fairtrade goods in both countries. Full transition to the new Mark should become reality in the future as it gradually replaces the old Certification Marks in both countries.
==IFAT Fair Trade Organization membership==
[[Image:Ftomark.jpg|thumb|125px|[[International Fair Trade Association|IFAT Fair Trade Organization Mark]]]]<!-- FAIR USE of FTomark.jpg: see image description page at http://en.wikipedia.org/wiki/Image:Ftomark.jpg for rationale -->
In an effort to complement the Fairtrade product certification system and allow most notably handcraft producers to also sell their products outside [[worldshops]], the [[International Fair Trade Association]] (IFAT) launched in 2004 a new Mark to identify fair trade organizations (as opposed to products in the case of [[FLO International]] and [[Fairtrade]]). Called the FTO Mark, it allows consumers to recognize registered Fair Trade Organizations worldwide and guarantees that standards are being implemented regarding working conditions, wages, child labour, and the environment. The FTO Mark gave for the first time all Fair Trade Organizations (including [[handcrafts]] producers) definable recognition amongst consumers, existing and new business partners, governments, and donors.
==Fair trade impact studies==
{{main|Fair trade impact studies}}
Several independent studies have recently measured the impact of fair trade on disadvantaged farmers and workers. The following studies are described and discussed on the [[Fair trade impact studies]] page.
*Brewing Justice: Fair Trade Coffee, Sustainability and Survival
*The Impact of Fair Trade on Producers and their Organizations: A Case Study with Coocafe in Costa Rica
*One Cup at a time: Poverty Alleviation and Fair Trade coffee in Latin America
*Étude d'impact du commerce équitable sur les organisations et familles paysannes et leurs territoires dans la filière café des Yungas de Bolivie
*Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nicaragua?
*Fair Trade on marginalised producers: an impact analysis on Kenyan farmers
*Assessing the Potential of Fair Trade for Poverty Reduction and Conflict Prevention: A Case Study of Bolivian Coffee Producers
==Fair trade and politics==
===European Union===
[[Image:Faitrade display.jpg|thumb|300px|Display of Fairtrade products at the [[Derbyshire County Council]] head office]]
As early as 1994, the European Commission prepared the “Memo on alternative trade” in which it declared its support for strengthening Fair Trade in the South and North and its intention to establish an EC Working Group on Fair Trade. Furthermore, the same year, the [[European Parliament]] adopted the “Resolution on promoting fairness and solidarity in North South trade” (OJ C 44, 14.2.1994), a resolution voicing its support for fair trade.
In 1996, the [[Economic and Social Committee]] adopted an “Opinion on the European “Fair Trade” marking movement”. A year later, in 1997, the document was followed by a resolution adopted by the European Parliament, calling on the [[European Commission|Commission]] to support Fair Trade [[banana]] operators. The same year, the European Commission published a survey on “Attitudes of EU consumers to Fair Trade bananas”, concluding that Fair Trade bananas would be commercially viable in several EU Member States.<ref name="FINE2006">FINE (2006). Business Unusual. Brussels: Fair Trade Advocacy Office</ref>
In 1998, the European Parliament adopted the “Resolution on Fair Trade” (OJ C 226/73, 20.07.1998), which was followed by the Commission in 1999 that adopted the “Communication from the Commission to the Council on “Fair Trade” COM(1999) 619 final, 29.11.1999.
In 2000, public institutions in Europe started purchasing Fairtrade Certified coffee and tea. Furthermore, that year, the [[Cotonou Agreement]] made specific reference to the promotion of Fair Trade in article 23 g) and in the Compendium. The European Parliament and Council Directive 2000/36/EC also suggested promoting Fair Trade.<ref name="FINE2006" />
In 2001 and 2002, several other EU papers explicitly mentioned fair trade, most notably the 2001 Green Paper on [[Corporate Social Responsibility]] and the 2002 Communication on Trade and Development.
