Examining the Impact of Fair Trade on Poor Countries
The usual understanding of fair trade is that it is a system that will aid the growth of developing countries, empowering its producers to grow their businesses and pass that success onto their communities. However, in the opinion of some it’s not currently living up to that promise.
Fair trade, which began developing in the 1960s as a social movement, focuses on the export of goods from developing countries to developed nations. Although an increasing number of products are falling under the fair trade umbrella it still primarily encompasses food products – coffee, cacao, tea, sugar, honey and regional fruits – as well as cotton, wine, precious metals and localized handicrafts.
The fair trade movement is designed to operate in such a way that the producers receive larger payments for their goods than they would if they tried to trade alone, thanks to a greater social acceptance and higher standards of production in terms of environmental impact.
In theory, this is a wonderful concept. But the responses to its actual workings are not always positive. There are those who feel that it may impede long term growth, as it does not really challenge real market conditions.
Gaining a Better Understanding of the Impact of Fair Trade
To form any real opinion on fair trade as a practice it is essential to understand its impact. A good example to look at would be traditionally impoverished coffee producers from third world nations.
Under fair trade they are paid more for their goods than they would have been in a traditional market. Because of this, there are those that say these farmers will then misrepresent price signals in the natural market, leading to wasted resources and overproduction. In more basic terms, the fear is that these fair trade farmers will try to persevere in an inefficient system with no eye to long term viability or growth.
Others point also to the impact of the additional costs involved with complying with fair trade standards. These can be quite high, discouraging some producers from striving to produce export quality goods.
The Effect of Fair Trade on Local Markets
Most fair trade producers do still also operate within their own local markets, but increasingly their focus is those foreign sales, as they are more profitable in the short term. This can leave the local markets under stocked, under served and/or offering goods that are priced out of the reach of locals, essentially having a great negative impact on the poorest sections of these developing countries.
The Discussion on the Impact of Fair Trade on The Poor Continues
So, who is right? Those who truly believe that fair trade aids these third world farmers and other producers in the short term, earning extra money in the short term that will allow them to spend on growing their businesses and communities. Or those who say that these positive short term benefits pale in comparison to the possibly negative long term effects? The debate on the impact of fair trade on poor countries continues…
Fair Trade Certification Problems & Challenges
An official fair trade certification gives a small farmer or producer something potentially extremely valuable; the chance to sell their products in new, far larger and more lucrative markets, markets all over the world, and a chance to compete with multinational corporations on a leveller playing field.
These fair trade certifications are granted by a growing number of regulated bodies, which include FLO International and TransFair USA. In granting them, it is seen as a guarantee to consumers that if they buy a certified product not only will the producers truly benefit from purchases made but that consumers can be assured they are getting a high quality, environmentally friendly product as well.
Are the Smallest Producers Being Excluded?
Although it seems to many to be an excellent idea, fair trade certification is not without its critics. Obtaining a fair trade certification is not free, it costs between $2,000 and $4,000 in administrative fees alone, a sum that many of the smallest farmers and producers could never hope to raise. This of course excludes them from the programs, leaving, some say, those who need the benefits that fair trade offers the most out in the cold.
Obtaining fair trade certification is not the end of the potential difficulties new producers face. Making the changes in their day to day operations to ensure they meet the required sustainability standards can be a struggle, although it should be noted that increasingly assistance is available in this area that allows the smallest producers to keep their goods up to scratch.
Is Big Business Getting Too Involved in Fair Trade?
As anything becomes more popular and more successful it is only natural that those behind it want it to continue to thrive and grow. One recent criticism of the current fair trade system is that in order to grow the industry in general, large companies are being favoured over small producers, something that seems to be the complete opposite of the intentions behind fair trade.
How valid these accusations and criticisms are is uncertain. They are being investigated by the major fair trade associations and most claim that their mission has not changed in any way and the focus is still on helping the most deserving and that ‘the rules’ are applied in equal measure to all.
The Future of Fair Trade
It’s well worth remembering that the concept of fair trade certification is less than 60 years old. Rome wasn’t built in a day and a truly equal system that allows small producers to gain the proper recompense and recognition for their efforts can’t be perfected in six decades.
The fair trade movement is seeking to undo centuries of inequality, a huge undertaking that takes time, organization and consistent effort. But given all the good that fair trade has achieved so far, even its harshest critics should admit it’s done very well in such a short time and that the future of the concept is still very bright.
Disadvantages of Fair Trade
Many groups are always talking about the advantages but only a few out there who actually admit that there are also disadvantages of fair trade. Their claims actually have merit given that it is rare for something to have purely positive effects and no negative ones.
