Fair Trade has expanded massively in the last decade – Here’s a few reasons why I like Fair Trade and why I don’t like the neoliberalised free market. I should have posted this for #worldfoodday – better late than never. Obviously relevant to Global Development course – a post on the limitations of fair trade is coming later

 

Fair Trade – Core principles and practices

‘Fair Trade involves thinking about the practicalities of trade and asking questions such as ‘can trade be made to work for rather than against commodity producers in the South, can the process of production be democratized, ownership shared, organized labour encouraged, child labour unnecessary, environmental sustainability and human rights promoted. Can consumers be induced to think and pay more than they currently think is necessary? Is it possible to survive and even thrive in and against the conventional market place? Is there any bottom line other than price and profit?’^[iii]

‘Fair trade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fair trade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fair trade offers consumers a powerful way to reduce poverty through their every day shopping.’^[iv]

 

What is ‘Fair Trade’?

 A useful and accessible starting point is to turn to in the New Internationalist’s ‘no-nonsense guide to fair trade, in which the author argues that ‘Fair trade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives.’ In concrete terms, Ransom distinguishes 7 ideals (see below) that businesses involved in the fair trade movement should be committed to. Despite recent concerns that Fair trade is not as ‘fair’ as it might be in practices, these 7 ideas are still firmly embedded in Fair trade International’s standards for producers and buyers  and include the following

1.         Democratic organization

2.         Recognized Trade unions

3.         Decent working conditions

4.         Environmental sustainability

5.         The minimum price guarantee

6.         The social premium

7.         Long-Term relationships 

Given that one of the core principles of the fair trade movement is ‘democratic organisation’ it is both inevitable and healthy that there is ongoing debate over how these ideals manifest themselves in practice, a factor, along with the global scope and rapid expansion of the movement, which helps to explain why there is such a wide variety of fair trade labeling initiatives.  This said, it is at least possible to discern a shared set of core ideals that, in principle at least, set fair trade apart from ‘free trade’

The democratic imperative in fair trade suggests that to be truly fair, food production and distribution would involve the creation of new food networks, smaller scale, and less oligopolistic than they are today, and the idea of fair shares suggests ethics comes before profits – challenging the very motive for engaging in production and exchange – (on both the part of producers and buyers… ). This potentially puts the practise of fair-trade into conflict with the present global neo-liberal free market system.  This idea is not lost on many in the fair-trade movement

Piercy, commenting on the early origins of the fair trade movement in the 1960s in the United Kingdom, makes the following, more concrete criticisms of ‘free market’ economics.^[v]

• The poorer countries becoming caught in a trap of producing raw materials that are subject to price fluctuations while wealthier countries ‘added’ value to these raw materials by producing them
• The increasing subsidies wielded by MNCs – receiving subsidies from governments in the form of tax breaks or infrastructural development.
• Quotas on imports to protect key industries.
• Subsidies to farmers in developing countries, meaning the prices of their products are cheaper than those produced by farmers in the developing world.
• MNCs using their buying power to force down prices paid to farmers in the developing world down, resulting in prices in supermarkets going down.
• The agents of large companies often bribed officials to encourage them to ignore health and safety and labour laws, allowing the all too familiar and terrible sweatshop conditions

Similarly, even the briefest perusal of some of the informative material produced by the World Development Movement^[vi] or even a more mainstream group such as Oxfam^[vii], both founder members of Fair trade International, reveals many criticisms of the way that various and numerous multinationals, the World Trade organization and The European Union operate in ways that systematically put profits for shareholders over people and planet.

 

The fair trade standards – the institutional framework

Before examining the extent to which the ‘Supermarkets’ move into the fair trade market transgresses the spirit and practice of fair trade, it is necessary to outline in concrete terms what exactly the ideals mean in practice, to this we need to look at the institutional framework which informs fair trade standards.

Fair trade International is the international body with overall responsibility for developing the fair trade standards associated with the fair trade logo and brings together production, purchasing and consumption through devising and maintaining the standards which producers and buyers agree to in order to qualify for certification and be able to display the fair trade logo^[1]. The standards are different for producers and buyers, and much more rigorous for producers.

Producers must be democratically organized, preferably into co-operatives or other democratic associations, the right of workers to join trades unions and enjoy decent working conditions will be guaranteed, and there will be no child labour. There will also be a commitment to reinvesting profits into the social development of the workers and wider community and any productive enterprise should be environmentally sustainable.

Buyers that purchase fair trade products guarantee to pay a ‘premium price’ that covers the cost of production – and is enough for investment in longer term social development. Buyers also have to commit to long term relationships with their producers.

 

The Fair Trade Standards

Fair trade International publishes several documents that outline the standards fair-trade producers and buyers need to maintain in order to qualify for fair-trade status and be able to display the fair-trade local. There are separate, yet overlapping standards, based on core principles for producers and buyers of fair-trade products

• For producers  standards are outlined separately for small scale producers^[2]; contract production^[3] and for hired labour^[4]

• Standards for buyers are outlined in the ‘The Generic Fair trade trade standards’^[5] document which outline the relationship between producers and buyers. In addition there are also additional, specific standards for producers producing certain products^[6] and a prohibited materials list^[7],

 

The seven ideals of fair trade – what they mean in practice

Below is an outline of what Ransom’s seven ideals of fair trade should look like in practice, if we take the standards outlined by Fair trade international as a base.

