Title Page

A commercial agreement under which distributors sell products of

a given class at no less than a minimum price set by the

manufacturer

Fair Trade

Fair Trade Definition

Refers to any money or resources that are transferred from one country to another

without expecting full repayment.

AidAid Definition

Fair Trade

What is Fair Trade? And why should we implement it?

Not everyone benefits from international trade. In less developed nations, the workforce is oftenexploited by large multinationals under low wages and long work hours whilst the company makesabnormal profits from selling it’s commodities overseas. Meanwhile, smaller domestic firms in thesecountries find it hard to survive as larger firms will often have most of the market share. Also, MEDCs are prone to setting up expensive trade barriers to prevent the dumping of cheap goods from these domestic firms into their country. This is known as protectionism and makes it very hard for these domestic firms to expand internationally. Fair Trade helps the disadvantaged workforce and producers by attempting to control development sustainably.

The goals of fair trade are;

• To improve market access, price rates, producer organizations and trade stability with these producers.•To prevent the exploitation of child labor and open up greater benefits for less-skilled workers; mainly women and indigenous people. • To protect human / labor rights by promoting economic, social and environmental security. • To raise awareness of the Fair Trade act, international trade ethics and the rules and ethics of conventional international trade.

A coffee farm, Brazil

• The Fair Trade Foundation The Fair Trade Foundation is a UK originated organization set up by non-

government organizations and alternative traders. It uses a labeling system, the Fair Trade mark, to depict which firms and commodities have been produced according to the Fair Trade guidelines it sets. Consumers will then be obliged to only purchase these goods to help prevent the exploitation of workforces and producers in these nations. A firm may apply for the Fair Trade mark if it meets with the following guidelines;

• For factories or plantations; reasonable working hours and conditions. • For small farms or farming co-operatives; a democratic structure.

• A price offered to the producers from the suppliers which pay for their total cost of production.

• Long term production planning and sustainable production practices. • Additional social benefits for the producers.• Partial payment to the producers in advance to help them prevent

falling into debt.

• The Fair Trade Labeling Organizations Ltd. This organization sets the criteria for establishing and maintaining Fair

Trade standards. Firms which meet these standards can apply to the FLO. All in all, there are 17 Fair Trade organizations in the world.

Not Aid

Why Get Aid?

• Economical Reasons

• Political Reasons

• Moral Reasons

•

Economical Reasons• The most important and the strongest reason why a

country receives aid. Aid helps to: – Supplement the lack of domestic resources such as foreign

exchange. – Enables infrastructure changes to be made to the economy

such as dams and roads .– Contributes to the take-off phase in sustained economic

growth.– Increase the infrastructure, created by the foreign MNC,

within the coutry

Political Reasons

• ‘Foreign Aid’ is often seen as a necessity for a country if it is to maintain power.

• Military goods is a good example.– Maintains existing government– Helps suppress the opposition– Example: Military goods helped maintain the

power balance between NATO and the Soviet Union, in the continent of Africa.

Moral Aid

• MEDCs feel that they have a responsibility for the development of LEDCs

• Is linked to basic humanitarian reasons

• Or after a colonial power has left the country after using most of its recourses.

Set Backs or Problems

• Aid can have set backs for LEDCs.

• The set backs are all to do with the three types of aid.

• Such problems are linked to private companies with the nation

• Overseas companies may lend money to small entreprenuers, but the profit and comercial benefits created through banks will be less.

• Transfers of low interest grants interfere in the market determination of interest rates and exchange rates

Winners and Losers

• Winners American Industry workers,

farmers in less developed countries, Chile (who have recently struck a fair trade deal with the USA), Drug developers (as fair trade is now accepted in the pharmaceutical world) and customers will gain as prices on food will be cheaper.

Losers• European farmers are the major

loser if free trade is to take place.• Governments in developed

countries may lose revenue from import taxes or tax from local companies.

• Multinationals may lose out because they will no longer be able to exploit developing countries as fair trade will allow these countries to hopefully develop.

• Companies such as Dale (banana producers will face an increase in competition from overseas.

Conclusion

• Fair Trade is a good idea in theory but it may take along time for all developed nations to comply to this.

• Many people feel fair trade is better then aid. This is because it allows the economies of the undeveloped nations to develop.

• However many developed nations are against this as they will no longer be able to ‘exploit’ the less developed nations. And it will enable these nations to break into all markets.

Conclusion

• There is also a double edged sword as the undeveloped nations cant develop without sufficient food, however they cant develop with free food (aid).

• Fair trade will also lead to a price decrease as EU subsidies will have to be taken away so the EU farmers can compete with the farmers from Africa and Asia. Therefore many EU farmers will be out of business.

Conclusion

• Some things are now traded freely around the world such as drugs to fight against Aids. These are now traded freely to African nations.