© Max Havelaar These posters from Max Havelaar, a fair trade
organization, advocate for the social issues behind fair trade.
They show how producers can pay for electricity, schools and
medicines through higher prices for their goods.
What does "fair trade" mean? You won't find one single answer.
Here we look at the market profile of fair trade - the players,
controversies, benefits and drawbacks.
Fair trade in international commerce has two distinct meanings.
In trade negotiations, the term is used broadly to argue that
subsidies and disguised barriers skew the global trade system
against developing countries and commodity producers. Former World
Bank chief economist and Nobel Prize winner Joseph Stiglitz, for
example, argues for "fair trade for all" in the context of the
latest WTO round of trade liberalization, the Doha Development
Meanwhile, small farmers in developing countries who produce
some of the world's favourite fruit and beverages still find
themselves getting pennies for products that sell for several
dollars in the rich world's supermarkets. Even worse, their income
fluctuates violently from season to season, sometimes from day to
day, depending on commodity prices. Striving against other
producers to keep up their revenues when prices are dropping can
lead to collective impoverishment across the globe.
This is where the other, more famous fair trade movement comes
in. Unofficially reaching the age of 60 this year, this labelling,
marketing and advocacy initiative seeks to ensure that producers in
developing countries receive more of the profits from the price
paid by consumers. This article tries to put the alternative fair
trade movement into its trade development context.
Fair trade often pays the producers one-quarter to one-third
more than they can get on the open market. But only
Fairtrade-labelled products - that is, those certified by Fairtrade
Labelling Organizations (FLO) International - imply agreement on a
minimum price. Most alternative fair trade agreements speak only of
giving producers an unspecified "fair price" for their products to
provide a living wage and sustainable costs of production (Fair
Trade in Europe 2005).
Sales through this new channel still represent less than 0.1% of
all goods traded internationally, according to the United
States-based Fair Trade Federation.
So can this trade have a major impact? Will it survive
competition from bigger players? The European-centred FLO points
out: "Fair trade products [i.e., from all the alternative fair
trade bodies] can now be found in 55,000 supermarkets all over
Europe and the market share has become significant in some
countries: 47% of all bananas, 28% of the flowers and 9% of the
sugar sold in Switzerland are Fair Trade labelled. In the UK, a
market with eight times the population of Switzerland, labelled
products have achieved a 5% market share of tea, a 5.5% share of
bananas and a 20% share of ground coffee."
While market share may be very small, sales are growing fast.
"Fair Trade sales in Europe have been growing at an average 20% per
year since 2000. The annual net retail value of Fair Trade products
sold in Europe now exceeds EUR 660 million. This is more than
double the figure five years ago," notes FLO.
Fair trade labelling initiatives are under way in 15 European
countries, while fair trade producers are organized into some 3,000
grass-roots organizations, with umbrella structures present in over
50 developing countries. Apart from coffee, bananas and some other
fruits and vegetables, fair trade producers also include artisanal
Europe represents most (60-70%) of the fair trade market. The
trade importing organizations say 26% of their sales come from
Africa, 40% from Asia and 34% from Latin America.
The impact of fair trade products goes beyond its market share.
Advocacy for alternative fair trade seeks to strike a chord among
consumers by highlighting development goals that do not depend on
traditional market solutions. Europe's fair trade organizers also
argue in their most recent report, Fair Trade in Europe
2005, that: "Fair Trade has become much more than a niche
market for socially-aware and middle-class Northern consumers. It
is expanding into mainstream distribution channels and is
increasingly being recognized by consumers, public authorities and
even private companies as an efficient tool for poverty eradication
and sustainable development."
Critics of fair trade probably would not agree that it is an
efficient tool to reduce poverty for any but a small number of
producers (see "pros and cons" below). For the exporters, though,
alternative fair trade represents a market niche opportunity. For
trade development professionals, fair-traders represent potential
partners in building the skills exporters need for world markets,
such as those related to standards.
Policy-makers must take notice, too. Fair-traders are a
political force that have a much louder voice than their position
in international trade statistics might lead you to believe. Their
campaigns often highlight the social and environmental costs that
anti-globalization advocates see in open markets. In this way, the
fair trade movement ties in with the protests during WTO
ministerial meetings at the way current trade negotiations are
developing. Nevertheless, many fair-traders fully accept market
realities and oppose all forms of disguised protectionism (see
the interview with Paola Ghillani).
Fair trade organizations use five tools to contribute to
Fair-traders point out these development advantages:
As for the alternative fair-traders themselves, they see a
bright future but agree there are lots of improvements to make.
Web resources on fair trade
This article benefited from research and discussion with
Natalie Domeisen, Prema de Sousa, Marija Stefanovic and Alexander
They also consulted draft papers on fair trade prepared by
ITC's Market Analysis Section and Export-led Poverty Reduction