In 2004, the [[European Union]] adopted the “Agricultural Commodity Chains, Dependence and Poverty – A proposal for an EU Action Plan”, with a specific reference to the Fair Trade movement which has “been setting the trend for a more socio-economically responsible trade.” (COM(2004)0089).
In 2005, in the European Commission communication “Policy Coherence for Development – Accelerating progress towards attaining the Millennium Development Goals”, (COM(2005) 134 final, 12.04.2005), Fair Trade is mentioned as “a tool for poverty reduction and sustainable development”.<ref name="FINE2006" />
And finally, on [[July 6]], [[2006]], the European Parliament unanimously adopted a resolution on Fair Trade, recognizing the benefits achieved by the Fair Trade movement, suggesting the development of an EU-wide policy on Fair Trade, defining criteria that need to be fulfilled under Fair Trade to protect it from abuse and calling for greater support to Fair Trade (EP resolution “Fair Trade and development”, 6 July 2006)
"This resolution responds to the impressive growth of Fair Trade, showing the increasing interest of European consumers in responsible purchasing," said [[European Green Party|Green]] MEP [[Frithjof Schmidt]] during the plenary debate. [[Peter Mandelson]], EU Commissioner for External Trade, responded that the resolution will be well-received at the [[European Commission|Commission]]. "Fair Trade makes the consumers think and therefore it is even more valuable. We need to develop a coherent policy framework and this resolution will help us."<ref>Frithjof Schmidt MEP (2006). [http://www.frithjof-schmidt.de/Parliament_in_suppor.163.0.html Parliament in support of Fair Trade] URL accessed on August 2, 2006.</ref>
===Belgium===
[[Belgium|Belgian]] lawmakers discussed as early as 2006 a possible legislation on fair trade. In January 2008, lawmakers proposed possible definitions and three proposals were debated. A consensus on a common definition, however, has not yet been reached.<ref>RTBF (January 2008) Le commerce équitable veut se doter de lois, http://www.rtbf.be/info/societe/ARTICLE_149630</ref>
===France===
In 2005, [[France|French]] [[French National Assembly|parliament]] member [[Antoine Herth]] issued the report “40 proposals to sustain the development of Fair Trade”. The report was followed the same year by a law, proposing to establish a Commission to recognize Fair Trade Organisations (article 60 of law no. 2005-882, Small and Medium Enterprises, 2 August 2005).<ref>FINE (2006). Business Unusual. Brussels: Fair Trade Advocacy Office</ref>
In parallel to the legislative developments, also in 2006, the [[France|French]] chapter of [[International Organization for Standardization| ISO]] (AFNOR) adopted a reference document on Fair Trade after five years of discussion.
===Italy===
In 2006, [[Italy|Italian]] lawmakers started debating how to introduce a law on fair trade in [[Parliament of Italy|Parliament]]. A consultation process involving a wide range of stakeholders was launched in early October.<ref>Nembri, Antonietta (October 4, 2006) [http://www.vita.it/articolo/index.php3?NEWSID=72176 Equo e solidale: un convegno sul futuro normativo.] URL accessed on October 28, 2006.</ref> A common definition of fair trade was most notably developed. However, its adoption is still pending as the efforts were stalled by the [[2008 Italian political crisis]].