 

1. Democratic organization –

It is believed that the best way of guaranteeing that trade adds to the social and economic development of producers and of their communities is to ensure as far as possible that producers are be small scale, preferably organized along co-operative lines so that they are democratically controlled by their members. All members should have a voice and vote in the decision-making process of the organization and there should be no discrimination on the basis of any “distinction of any kind such as, race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status”

Probably less well known is that fair-trade producers should aim to establish more control over the productive processes related to their own production through, for example, establishing more direct communication and negotiation with buyers, adding value by establishing processing facilities and/ or by heading towards mutual ownership with other producer organizations

2. Recognized Trade unions– Where not co-operatively owned, as is the case in many large scale fair-trade producers, workers will have the right to join an independent union and to organize collectively to improve their bargaining power in relation to their employers. This obviously implies that workers will be contractually employed and that the company will have overt, written employment policies, clearly outlining the conditions of employment.

3. Decent working conditions – workers should receive at least a living wage, not be required to do forced overtime, have decent breaks and work within god health and safety parameters. The organization is also expected to will continue to develop its business-related operations and maximise the return to the members, which may involve reducing cost in operations, increasingly skilled management and staff, the building up of working capital, implementation of quality control, training/education and risk management. Working conditions should be equitable for all workers. Salaries must be equal or higher than the regional average or than the minimum wage in effect. Health and safety measures must be established in order to avoid work-related injuries. A crucial part of this ideal is that child labour does not occur. Fair Trade licensing requires that children below the age of 15 are not employed. According to the standards laid down by the fair trade foundation, child Labour is not altogether banned as children may help their parents after school and during holidays, but only on the conditions that working hours do not ‘jeapordise’ the child’s education, through preventing the child attending school for example, and that work is supervised by a parent and that the child’s wellbeing is not undermined in any way.

4. Environmental sustainability – Producer organizations are expected to assess the environmental impacts of its members’ operations, to develop plans designed to mitigate those impacts and to monitor the implementation of those plans – the standards outline a fairly lengthy list of expectations – such as protecting virgin forest, establishing buffer zones, not depleting local resources and improving members standard of living so they can live more sustainably. Given that by far the largest fair trade sector is in agriculture, it is no great surprise to find that the conservation of soil is a primary tenet of sustainable agricultural production. Finally, to get fair trade accredited, certain things are band such as Genetically Modified Organisms.

5. The minimum price guarantee – fair trade buyers agree to pay a minimum price for products even when the market price for that product falls below the minimum price. This is to provide a degree of security of income, guarding against increasingly volatile price fluctuations in the price of food. The minimum price varies by product. Companies trading Fair trade products must pay a price to producers that aims to cover the costs of sustainable production: the fair trade minimum price, and also pay an additional sum that producers can invest in development: the fair trade premium.

6. The social premium – The ‘minimum standards’ are fairly straightforward – the fair trade premium must be democratically spent in accordance with Fair trade Standards to improve the social wellbeing of the workers in the producer organization, their families, and the wider community. What the money gets spent on will depend on the perceived needs and wants of the particular community of producers. Examples of how the premium has been spent include everything from work relating training for employees, to buying text books for worker’s children, to improving local buildings and water supplies. Money has even been spent on developing a local football club in one South African community. See the section on ‘case studies’ for more details.

7.Long-Term relationships – Producers are expected to partially pay for products in advance when producers ask for it and to sign contracts that allow for long-term planning and sustainable production practices.

 

Fair Trade against Free trade

I don’t want to go into detail about the global ‘free trade’ food system – but this is the briefest comparisons of how the mainstream food business undermines the principles of fair trade.

Selected principles of the Fair Trade Movement

Selected principles of the neo-liberal free market system

Democratic organization – ideally in the form of co-operative organization where workers own and control the company for which they work. Recognized Trade unions –workers will have the right to organize collectively to improve their bargaining power in relation to their employers. Decent working conditions – workers should receive at least a living wage, not be required to do forced overtime, have decent breaks and work within god health and safety parameters Environmental sustainability – small scale production The minimum price guarantee – fair trade buyers agree to pay a minimum price for products even when the market price for that product falls below the minimum price. This is to provide a degree of security of income, guarding against increasingly volatile price fluctuations in the price of food. The minimum price varies by product. The social premium Long-Term relationships

Top down management style – CEOs and directors run the company of behalf of distant shareholders – CEOs and directors control shares themselves – strategic decisions made by senior managers with little input from workers / Distancing of those  in the supply ‘Outsourcing’ production -lengthy and obscure supply chains / rule of the consumer rather than the producer Increasing trend towards hiring of agency workers who have fewer rights. Some companies do not allow workers or actively discourage workers to join trades unions Sweat shop labour, moving around ‘race to the bottom’ Industrialized mass production techniques, widespread pollution.. Using monopoly power to push prices paid for raw materials down/ gambling on food prices and increasing sustainability/ Subsidies to EU farmers – undermines principle of a ‘fair market price’ WTO, monopoly power… WTO lead Neoliberalisation – undermining the welfare state – through encouraging privatization and deregulation Failure to engage in enduring relationships

 

Sources