A lot of consumers in Western nations recognise that the
world's wealth is distributed very unequalIy and
that products are far too cheap to provide developing
country producers with a decent living. They want to
help change the situation, but don't know how to go about
it.
The 'fair trade' approach aims to alleviate poverty in
the South by establishing a trading system based on
equal partnership and respect, allowing marginalised
producers to gain access to Northern markets. Certain
criteria are agreed by both sides. As a minimum, the
producers commit themselves to democratic functioning
and decision-making procedures within their organisations.
In return, fair trade bodies agree to provide direct
access to the European market for their products avoiding
middlemen and speculators as far as possible. They
pay a fair price for the goods: enough to cover the producers'
basic needs and production costs with a margin
for investment. 40%-50% of the price is paid in advance,
and a long-term working relationship is created
between the two sides.
In addition to these basic elements, several other issues
are usually agreed. For instance, the activity of the
Southern partner should be economically, environmentally
and socially sustainable. It should provide
acceptable working conditions and contribute to the development
of the community, creating jobs, where
possible. The development of an export product must not
jeopardise local food security, and the processing
should be done, as far as possible, in the South.
The North's 'Alternative Trading Organisations' (ATOs)
agree to provide regular feedback to producers on
market trends, and health and safety regulations. They
provide finance and training to build up the
management capacity of the producer groups, and enable
participation in campaigns to promote fair trade and
create an international trade structure that benefits
producers. The role of women in the decision-making
process, both within the Southern producer group and
the Northern fair trade organisations, is also
emphasised.
Who are the producers?
These include federations of producers, cooperatives,
workshops for the handicapped, state organisations,
private companies, and increasingly, Northern groups
producing goods in the context of the 'social' economy.
Any group respecting the aforementioned criteria is a
potential partner of the fair trade movement. However,
for a producer group to be accepted, it must be able
to produce a marketable product, at a reasonable price,
and in sufficient quantities. EFTA currently imports
products from some 800 trading partners in 45 different
countries in the South - representing 800,000 producer
families or approximately five million people.
Producers gain direct access to the EU 'fair trade' market,
often leading to subsequent sales in the
mainstream market. They are guaranteed a fair price and
decide themselves how the extra premium they
receive should be distributed in the best interests of
their communities. Most producers only market part of
their total production under the fair trade arrangement,
the rest being sold under the usual 'mainstream'
conditions. But payment of a fair price for even a small
part of the total production can have an upward
effect on prices. When ATOs buy up part of the production
at a higher price, this reduces the availability of
the product to the middlemen who are forced to offer
more. This phenomenon has been observed in honey
production in Mexico, cocoa in Bolivia and tea in Zimbabwe.
The fact that fair trade organisations pay part of
the price in advance is also crucial for smallscale producers
- who can then buy inputs and perhaps get through
the season without having to go to the money lenders.
Likewise, the stability offered by guaranteed payment -
whether advance or promptly on deliveryr is greatly valued.
Many ATOs also offer producers training and
assistance. Another benefit is that producers gain confidence
to approach a trading system they once saw as
too complicated. Coffee farmers in Tanzania, for example,
now speak of international exchanges in London or
New York with a real understanding of the impact these
have on their lives.
A fair price
The fair trade price covers the cost of producing the
item, including social and environmental costs. It must
provide producers with a decent standard of living and
a margin for investment. In the case of primary
commodities like coffee or cocoa, where the price is
determined on international exchanges, the fair trade
movement pays the international price, plus an additional
margin.
Fair prices to producers need not always mean higher prices
for consumers. Approximately half the prices for
fair trade products are higher than the market price,
and half are lower. Many products are highly
competitive. This is so for the recently launched 'fair
trade' labelled bananas sold in the Netherlands and
Switzerland. The absence of intermediaries in the distribution
chain, and the invaluable contribution of the
movement's volunteers, make this possible. Not all consumers
expect to pay a price which does not guarantee a
decent standard of living to the producers. Recent surveys
reveal that Europeans are becoming increasingly
discerning in their choices and are more willing to pay
a higher price for a product reflecting criteria they
believe to be important. For example, in the UK, 86%
of consumers in a survey said they were now aware of
fair trade labelled products and 68% said they were willing
to pay more. The figures for Sweden were 84%
and 64% respectively. About two thirds of Dutch and Belgians
also knew about fair trade labelling.