===Netherlands===
The Dutch province of [[Groningen (province)|Groningen]] was sued in 2007 by coffee supplier [[Douwe Egberts]] for explicitly requiring its coffee suppliers to meet fair trade criteria, most notably the payment of a minimum price and a development premium to producer cooperatives. Douwe Egberts, which sells a number of coffee brands under self-developed ethical criteria, believed the requirements were discriminatory. After several months of discussions and legal challenges, the province of Groningen prevailed in a well-publicized judgement. Coen de Ruiter, director of the [[Stichting Max Havelaar|Max Havelaar Foundation]], called the victory a landmark event: "it provides governmental institutions the freedom in their purchasing policy to require suppliers to provide coffee that bears the fair trade criteria, so that a substantial and meaningful contribution is made in the fight against poverty through the daily cup of coffee".<ref>Max Havelaar Foundation (2007). [85.82.218.199/fileadmin/Bruger_filer/Dokument_database/IKAvaerktoej/EU_siden/Max_Havalaar.pdf Dutch Province of Groningen wins summary brought by Doug Egberts and can continue specifying fair trade coffee]</ref>
===United Kingdom===
In 2007, both Scottish and Welsh governments were actively attempting to become the "world's first fair trade country". In Wales, the campaign to make Wales the world’s first Fair Trade country was launched in 2004 by the [[National Assembly for Wales]].<ref>Fair Trade Wales (2007) [http://www.gwe.nu/fairtrade/ Fair Trade Wales] URL accessed on June 24, 2007.</ref> In Scotland, First Minister [[Jack McConnell]] pledged that Scotland will aim to become a "[[Fairtrade Town|Fair Trade Nation]]".<ref>Scottish Executive (2007). [http://www.scotland.gov.uk/News/Releases/2006/07/03112221 Scotland set to become Fair Trade nation] URL accessed on June 24, 2007.</ref>
In June 2007, a [[Select Committee (Westminster System)|parliamentary committee]] published the report [http://www.publications.parliament.uk/pa/cm200607/cmselect/cmintdev/356/356i.pdf Fair Trade and Development], criticising the government for "failing to adequately support fair trade despite having said it wanted to help poor countries trade their way out of poverty". The MPs, led by [[Malcolm Bruce]], said the [[Department for International Development]] "had not kept pace with growing support for fair trade among the public and retailers".
The committee report examined several ethical trading schemes and concluded that fair trade was "gold standard in terms of trading relations with producers". It called for greater support both domestically and internationally of fair trade organisations and recommended making a senior official responsible for fair trade within the government. The report also suggested to commission research on the feasibility of a labelling scheme which will force all retailers to show how much they paid farmers and workers in the developing world for each particular product.<ref>International Development Committee (June, 2007) [http://www.publications.parliament.uk/pa/cm200607/cmselect/cmintdev/356/356i.pdf Fair Trade and Development] URL accessed on June 24, 2007.</ref>
== Common justifications for fair trade ==
[[Image:FairtradeRiceIndia.jpg|thumb|350px|Fairtrade Certified [[Rice]] Producer in [[Thailand]]]]Implicit and often explicit in fair trade is a criticism of the current organization of international trade as being "unfair". Fair trade advocates argue in favor of the need for fair trade by mentioning the purported [[microeconomic]] [[market failures]] of the current system and an alleged commodity crisis and its impact on [[developing country]] producers.
===Free trade and market failures===
All [[FINE]] members and fair trade federations support in theory the principles of unhindered [[free trade]]. However, as [[Alex Nicholls (academic)|Alex Nicholls]], social entrepreneurship professor at [[Oxford University]], states, the "key conditions on which [[Classical liberalism|classical]] and [[Neoliberalism|neo-liberal]] trade theories are based are notably absent in [[rural]] agricultural societies in many [[developing country|developing countries]]."<ref name="Nicholls2004">Nicholls, A. & Opal, C. (2004). Fair Trade: Market-Driven Ethical Consumption. London: Sage Publications. p17-19</ref> Perfect market information, perfect access to markets and [[Credit (finance)|credit]], and the ability to switch production techniques and outputs in response to market information are fundamental assumptions which "are fallacious in the context of agricultural producers and workers in developing countries".<ref name="Nicholls2004" />
The example of coffee is particularly telling: "since it takes from three to four years for a coffee plant to produce significant quantities of coffee, and up to seven years before the plant reaches peak productivity, it is difficult for coffee farmers to react quickly to price fluctuations. As a result, coffee supply often increases even as market prices plummet. Further, this leads to a collective action problem, where each farmer has an incentive to increase production as price falls in order to reduce per unit cost and increase his or her margins. In aggregate, this activity creates a negative feedback loop and further depresses the world price."<ref name="Conroy">Grodnick A. & Conroy M. (2007). Fair Trade: The Challenges of transforming globalization. Routledge. p86</ref>
According to Fair trade proponents, this example clearly shows how the absence of perfect microeconomic conditions can nullify or even reverse the potential gains to producers from [[trade]]. While [[Alex Nicholls (academic)|Nicholls]] agrees that the win-win situation for all actors involved may be broadly correct in some markets, nevertheless, "within developing countries market conditions are not such that producers can unambiguously be declared to be better off through trade."<ref name="Nicholls2004" /> The existence of these [[market failure]]s lessens the capacity trade has to lift developing countries out of [[poverty]].