Fair Trade Products
Though many developing countries are continuing to sell their products on the market most of them continue to be sold as specialized products. Despite their best efforts, only a few have managed to reach the mainstream distribution channels. An example is soap being sold through companies that sell fair trade product is clearly more environment friendly and would benefit not only consumers but also those who manufacture them. However these kinds of soaps remain to be sold in specialty shops and not much in commercial stores.
One solution suggested to counter this disadvantages is to offer online shopping. This is a good idea considering that the products are come from developing countries. The problem is that the price will likely go up due to shipping fees and may not be affordable to the average consumer who just wants to buy one or two bars of soap.
Tariffs are a Disadvantage of Fair Trade
Tariffs or the tax put on exports and imports is another one of the disadvantages of fair trade. In most countries, the tariff for non-processed good remains lower than processed ones. What this means that instead of exporting roasted coffee for instance, a farmer may opt to simply export coffee beans in order to remain profitable. This choice however brings to light two issues. First the beans will be processed by another company which means it has lost its fair trade capability. Second because it will be more profitable to export raw materials or non-processed goods, developing countries may become hesitant to put up facilities needed for processing. Not only do they lose to multinational companies but they also encumber their possible development.
Fair Trade Certification
Another issue is on the use of the certification. An example is when a farmer decide to export the coffee beans. The company that buys the beans can have the Fair Trade certification on its final product, but it is the one that enjoys all the benefits derived from it. Companies using the certification also tend to confuse consumers as to where the products actually comes from. One can argue that this is unfair but it is hard to find a legal way to stop it.
Disadvantages of Fair Trade has a long way to go
The world still has a very long way to go if we are to fully maximize what fair trade is all about. Despite the disadvantages of fair trade, it is important to keep in mind that there will always be ways to solve these disadvantages.
5 Benefits of Fair Trade Everyone Should Understand
A growing number of consumers do understand, in a rather vague way, that fair trade, and buying fair trade products, is a good thing, whether it’s coffee, clothing, shoes or something else. However, accepting that it is ‘good’ isn’t enough to swing many in their purchasing decisions, a better understanding of fair trade and its benefits is called for. Here’s a run down of five of the biggest benefits of fair trade that will help further that understanding.
Individual Income Increases
Fair trade increases the income of the farmers, craftsman and others that participate in it. They are paid for their goods at an agreed upon, set price that all parties agree is fair and then given access to less complicated distribution channels, allowing them to keep more of their profits for themselves.
Producers Gain Access to a World Market
Farmers, craftspeople and others who live and work in small communities in developing countries benefit when they have access to the rest of the world, its markets and its consumers. This is exactly what fair trade provides. A small fair trade coffee producer from Costa Rica, for example, has the chance to get their products into the hands of people in say, Kansas City, Missouri, far away in the US, something that would have been unthinkable just a few decades ago.
Fair trade producers are, as a part of the agreements that grant them their certifications, held to higher environmental standards than many who mass produce goods. Farmers are limited in the number of pesticides they can use and complete transparency is required in detailing growing and production methods. This results in environmental benefits not only for the country the good are being produced in but for the world in general.
It’s a basic financial truth; those who make more spend more. As those involved in fair trade increase their income the positive effect is passed on to the communities they live in. Often fair trade pricing includes a premium that covers the costs of local projects including the construction of schools, hospitals and other community centres, educational scholarships and even low cost loans that allow producers to expand their operations.
The world is a big place and even with the rise of the Internet far too many people are unaware of just how others live, the struggles they face and the help that they need. When purchasing fair trade goods, it’s far from unusual for consumers to become more interested in where these products came from, who produced them and how those people live. This increased awareness is good for everyone, as it fosters a global understanding that is desperately needed right now. These are just some of the benefits of fair trade, there are many more. Understanding these basics however is a great start for anyone who has ever wondered if by opting to buy fairtrade goods they are really making a difference.
One of the major benefits that the fair trade movement has given producers is that it has promoted fair trade justice. The large and rapid growth in consumption of fair trade products means that many consumers nowadays are clearly concerned that producers from developing countries get what they deserve. However because international trade rules continue to be in favor of rich countries, majority of people in developing countries continue to live in poverty.
Fair Trade Benefits
It seems that even today, fair trade can only be successful if the conditions are right. Though many farmers, producers and workers around the world are clearly benefiting, there are those that continue to await the justice due to them. In other areas there are still people that continue to be at the mercy of these trade rules.
