When Hollywood blockbuster Blood Diamond hit theaters across the world, moviegoers were shocked to realize that the so-called diamond trade could mean grossly unfair exploitation of developing countries by their rich industrialized counterparts. Fiances probably suffered guilt trips when buying an engagement ring for their beloved.
But such “rape” of the South - parts of Africa, South America and Asia - may not be limited to trading precious stones. Some argue that daily commodities like coffee are involved, as third world producers are inadequately paid for their labor and produce. In reaction to “unfair trade,” a social movement dubbed “fair trade” has gained momentum worldwide.
Case Example: Coffee
Coffee, after oil, is the second most exchanged item in the global trade market. Every day, roughly 2.5 billion cups of coffee is consumed globally, and coffee lovers can enjoy a large variety, from bittersweet Nicaraguan to fragrant Costa Rican blends.
But the reality of coffee production in developing countries is far from aromatic.
According to a special report by the Korean Broadcasting System, the average worker at a coffee plantation in Kenya earns about two dollars per day - after slaving away under the sun for more than 10 hours. Meanwhile you, a coffee drinker in Korea, spend twice the amount for a cup of coffee at a local cafe.
The four-dollar drink contains at most 14 grams of coffee bean, but a farmer cannot expect to be paid more than a dollar per kilogram of fine quality coffee beans (enough to brew more than 70 cups of the drink). Less than 0.5 percent of what you pay for a cup goes around to hardworking planters and laborers.
Fair Trade and Sustainable Development
The fair trade movement judges such systems as unjust, and advocates fairer exchange between marginalized producers in Africa, Asia and Latin America and consumers in the industrialized countries.
Movements for fair trade began around 1950, when various community and religious groups made attempts to commercialize handicraft. The United States initiative called Ten Thousand Villages began buying needlework from Puerto Rico in 1946 and sold them in the US. Oxfam UK sold crafts made by Chinese refugees in Oxfam shops and set up the first Fair Trade Organization in 1967.
The United Nations Conference on Trade and Development (UNCTAD) gave the equitability concept a boost in 1968 with its motto “Trade Not Aid” at its second conference.
In 1973, coffee emerged as a major fair trade product, and today accounts for up to half of the turnover of some fair trade organizations. Other goods include tea, sugar, chocolate, various fruits and vegetables, ice cream, wine and cotton products.
Fair trade clothes have also gained wide popularity. British brand People Tree boasts a colorful array of fashionable clothing for men and women that are not only fair trade but also made mostly from fair trade certified cotton.
More recently, joint efforts took shape in Europe to guarantee producers fair compensation as well as empowerment to achieve security and economic self-sufficiency. The term “fair trade” was commonly adopted among supporters of the alternative trading idea.
In 1988, Max Havelaar introduced the concept of labeling fair trade goods in the Netherlands. In 1997, Fairtrade Labelling Organizations International (FLO) became the umbrella organization for the European Union’s four main labeling groups. FLO unites 21 national initiatives across Europe, Japan, North America and Australia/New Zealand.
FLO and three other influential organizations ? International Fair Trade Association (IFAT), Network of European Worldshops (NEWS), and European Fair Trade Association (EFTA) ? are collectively referred to as FINE (FLO, IFAT, NEWS, EFTA). FINE runs a joint advocacy office in Brussels, Belgium.
According to FINE, fair trade is defined as “a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade.”
How Fair Trade Works
- Producer organizations cultivate products or produce a wide variety of marketable products (foods and handicrafts) and export them to consumer countries. Workers involved in production must be paid minimum levels of wages.
- Fair trade importing organizations buy products from producer organizations at a fair price. Producers must be paid above market prices for their goods. The minimum price covers the cost of sustainable production and the extra premium is invested in social or economic development projects.
- In their respective home countries, the importing organizations operate as wholesalers or retailers, or sometimes as a combination of both. Products bear fair trade certifications.
Criticisms of the Movement
The fair trade movement is widely praised for its efforts to lift developing countries out of poverty, but is not free of criticism. Critics say fair trade organizations attempt to set a price floor for a product like farm subsidies. This leads to excess supply, and according to the law of supply and demand, lower prices may result in the non fair trade market.
Brink Lindsey, senior fellow at the Cato Institute in Washington, D.C., assesses fair trade in his 2004 report on the coffee crisis “Grounds for Complaint?” He called the movement “a misguided attempt to make up for market failures,” encouraging market inefficiencies and overproduction.
“Symbolic victories are the only kind that the fair trade movement is likely to achieve,” wrote Lindsey. “The juxtaposition of the designer coffee boom and rock-bottom raw material prices strikes market critics as compelling evidence of unfairness and exploitation.”
Others, such as French author and broadcaster Jean-Pierre Boris, pointed out that fair trade stops short of actively advocating immediate trade policy changes that would have a larger impact on disadvantaged producers’ lives.
A Growing Fair Trade Market, Nevertheless
Despite criticism, fair trade has become one of the fastest expanding markets in the world According to a survey by Jean Marie Krier, “Fair Trade in Europe 2005,”. Sales in Europe have been growing annually at an average 20 percent since 2000. The annual net retail value of fair trade products sold across the continent (660 million euros) is double that of the figure five years ago.
Although fair trade products account for a miniscule portion of global trade, they have become significant in some European countries. In Switzerland, for example, 47 percent of bananas, 28 percent of flowers and nine percent of the sugar are fair trade labeled.
In the UK, a market with eight times the population of Switzerland, labeled products have achieved considerable market shares of tea (five percent), bananas (5.5 percent) and ground coffee (20 percent).
Fair trade products are found in 55,000 supermarkets all over Europe. FLO claims that more than one million workers and farmers benefited from Fairtrade, and including their dependents, 5 million people were affected in 2005.
The Conscious Consumer
Fair trade organizations are actively engaged in supporting producers and in raising awareness, but the consumer’s role is vital.
“We want people to feel that by buying Fairtrade Mark products they are part of a movement for change, a model of trade that brings positive social and economic development for poor communities,” Harriet Lamb, Executive Director of the Fairtrade Foundation, is quoted as saying in the Fairtrade Foundation newsletter Fair Comment (Spring 2007).
Fairtrade Foundation is an independent certification body that awards the Fairtrade mark to products that meet international Fairtrade standards set by FLO.
“Fairtrade is growing at a phenomenal rate, but there’s still a very long way to go,” she insisted. “That’s why it’s so important that people don’t see Fairtrade just as a one-off purchase, but as part of their everyday lifestyle and commitment to bringing about positive change.”
Countless people all over the world sip their coffee every morning, oblivious of its actual costmillions of coffee planters and laborers in developing countries being inadequately compensated for their sweat and tears.
The economic soundness of measures taken by fair trade organizations, as indicated by critics, has yet to be proven. But the social movement points to one important lesson: the phenomenal role of consumer power, which each and every one of us possesses.
“Fair trade teaches us that consumers are not condemned to be only bargain-hunters¡¦ Fair trade reminds us that trade is about people, their livelihoods, their families, sometimes their survival,” said European Union Trade Commissioner Peter Mandelson during a conference on fair trade in June 2005.
Consumption is integral to making the market roll in any economic model: informed consumers can get great deals seeking profitable price-quality ratios, but the conscious consumers can change the world.