Fair trade is seen as an attempt to address these purported market failures by providing producers a stable price for their crop, business support, access to premium Northern markets, and better general trading conditions.
===The commodity crisis===
Fair trade advocates also often point out that unregulated competition in global commodity markets ever since the 1970s and 1980s has encouraged a price "[[race to the bottom]]". During the 1970-2000 period, prices for many of the main agricultural exports of developing countries, such as [[sugar]], [[cotton]], [[cocoa]], and [[coffee]], fell by 30 to 60 percent.<ref>Agricultural Commodity Chains, Dependence and Poverty. A proposal for an EU Action Plan. European Commission, 2004.</ref> According to the [[European Commission]], “the abandonment of international [[Economic interventionism|intervention policies]] at the end of the 1980s and the commodity market reforms of the 1990s in the developing countries left the commodity sectors, and in particular small producers, largely to themselves in their struggle with the demands of the markets”. Today, “producers… live an unpredictable existence because the prices for a wide range of commodities are very volatile and in addition follow a declining long-term trend”.<ref>Agricultural Commodity Chains, Dependence and Poverty. A proposal for an EU Action Plan. European Commission, 2004.</ref> The total loss for developing countries due to falling commodity prices has been estimated by the [[Food and Agricultural Organisation]] (FAO) to total almost $250 billion during the 1980-2002 period.<ref name="FINE2006" />
Millions of poor farmers are dependent on commodities and on the price they receive for their [[harvest]]. In about 50 developing countries, three or fewer primary commodity exports constitute the bulk of export revenue.
Many farmers, often without other means of subsistence, are obliged to produce more and more, no matter how low the prices are. Research has shown{{Fact|date=April 2008}} that those who suffer most from declines in commodity prices are the rural poor — i.e. the majority of people living in developing countries. Basic [[agriculture]] employs over 50% of the people in developing countries, and accounts for 33% of their GDP.<ref>UNCTAD Press Release, “UNCTAD Calls For Policy Changes to Avoid Throwing World Economy Into Recession,” 25 August 1998.</ref>
Fair trade supporters believe current market prices do not properly reflect the true costs associated with production; they believe only a well-managed stable minimum price system can cover environmental and [[social cost|social]] production costs.
==Criticism==
{{main|Fair trade debate}}
Fair trade's increasing popularity has drawn criticism from both ends of the [[political spectrum]]. Some economists and [[think tanks]] see "fair trade" as a type of [[subsidy]] that impedes growth. Segments of the [[Left-wing politics|left]] criticize fair trade for not adequately challenging the current trading system.