Fair Trade Coffee and Bananas
The reason for the campaign is that the current situation has glaringly showed that even with Fair Justice Act the system is still not working. Consider coffee, the price of it remains low because of oversupply. This is not just because more farmers are into growing coffee, but because of fair trade there are also other factors involved. One such factor is that some countries were forced to raise cash crops as a condition of obtaining loans from the World Bank. There is also oversupply in sugar which is due to trade rules that allow American sugar producers to receive subsidies. An advantage the sugar producers from developing countries do not have.
One of the most fought over fair trade products is bananas, this is an example of another product where the system has failed. Some Latin American countries continue to practice the use of pesticides and even exploitative labor. Though this means that they are not fair trade certified, their production costs are lower compared to producers and farmers that practice fairtrade. As a result some have opted to grow other products because they can’t compete with the low production costs.
Supporting Fair Trade Suppliers
There is more to the issue than just supporting and buying fair trade products. We, as consumers, must not only ensure that fair trade justice is present, but that our government itself must support trade rules that are fair for everyone. This way we make sure that we not only get the benefits that fair trade has to offer, but we also help the producers and farmers make their lives better..
When you buy Fair Trade products you only spend a little bit of extra money on those products. But that little bit of extra money that guarantees a fair wage to the artisan or craftspeople who make those items adds up to massive amounts of money that is used to fund huge change. More than 4 billion dollars are spent on Fair Trade products yearly.
The huge buying power of consumers who come together to purchase Fair Trade items has directly impacted countless communities both here and in developing countries. It’s easy to tell yourself that the extra money you pay for items won’t make a difference in the long run as a way to justify buying a lower priced item from a chain discount store. But the truth is that the extra money you spend on fairly produced items makes an enormous difference in the world. When you buy these products you are making a difference in the world.
Funds go directly to Fair Trade Artisans
That’s because the premiums that you pay on Fair Trade items go directly to the person that made the product, not to the shareholders of some giant global corporation. Your money is not paying for some executive’s private jet or fancy home. It’s putting food on the table for the family of a craftsman. It’s funding a public school in a developing community. It’s giving a woman the money she needs to leave her abusive husband and feed her children. It’s promoting growth and independence in communities around the world. It’s also helping the environment. The crafters and artists who create these products are not pouring chemicals into river or creating massive environmental damage with huge factories. They are using locally made and sustainably produced materials to create beautiful fairtrade products that are very high quality and will last.
It changes communities
Buying Fair Trade also changes the way that communities are run. When a small business prospers because of the program that money and success impact the entire community. That one small business that is supported by the purchases that you and people like you make will provide employment for local workers, money for the local community to use for health care, education, and streamlined services like water and sanitation. These small businesses will also be able to mentor other small business owners and teach those business owners the skills they have learned from the Fairtrade program. When small businesses thrive the community thrives. When these communities thrive the country thrives. When the country thrives and contributes to the global economy other countries thrive. Fair Trade is the heart of a new type of consumerism – consumerism that cares.
Are you a thoughtful consumer?
The global recession rocked many countries, and many of them are still trying to recover. But the recession also made people realize how interconnected people are with each other, with other communities, and with other countries. These days consumers are more thoughtful about what they buy and really want to know that their purchases have meaning because. When you buy ethically produced products for fair prices you are helping other people just like you to follow their dreams and help their communities. Together everyone can build a stronger economy and a brighter future.
Benefits of Fair Trade Products
It can be a challenge to find the extra money for Fair Trade clothing and products if you are on a tight budget. Sometimes it may seem like it’s just easier to buy the items you need from discount stores. But you can choose to support it, even on a limited budget. With a little planning and a little ingenuity you can find ways to stick to your budget and still only buy certified items. The higher quality of these items means they will last longer, so a little extra money spent now means that you won’t have to replace the item in a few months and spend even more money. Think of the long term benefits of shopping for these items instead of the short term loss of money. The sacrifice of paying a slightly higher price up front for well-made ethically produced items is worth it when you remember what you are a part of when you buy these handcrafted sustainably produced items.
There has been an interesting discussion over at the poverty matters blog. Vidal wrote that IEA (Institute of Economic Affairs) has attacked fair trade products and their certification, suggesting that it is misleading consumers, expensive and an unproven idea.
So, the grim forces of reason and neoliberal economic efficiency must be worried. It’s only November and the Institute of Economic Affairs has already launched a vicious, 130-page report detailing how fair trade is “costly, opaque and substantially unproven”. According to the IEA, it distorts markets, misleads consumers, holds back social development, celebrates backward forms of production, relies on inefficient cooperatives and has high administration costs. Oh, and it is neocolonialistic and paternalistic, not a strategy for long-term development and its claims are exaggerated.
