FAIR TRADEFAIR TRADE

Does it make sense?Does it make sense?

Carol WillsCarol Wills

For ICEA, 21 January 2010For ICEA, 21 January 2010

What I’m going to discussWhat I’m going to discuss

How Fair Trade beganHow Fair Trade began What Fair Trade is and is notWhat Fair Trade is and is not The definitionThe definition The movementThe movement Different models of Fair TradeDifferent models of Fair Trade ImpactImpact Response to criticismsResponse to criticisms Does it make sense?Does it make sense?

How Fair Trade beganHow Fair Trade began Post WW2 : Response to poverty, exploitation & Post WW2 : Response to poverty, exploitation &

injusticeinjustice Known as “alternative” until 1985Known as “alternative” until 1985 Phrase “Fair Trade” first coined at GLC conference Phrase “Fair Trade” first coined at GLC conference

in 1985in 1985 1988: Launch of Max Havelaar label in 1988: Launch of Max Havelaar label in

Netherlands, followed quickly by othersNetherlands, followed quickly by others 1989: WFTO founded (Now 400 + member 1989: WFTO founded (Now 400 + member

organizations in 70 countries)organizations in 70 countries) 1994: FT labelling initiatives come together to 1994: FT labelling initiatives come together to

create FLOcreate FLO 2004: Fair Trade Advocacy Office opened in 2004: Fair Trade Advocacy Office opened in

BrusselsBrussels

What Fair Trade is and is notWhat Fair Trade is and is not

Not just about standards, certification & Not just about standards, certification & labelling. Nor just about coffeelabelling. Nor just about coffee

Fair Trade means: paying a fair price, Fair Trade means: paying a fair price, working together, capacity building, working together, capacity building, organizational development, transparency & organizational development, transparency & traceability through supply chain, stable traceability through supply chain, stable trading relationships, respect for trading relationships, respect for environment, protection of human rights environment, protection of human rights (especially women’s & children’s), support for (especially women’s & children’s), support for traditional production methods, awareness traditional production methods, awareness raising plus monitoring & verification + raising plus monitoring & verification + regular assessment of impact.regular assessment of impact.

Definition (agreed 2001)Definition (agreed 2001) Fair Trade is a trading partnership, based Fair Trade is a trading partnership, based

on dialogue, transparency and respect, on dialogue, transparency and respect, that seeks greater equity in international that seeks greater equity in international trade. It contributes to sustainable trade. It contributes to sustainable development by offering better trading development by offering better trading conditions to, and securing the rights of, conditions to, and securing the rights of, marginalised producers and workers – marginalised producers and workers – especially in the South. Fair Trade especially in the South. Fair Trade organizations, backed by consumers, are organizations, backed by consumers, are engaged actively in supporting producers, engaged actively in supporting producers, awareness raising and in campaigning for awareness raising and in campaigning for changes in the rules and practice of changes in the rules and practice of international trade. international trade.

Fair Trade promotes sustainable Fair Trade promotes sustainable development throughdevelopment through

deliberately working with marginalised deliberately working with marginalised producers in order to help them move producers in order to help them move from a position of vulnerability to security from a position of vulnerability to security and economic self-sufficiencyand economic self-sufficiency

Empowering producers as stakeholders in Empowering producers as stakeholders in their own organizationstheir own organizations

Actively playing a role in the global arena Actively playing a role in the global arena to achieve greater equity in international to achieve greater equity in international tradetrade

Methods:Methods:

Strengthening small producers’ organisationsStrengthening small producers’ organisations Increasing participation in decision-making by Increasing participation in decision-making by

producersproducers Providing support for training/ capacity Providing support for training/ capacity

building, especially for womenbuilding, especially for women Encouraging better environmental practices Encouraging better environmental practices

and application of responsible production and application of responsible production methodsmethods

Market accessMarket access

The Fair Trade MovementThe Fair Trade Movement WFTO global network of producers, WFTO global network of producers,

exporters, importers, retailers who believe exporters, importers, retailers who believe trade should improve lives of poor people trade should improve lives of poor people without harming planet. 5 regional without harming planet. 5 regional networks + many country level forums + networks + many country level forums + EFTA & NEWS!EFTA & NEWS!

FLO – world-wide standard setting & FLO – world-wide standard setting & certification body with 24 national certification body with 24 national initiatives & 3 regional producer networks.initiatives & 3 regional producer networks.