===Price distortion argument===
[[Image:Effect of a Price Floor.gif|right|thumb|270px|Effects of a Price Floor]]
'''Criticism''': Fair trade opponents such as the [[Adam Smith Institute]] claim that similar to other [[farm subsidies]], fair trade attempts to set a [[price floor]] for a good that is in many cases above the [[market price]] and therefore encourages, as fair trade opponents claim, existing producers to [[produce]] more and new producers to enter the market, leading to excess supply.<ref>http://www.adamsmith.org/pdf/groundsforcomplaint.pdf</ref> Through the laws of [[supply and demand]], excess supply can lead to lower prices in the non-Fair Trade market.<ref>http://www.adamsmith.org/pdf/groundsforcomplaint.pdf</ref>
In 2003, [[Cato Institute]]'s vice president for research [[Brink Lindsey]] referred to fair trade as a “well intentioned, [[Economic interventionism|interventionist]] scheme...doomed to end in failure." Fair trade, according to Lindsey, is a misguided attempt to make up for [[market failures]] in which one flawed pricing structure is replaced with another.<ref>Brink, Lindsey. (2004). [http://www.freetrade.org/node/68 Grounds for Complaint: Understanding the "Coffee Crisis"]. URL accessed on August 8, 2007.</ref> Lindsey's comments echo the main criticisms of Fair Trade, claiming that it "leads fair trade producers to increase production." While benefiting a number of Fair Trade producers over the short run, fair trade critics worry about the impact on long run development and economic growth. Economic theory suggests that when prices are low due to surplus production, adding a subsidy or otherwise artificially raising prices will only exacerbate the problem by encouraging more supply<ref>Milton Freidman, Free to Choose 1979</ref> and also encouraging workers into unproductive activities.<ref>[http://www.citizenshipfoundation.org.uk/main/comps.php?56 Citizenship Foundation: 2006 entries Lakha<!-- Bot generated title -->]</ref>
'''Response''': The [[Fairtrade Foundation]] counters the price distortion argument by claiming that fair trade does not ‘fix prices’. "It rather has a minimum floor price that ensures farmers can meet the costs of sustainable production should market prices fall below this level. The minimum price is not a fixed price but the starting point for a market-based price negotiation. Many fair trade growers routinely earn more than this for the quality, type of coffee bean (or other product) or the particular origin they offer. The minimum price mechanism provides the most vulnerable people in the supply chain the security to meet their basic costs in time of crisis. Effectively, it provides a safety net should markets fall below a level considered necessary for farmers to earn back the costs of sustainable production".<ref>The Fairtrade Foundation (2008) Responding to Unfair Trade</ref>
Moreoever, the fair trade minimum price only applies if the market price is lower than this. When market prices exceed the minimum price, traders must negotiate on the basis of market prices, not fair trade minimums.<ref>The Fairtrade Foundation (2008) Responding to Unfair Trade</ref>
Several academics, including Hayes,<ref>Hayes, M. G. (2006) On the efficiency of Fair Trade, ''Review of Social Economy'', 64 (4), 447-68</ref> Becchetti, and Rosati<ref name="Becchetti"/> also identify two other counterarguments to this criticism.
#First, in many cases the exchange between producers and intermediaries does not occur in a competitive framework.<ref name="Becchetti"/> In such case the market price is a distortion because it does not reflect the productivity of producers but their lower market power.<ref>[http://www.udbs.dur.ac.uk/fairtraderesearch/The%20Economics%20of%20Fair%20Trade%20plain%20guide.pdf Hayes, M. G. and Moore, G. A. (2005)''The Economics of Fair Trade:a guide in plain English'']</ref>
#Second, the price distortion argument does not take into account the principles of [[product differentiation]]. [[Coffee]], for example, cannot be compared to other commodities such as [[Petroleum|oil]]: there is not one single type of coffee but instead many different [[brands]] that are differentiated from one another in terms of quality, blends, packaging, and now also "social responsibility" features. Consumer demand and taste define what different market prices are acceptable for each of these products.<ref name="Becchetti"/> In this sense, fair trade can be considered as a market-driven innovation in the food industry that creates a new range of products for which a growing segment of consumers are willing to pay more based on environmental and social responsibility claims.<ref name="Becchetti">L.Becchetti F.C. Rosati, 2006, [http://econpapers.repec.org/paper/rtvceiswp/209.htm Globalisation and the death of distance in social preferences ad inequity aversion: empirical evidence from a pilot study on fair trade consumers, CEIS Working Paper, n.216 and World Economy (forth.)]</ref>
==References==
{{reflist|2}}
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==See also==
{{Fair trade}}
{{commons|Fair trade}}
[[Category:Fair trade|*]]
[[Category:Alternative economy]]
[[Category:Social economy]]
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