The Aims and the Effects of the Fair-Trade Movement

“What aims and purposes motivate the fair-trade movement? To what extent do you think that the methods adopted by fair-trade organizations achieve those aims?”

• Introduction

In 2006, Fair trade certified sales amounted to approximately $2.3 billion worldwide, a 41% year-to-year increase. And fair-trade products generally account for 0.5-5% of all sales in their product categories in Europe and North America. In October 2006, over 1.5 million disadvantaged and marginalised producers worldwide were directly benefiting from fair-trade while an additional 5 million benefited from fair-trade funded infrastructure and community development projects.

It seems fair-trade becomes more and more important in the social life. So it is better to understand what is fair-trade.

2. Definition of fair-trade

In 2001, a common definition of fair-trade was developed 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):

“Fair trade is a trading partnership, based on dialogue, transparency and respect, which 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.”

The fair-trade 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 export goods from developing countries to developed countries, most notably handicrafts, coffee, cocoa, tea, and some other products in agriculture.

3. Motivation of the fair-trade movement

In this section, we will try to answer the first question: What aims and purposes motivate the fair-trade movement?

We can find the answer to this question on the website of FLOI (Fairtrade Labelling Organizations International), the aims and purposes of the fair-trade movement, or called fair-trade’s strategic intent is:

• “deliberately to work with marginalised producers and workers in order to help them move from a position of vulnerability to security and economic self-sufficiency.

• to empower producers and workers as stakeholders in their own organizations.

• to actively play a wider role in the global arena to achieve greater equity in international trade.”

The first aim is about marginalised producers and workers. They are the object and reason of the movement. Normally, they are easily hurt economically and treated by unequal conditions. And the fair-trade movement deliberately tries to protect those producers and workers.

The second aim pays attention on the role of producers and workers in their own organizations. Normally, those marginalised producers and workers do not have enough power in their own organizations to protect themselves. But the Fair Trade movement aims to strive for more power for them in their own organizations.

The third aim focus on the equity in international trade environment. It is important to create the opportunities and equity conditions for those marginalised producers and workers in domestic environment. But at the same time, we also need to take account into the international situation. And the fair-trade movement tries to reduce the gaps in different industries in different countries.

IFAT (International Fair Trade Association) prescribes 10 standards that fair-trade organizations must follow in their day-to-day work and carries out continuous monitoring to ensure these standards are following:

• Creating opportunities for economically disadvantaged producers

• Transparency and accountability

• Capacity building

• Promoting Fair Trade

• Payment of a fair price

• Gender Equity

• Working conditions

• Child Labour

• The environment

• Trade Relations

I think these can be seen as a very good addition and explanation to the three main purposes of the fair-trade organizations. Those standards tell us how we can identify the aims of the fair-trade movement in practice. One can visit the website of IFAT for details.

4. Effects of the fair-trade movement

Now, we should consider the second question in this section: To what extent do you think that the methods adopted by fair-trade organizations achieve those aims?

4.1 The methods

To answer the question, we need to know which methods are adopted by fair-trade organizations.

In nowadays, the main method adopted by fair-trade organizations is Fairtrade labelling. Although Solidarity trade occurs in 1960s, but the sales of fair trade products only really took off with the arrival of the first Fairtrade labelling initiatives. In 1988, the first Fairtrade labelling initiative, Max Havelaar, was created in the Netherlands

The independent certification allowed the goods to be sold in the mainstream stores, reaching a larger consumer segment and boosting fair trade sales significantly. The 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.

In 1997, Fairtrade Labelling Organizations (FLO) International was created, an umbrella organization whose mission is to set the Fairtrade Standards, support, inspect and certify disadvantaged producers and harmonize the fair-trade message across the movement. At present, over 20 Labelling Initiatives are members of FLO International.

Before my own comments of the question, I would like to introduce some popular argument of the fair-trade movement. It will be good if we can learn others’ opinion firstly.

4.2 The debate

Fair-trade’s increasing popularity has drawn criticism from both the leftist who flavor fair-trade very much, and the rightist who against fair-trade. These arguments can be divided into three different categories:

The price distortion argument, advocated by the Adam Smith Institute, and The Economist magazine calling fair-trade a “misguided attempt to make up for market failures” encouraging market inefficiencies and overproduction. They believe that this kind of artificial intervention of market price is easy to mislead and cause market failure. This is the opinion of rightist who oppose fair-trade.

The creation of insider/outsider markets argument is defended by the Booth and Whetstone. They do not explicitly criticize the ideals behind Fair Trade, but rather current certification, production and pricing systems. They just try to improve the effects of the movement by adjusting current method mildly.

The mainstreaming argument is defended by French author Christian Jacquiau, which criticizes segments of the fair-trade movement for working within the current system, rather than establishing a new fairer, fully autonomous trading system. It is a very extreme suggestion from the leftists.

One can read their articles for detailed discussion. But we can see lots of different points of view, by considering the different aspects of the Fair Trade movement and its main method, Fairtrade labelling. Now the question is, does Fairtrade labelling help the movement to achieve the aims? I think the answer is yes.

4.3 The effect

By using Fairtrade labelling system, those marginalised producers and workers can gain more power in their own organizations and achieve greater equity in international trade, so to help them move from a position of vulnerability to security and economic self-sufficiency. They really benefit from this movement, no matter more or less.

As the mild people said, we can redesign the current certification, production and pricing systems to make it more efficient to help the marginalised producers and workers. Or as the leftist suggest, we can adopt a complete new trading system. Maybe this extreme suggestion is best for those producers and workers in developing countries. So we can say that the Fairtrade labelling system help fair-trade organizations achieve their aims. And we still have some methods to make the whole system more efficient.

But, on the other hand, we should notice that current Fairtrade labelling system, or the advices of system changing and creation, are harmful to the market. On the point view of economics, the more often fair-trade organizations disrupt the goods market, the more possible market failures occurs. So market failure may be the price of Fair Trade movement, and we know that is bad for the whole society. Other people in economy may be worse off because of this fair-trade movement, which is also unfair to them.

5. Conclusion

As a conclusion, I should say that the three main aims of the fair-trade movement are found. And Fairtrade labelling system, as the main method adopted by fair-trade organizations, is helpful to achieve those aims. But we should be careful about those misleading effects on market and other people in economy.

References