2,500 products
The Fair Trade Movement currently offers a choice of up
to 2,500 products, many of which are superior
quality. These include chocolate with an extra high cocoa
content, chocolate guaranteed free of genetically
modified soya; coffee that competes with the highest
quality coffees on mainstream markets, an increasing
range of organic products, and textiles printed with
vegetable rather than chemical dyes.
In the early years, handicrafts dominated fair trade almost
exclusively. The range now includes jewellery,
household items, toys, artworks and giftware, while clothing
has recently been added to the list.
Hand-crafted products are of immense practical and cultural
value, reflecting the diversity of available
materials and the expertise of the producers.
In 1973, coffee was introduced for the first time and
quickly became one of the fair trade range's 'anchor'
products. Tea, cocoa, chocolate, sugar, wine, fruit juices,
nuts, spices, rice and other cereals followed. The
most recent addition is 'fair trade' bananas. On average,
food products represent 60% of fair trade retail
turnover. Half of this figure comes from coffee sales.
Prospects
The expansion of fair trade is largely due to two complementary
developments: professionalisation and a
strong European dimension. The building of production
and managerial capacity among Southern producers has
led to a big improvement in the quality and choice of
products on offer. Fair trade organisations in the North,
meanwhile, have restructured to ensure greater efficiency
in the use of their own resources. 'World shops'
are now found in many busy shopping centres, opening
hours have increased and window design, packaging and
management have all improved. Good use is made of the
media and promotional events.
EFTA was set up in 1990 in response to the growing centralisation
of decision-making and production at a
European level, and in recognition of the increasingly
competitive retail market. It represents 12 importing
organisations and 60% of European Fair Trade imports.
The Network of European World Shops (NEWS)
represents 2,500 outlets in 16 national associations.
In April 1997, the International Fair Trade Labelling
Organisation (FLO) was established. By capitalising on
the specific advantages of each member, these
European networks reduce individual costs and hence increase
competitivity.
A key aim of the movement is to raise awareness of the
degrading conditions under which international trade
and production is carried out, and to campaign for an
improvement. Mainstream business - from the producer
to the consumer - must recognise their responsibility
for the economic, social and ecological effects of
production and trade. To ensure that the fair trade movement's
own operations comply with the proper
standards, it has initiated a system of control known
as 'Social Auditing', which has aroused considerable
interest in both commercial and political circles.
The movement has also campaigned tirelessly for the introduction
of fair trade principles in legislation
governing EU and Member State dealings with the South.
One campaign, where EFTA has taken the lead since
1995, involves the proposed directive allowing vegetable
fats to be substituted for cocoa butter up to a
maximum of 5% in finished chocolate products. So far,
half a million signatures protesting against this
proposal have been collected. Postcards have been sent
to governments, MEPs and chocolate companies.
European institutions have shown some interest in the
fair trade issue. In 1991, the Parliament adopted a
resolution on 'coffee consumption as a means of active
support for small producers' and on making fair trade
coffee available within the European institutions. This
was followed in 1994 by another Parliamentary
resolution on promoting; 'fairness and solidarity in
North South trade'. The Commission responded in 1994
with a 'memorandum on alternative trade', stating its
support for strengthening fair trade and its intention to
establish an EC working group on the issue. In 1996,
the Economic and Social Committee adopted a
positively-worded opinion on the 'European Fair Trade
marketing movement.' Finally, the Parliament recently
passed a resolution on bananas which urges the Commission
to facilitate access for new fair trade operators.
But European institutions could do better. Positive incentives
for fair trade could include preferential import
duties and VAT rates for products carrying a fair trade
label. EU Member States should act to award tax
breaks to companies trading fairly and should provide
start-up capital for ATOs. An there should be a
coordinated approach to fair trade by the EU an its Member
States.
Fair trade has also received significant Commission support
to awareness-raising. But the Commission must also
coordinate the activities of its various services and
mobilise the resources more effectively. There should be
support, notably in the form of credit, technical assistance
and capacity building for Southern producers -
but also for fair trade organisations in the North. And
the EU should recognise existing fair trade labels
which have now been globally harmonised under the FLO.
(by Brid Bowen . Full text of an article from The Courier ACP-EU. No. 166,
November-December 1997: pages 72-74)