Fair Trade is 100% better than doing nothing
I find it interesting when I hear what the sceptics argue that Fair Trade is not going to solve poverty. Show me research that has ever suggested that it will solve global poverty? The point I’d like to make is, “Fair Trade is 100% better than doing nothing“ or what was excellently mentioned in the comments by ‘afterthebrain’; “Every worker who receives a fair wage for his or her toil is a small but important victory for humankind.”
Interestingly though, I’ve seen a rise in manufacturers of products such as coffee and fair trade shoes suggesting that their product is “Fairtrade”, failing however, to get certified. To me, this is what is misleading to consumers. People need to be educated and companies need to become certified. That’s my two-cents worth about Fair Trade. Steph.
The Story of Fair trade Coffee and What it Really Means
Although there are now many Fairtrade products available on the shelves of stores the movement began with what may still be the offering most familiar to consumers if you ask them about the initiative; fair trade coffee.
Global Coffee Facts
Legend has it that the fact that the beans from the coffee bean tree could be used to create a tasty and energizing beverage was first discovered by weary goat-herders in the Kaffa province of Ethiopia. Although that story is not formally documented the fact that 12th century Yemenites seeking a way to stay up all night to pray turned to coffee to do so is. And the rest, as they say, is history. By the 16th century, coffee was being widely consumed in Africa and the East and it had even made its way to Europe where it quickly became the fashionable choice of the wealthy.
These days of course coffee is a staple that many of us could not imagine starting the day without. Global coffee consumption has in fact doubled in just over 40 years, leaping from 4.2m tons in 1970 to 8.8m tons in 2014 and the US is the world’s largest consumer of imported coffee. Chains like Starbucks make billions and even fast food restaurants like McDonalds have entered the gourmet coffee arena successfully.
If there is one thing that’s for sure it’s that we love our coffee. We just really don’t usually have much of an idea what goes into growing and making it or what challenges and difficulties coffee growers face. And there are far more than just a few.
Coffee and the Fairtrade Initiative
As we just mentioned, it was coffee that got the concept of fair trade off the ground in the first place. Although coffee is grown, harvested and produced in more than 70 countries worldwide 70% of it comes from Latin America. And when global coffee prices crashed in the late 1980s many coffee farmers in the region were left in dire straits, forced to accept less than half per pound than just a few months before.
All of this led to the creation of the very first Fairtrade product. An initiative of the Dutch development agency Solidaridad, Max Havelaar coffee, produced by Mexican coffee farmers, hit the shelves of Dutch supermarkets in 1989 and the idea has spread far and wide ever since. The coffee, by the way, was named after the main protagonist in a transformational Dutch novel of the same named that helped change the unfair policies and grueling conditions workers faced in the Dutch colonies in the 19th century, making it very appropriate for use in this situation.
What Fair Trade Does for Coffee Farmers
At the heart of the initiative as it applies to coffee growers is an assurance that under the fairtrade system they will always be guaranteed the Fairtrade Minimum Price for their goods, along with extra money – around 20 cents per pound – that is to be used specifically to grow the business. In addition, organic coffee farmers receive an additional 30 cents per pound as long as their farming methods meet the accepted standards for organic produce.
What this means that even if the global coffee market fluctuates significantly, which it has several times since the crash of the Eighties, these smaller producers are still assured of a fair return on all of their hard work, safeguarding their businesses for the future and allowing for much-needed growth.
As is the case for all Fair trade certified offerings in order to remain in the program providers must meet certification standards at all times. These include rules on minimum wages paid to workers, sustainable farming practices and the assurance of a discrimination-free workplace for women.
More Than Just a Fair Price
Fair trade does provide more to coffee farmers than a fair price, though. Some may be able to access Fairtrade Premium, a source of additional capital to help improve infrastructures and provide worker education. There are also a wealth of educational resources available to all that help coffee farmers from all over the world remain competitive in an ever-changing market.
So, the next time you are in the coffee aisle at the supermarket and are faced with a choice between a big name brand and a fair trade coffee remember that by deciding on the latter you will not only be getting a great cup of coffee but your dollars will be making a real difference in someone’s life far away as well..
What is Fairtrade and Why Should You Care?
No doubt you’ve seen the Fairtrade label on goods and products in supermarkets, grocery stores, maybe even clothing and home goods stores, more than once or twice before. You may have even purchased one or two Fairtrade products in the past. But how much do you really know about the concept behind the label and what it really means to the both you, the consumer and the people who bring the product to you in the first place?
