View Point
July 22, 2005
Moving towards fairer trade

Trade liberalization is being advocated in contemporary development circles as holding the key to assisting low-income countries to boost growth and eradicate poverty. But a significant number of developing countries worry that they have more to lose than gain from freer trade, as most of them already enjoy special preferences in rich-country markets. Since vulnerabilities tend to be concentrated in specific countries and on specific products, there is a school of thought, which suggests that these vulnerabilities can be addressed through targeted financial and technical assistance by the global community.{{more}}

Increasingly however, proposals are being put forward in trade and development circles, which might see winners in the Doha Round, trade negotiations being asked to recycle some to their tax revenues. While this is being played out under the auspices of the World Trade Organisation (WTO) Doha Development Agenda, countries like our own have to see how effectively they can take charge of their own development. It is in this context that “Viewpoint” places the spotlight on the concept of “Fair Trade”, and the manner in which it is changing the way that business is done.

The Fair Trade Federation (FTF) is an association of fair trade wholesalers, retailers and producers whose members are committed to providing fair wages and good employment opportunities to economically disadvantaged artisans and farmers worldwide. FTF directly links low income producers with consumer markets and educates consumers about the importance of purchasing fairly traded products which support living wages and safe and healthy conditions for workers in the developing world. It also acts as a clearinghouse for information on fair trade and provides resources and networking opportunities for its members. By adhering to social criteria and environmental principles, Fair Trade Organizations (FTO’s) foster a more equitable and sustainable system of production and trade that benefits people and their communities. A small percentage of our bananas to the U.K is marketed under the fair trade label, but there remains a vast untapped potential in which our farmers and artisans in particular, can become engaged.

How does fair-trade work? Retailers of fair trade products work as directly as possible with the farmers and artisans to reduce the need for middlemen, and allow more of the retail price to be passed on to the original producers. To compensate, the producers organize themselves into cooperatives and take on responsibilities the middlemen would otherwise perform. For instance, a cooperative may purchase a truck for its farmers to transport their wares while the buyers often help producers with product development and may even offer financing so that their producers always have access to working capital.

Fair trade relationships are similar to the type of partnerships some manufacturers foster with suppliers. The producers are paid prices that enable them to have reasonable resources for their farms and communities. In return buyers are able to obtain high quality products and develop a sustainable supply chain. To verify that the farmers and artisans get a fair trade price – one that can provide a living wage and leave enough for producers to reinvest in their business – independent groups audit the books (good corporate governance practices) of both the fair trade producers and the distributors who buy from them. Once the auditors give their all clear, distributors can label the products as certified fair- trade goods.

For agricultural products, coming up with an acceptable fair trade price is fairly straight forward as the cost of growing crops should not be difficult to calculate. When it comes to handcraft though, the amount of labour, material and skills – set to create different products varies widely. Some fair trade companies commit to purchasing from artisans on an ongoing basis and pay for goods in advance so that the workers don’t have to wait to get paid. In selecting items to put on sale, the company chooses those which reinforce cultural traditions and are made using environmentally sensitive methods.

The concept of fair trade started modestly in the 1940s when a Mennonite volunteer travelled from Pennsylvania USA, to Puerto Rico where she met a group of women who were embroidering attractive table linens, but had no way to market them outside their own village. She took samples back to the U.S where she found a ready market among women’s groups and launched what became Ten Thousand Villages, now a 105 store retail chain that has some US $15million in annual sales.

Such creative endeavours don’t all have to be driven by public sector initiatives, once a supportive environment is provided to foster their growth and development. They will certainly provide opportunities for more people to be involved in the development process and thereby enhance the quality of life for a broader cross section of our community.