Fair Trade Federation USA (also member Fair Trade Federation USA (also member of WFTO)of WFTO)

Consumers, activists & campaignersConsumers, activists & campaigners

Size of Fair TradeSize of Fair Trade

STILL VERY, VERY SMALL – BUT GROWINGSTILL VERY, VERY SMALL – BUT GROWING 2008 UK Ft labelled sales grew by 43% to 2008 UK Ft labelled sales grew by 43% to

£700 million£700 million 2008 world-wide Ft labelled sales grew 22% 2008 world-wide Ft labelled sales grew 22%

to £2.9 billionto £2.9 billion 1 million + farmers, artisans & workers in 1 million + farmers, artisans & workers in

58 developing countries58 developing countries 746 Fairtrade certified producer 746 Fairtrade certified producer

organizationsorganizations 5 million people benefit directly5 million people benefit directly

Products certified by FLOProducts certified by FLO Bananas, cocoa, coffee, cotton, flowers, Bananas, cocoa, coffee, cotton, flowers,

fresh fruit, honey, fruit juice, rice, spices & fresh fruit, honey, fruit juice, rice, spices & herbs, sports balls, sugar, tea, wineherbs, sports balls, sugar, tea, wine

Composite products such as chocolate Composite products such as chocolate bars, cakes, biscuits. (All ingredients for bars, cakes, biscuits. (All ingredients for which Ft standards exist must be certified)which Ft standards exist must be certified)

Audited standards also cover groups of Audited standards also cover groups of small-scale producers & hired labour on small-scale producers & hired labour on plantations and in factories. plantations and in factories.

Process: application, audit, evaluation, Process: application, audit, evaluation, certification, annual inspectionscertification, annual inspections

Standards for traders buying FLO Standards for traders buying FLO certified productscertified products

Pay a price that covers cost of Pay a price that covers cost of sustainable production: The Ft sustainable production: The Ft minimum priceminimum price

Pay an additional sum for producers to Pay an additional sum for producers to invest in development: the Ft Premiuminvest in development: the Ft Premium

Make partial advance payments when Make partial advance payments when requested to do sorequested to do so

Sign contracts with certified producers Sign contracts with certified producers to allow for long-term planning and to allow for long-term planning and sustainable practices.sustainable practices.

Fairtrade minimum prices and Fairtrade minimum prices and premiumspremiums

See 22 page table on FLO website: See 22 page table on FLO website: www.fairtrade.netwww.fairtrade.net

Examples:Examples:

Organic fresh bananas from Bolivia $3 per kg FOB + 45 cents premiumOrganic fresh bananas from Bolivia $3 per kg FOB + 45 cents premium

Organic dried bananas from Costa Rica per kg FOB $4.20 + 80 cents premiumOrganic dried bananas from Costa Rica per kg FOB $4.20 + 80 cents premium

Dried organic apricots from Pakistan per kg ExW $0.31 + 7 cents premiumDried organic apricots from Pakistan per kg ExW $0.31 + 7 cents premium

Non organic dried apricots, Pakistan per kg ExW $0.29 + 7 cents premiumNon organic dried apricots, Pakistan per kg ExW $0.29 + 7 cents premium

Arabica conventional washed coffee per lb FOB $1.25 + 10 cents premiumArabica conventional washed coffee per lb FOB $1.25 + 10 cents premium

Arabica organic washed coffee per lb FOB $1.45 + 10 cents premiumArabica organic washed coffee per lb FOB $1.45 + 10 cents premium

Robusta conventional coffee per lb FOB $1.05 + 10 cents premiumRobusta conventional coffee per lb FOB $1.05 + 10 cents premium

If world market price exceeds FLO minimum If world market price exceeds FLO minimum price, the world market price must be paidprice, the world market price must be paid

WFTO’s Sustainable Fair Trade WFTO’s Sustainable Fair Trade Management System Management System still under developmentstill under development

New Standard for independent certification New Standard for independent certification of Fair Trade organizations complementing of Fair Trade organizations complementing the FLO product label approachthe FLO product label approach

Organisations applying for certification Organisations applying for certification must demonstrate that they: provide must demonstrate that they: provide market access for marginalised producers/ market access for marginalised producers/ foster capacity building & empowerment/ foster capacity building & empowerment/ are transparent & accountable/ promote are transparent & accountable/ promote environmental sustainabilityenvironmental sustainability

SFTMS auditSFTMS audit

Independent 3Independent 3rdrd party auditing party auditing required plus validation of a required plus validation of a published report.published report.