A Helping Hand, Not Charity
Some people mistakenly believe that Fairtrade is a charitable effort of some sort, the kind that disperses aid to the disadvantaged. That could not, however, be further from the truth. Fairtrade is all about business but also about securing fair pricing, better working conditions and greater independence for farmers and workers from all over the world.
Many of the providers do indeed come from some of the most marginalized and disadvantaged communities in the world, but rather than simply handing over aid money Fairtrade gives them the chance to grow their own businesses and improve not only their own lives but that of everyone else in their communities, from the inside out.
What Fairtrade Means for Providers
When those who work within the Fairtrade system say that it changes lives they are not exaggerating in any way. Not just the lives of the farmers, craftspeople, and other providers but also their family, their friends, their entire town or village.
By being allowed to use the skills and knowledge they already possess to grow a real business, one that can be passed down from generation to generation, people – and it is both men and women – are taking their future into their own hands rather than waiting and hoping that someone else will come along and do it for them. And, as a sort of added bonus, the farming and production practices of smaller scale farmers, growers and craftspeople is almost inevitably far more eco-friendly and, once again, that benefits far more people than just one or two, it can actually benefit everyone on the planet.
The movement has proved to be of particular benefit to women. While it is traditional that women perform much of the work on plantations, farms and in factories in many countries they also face discrimination, harassment, and even abuse while doing so. When empowered thanks to the Fairtrade initiative they can receive proper healthcare, protection from discrimination, pursue educational opportunities and some do start their own businesses, providing them with financial freedom their grandmothers, and even mothers, might never have thought was even possible.
What Fairtrade Means for Consumers
The big question for you, of course, is probably why should I seek out and buy Fair trade products? Well, there are the obvious reasons; your purchase is truly helping others, by opting for Fairtrade you will be helping a good idea become an even bigger and better idea and you will be making a difference in someone’s life that is tangible and rather easy to understand. Opting to spend your money on, say, Fairtrade certified coffee rather than Starbucks or another big name corporate brand may seem like a very small thing to do but the impact is far greater than you might know, especially if you encourage your friends and family to do the same thing.
But there is something ‘in it for you’ as well. Fairtrade certified produce is free of any genetically engineered ingredients and must, in order to meet certification standards, be cultivated with minimal use of pesticides and artificial fertilizers. In addition, all certified providers are required to meet strict standards in terms of water and waste management, worker conditions and energy use. All of these things are good for the environment and though that environment may be far away from where you live by now we all know that the ‘knock-on’ effects of environmental bad practices – and conversely environmentally sound practices – will end up affecting everyone, no matter where they live. So that one simple purchase choice actually has plenty of upside for you and your family too, aside from the fact you’ll get some great stuff!
The average consumer is often turned off from buying fair trade products upon learning that the prices are higher than commercial ones. The prices go higher still when the products are sold at specialty shops instead of regular stores. Just how is a product priced?
Fair Trade Certification
When a product obtains certification the minimum price is often set by certain standards. The minimum price of the product is the amount that a buyer, a wholesaler for example, has to pay the producers who made the product. Unlike other commercial items, the price of fair trade products is not fixed. Since it aims for producers to practice sustainable production the minimum is set at the cost that covers the production. This ensures that even if the market price for that product falls below the minimum set, the farmers will not be at a loss. Thus it plays the role of a safety net. However if the market price goes way above the minimum level then the buyer has to pay the producers the current market price. In addition both the wholesalers and producers can negotiate for a higher price if it is determined that the product is of high quality, among other requirements.
Fair Trade Products for sale
Because the idea of fair trade is to cut the distribution chain, it does not answer why some of the products remain to be sold at a higher price. Thus aside from the price of the fair trade products, it is agreed upon by the producers and wholesalers, the agencies though the FLO Standards Unit puts an additional price on top of it. This may seem counterproductive since the price of the product will obviously be higher than the current market price.
Fair Trade adds improvement to communities
There is however a purpose why a premium is added. The income from the premium is used as investment capital in order to develop projects geared for the producers and workers economic, environmental and social improvement. For example, the amount can be invested to build schools and their communities in the area where the products are manufactured. It can also be used to build or improvement facilities that will help in increasing the yield or enhancing the quality. By focusing on improvements in the area it is envisioned that the income of the producers and the wholesalers increase.
So the next time you hesitate on buying fair trade products because of its price, give it a second thought. Buying Fair Trade products not only means that you help the environment but it also means that you are helping people lead better lives.