Following this, products may carry Following this, products may carry label communicating that they were label communicating that they were sourced & produced under Fair Trade sourced & produced under Fair Trade conditions & practices.conditions & practices.

Likely to apply mostly to handcrafts Likely to apply mostly to handcrafts for which FLO has no standards.for which FLO has no standards.

Different models of Fair TradeDifferent models of Fair Trade

Some FTOs choose to develop as Brands e.g. Some FTOs choose to develop as Brands e.g. Traidcraft, PeopleTree, Divine Chocolate, Traidcraft, PeopleTree, Divine Chocolate, cafedirect. cafedirect.

AlterEco, France, set up as specialist sourcing AlterEco, France, set up as specialist sourcing co. for supermarkets’ own label Ft products.co. for supermarkets’ own label Ft products.

CTM, Italy, owned by network of 250 coop FT CTM, Italy, owned by network of 250 coop FT shops & is their suppliershops & is their supplier

Traidcraft’s growth due to network of 1,000s Traidcraft’s growth due to network of 1,000s of volunteer Fair Traders & church groups of volunteer Fair Traders & church groups supplied at wholesale rates via mail order supplied at wholesale rates via mail order cataloguecatalogue

Impact: Does FT make a Impact: Does FT make a difference?difference?

Producers themselves say so: more Producers themselves say so: more food, better houses, children going to food, better houses, children going to school, improved health, women’s school, improved health, women’s empowermentempowerment

More efficient organizationsMore efficient organizations Greater self-reliance, self-confidenceGreater self-reliance, self-confidence Can be a stepping stone to other thingsCan be a stepping stone to other thingsBut everything depends on regular ordersBut everything depends on regular orders

Impact at consumer levelImpact at consumer level

Greater awareness of the need for trade Greater awareness of the need for trade justicejustice

Consumers want to know how products Consumers want to know how products were grown/ made. They support FT with were grown/ made. They support FT with their purchasingtheir purchasing

Fair Trade remains small but impact on Fair Trade remains small but impact on conventional business world is big: ETI, conventional business world is big: ETI, CSR etc. etc. - transforming business CSR etc. etc. - transforming business behaviourbehaviour

Common criticismsCommon criticisms FT14 a marketing exercise intended to maintain FT14 a marketing exercise intended to maintain

predominance of Ft mark in competitive market-place. predominance of Ft mark in competitive market-place. AgreeAgree

Fair Trade is unfair: It offers small no. of farmers a higher, Fair Trade is unfair: It offers small no. of farmers a higher, fixed price for products and excludes majority (who are left fixed price for products and excludes majority (who are left even worse off). even worse off). Misunderstanding of how Ft’s open system Misunderstanding of how Ft’s open system works. Prices not fixed. No one excluded. works. Prices not fixed. No one excluded.

Most farmers helped by FT are in Mexico. Most farmers helped by FT are in Mexico. IncorrectIncorrect FT does not aid economic development. It keeps “the poor FT does not aid economic development. It keeps “the poor

in their place”. in their place”. Further misunderstanding of how system Further misunderstanding of how system works. works.

FT only helps landowners & denies labourers opportunity of FT only helps landowners & denies labourers opportunity of permanent employment. permanent employment. FT standards also cover FT standards also cover employed labouremployed labour

Further criticisms from “Unfair Further criticisms from “Unfair Trade”Trade”

4/54/5thth of produce sold by Ft certified farmers ends of produce sold by Ft certified farmers ends up in non-Ft goods. up in non-Ft goods. FT market remains small. FT FT market remains small. FT farmers negotiate for best possible prices with all farmers negotiate for best possible prices with all buyers.buyers.

Just 10% of Premium goes to farmers. Retailers Just 10% of Premium goes to farmers. Retailers pocket the rest. pocket the rest. Full premium paid direct to Full premium paid direct to farmers. farmers.

FT arose from coffee crisis of 1990s. FT arose from coffee crisis of 1990s. FT labelling FT labelling began as a result of this & came to attention of began as a result of this & came to attention of development comunity. FT started in 1940sdevelopment comunity. FT started in 1940s

FT movement believes that free trade harms the FT movement believes that free trade harms the poor. poor. Not so.Not so. FT believes that free trade is not FT believes that free trade is not free until the playing field is level for all.free until the playing field is level for all.

Does Fair Trade make sense?Does Fair Trade make sense?

What do you think?What do you think?