January 1998
Without adequate information on alternatives and, in general, without pressure exerted by ordinary citizens and consumers, neither commercial companies nor international decision-makers are likely to modify the current system of exploitative trade. Whatever progress has been made in introducing codes of conduct into business and principles of equity and justice into international trade, is largely due to the success of campaigns by fair trade organisations and other similar bodies.
The fair trade movement has become more professional in its awareness-raising and advocacy work - producing well researched documents, attractive campaign material and public events, and using all channels of communication to diffuse a message. It has also benefited from the establishment of European structures to harmonise and centralise its campaigning (adopting common themes for the whole movement, establishment of an EFTA advocacy office in Brussels, efficient research of issues, distribution of information, and co-ordinated approaches to decision-makers).
The fair trade movement's unique structure has guaranteed it success out of all proportion to its size. While the movement has become more professional and pan-European, it maintains an exceptional grassroots base, depending on its network of over 100,000 volunteers, representatives and activists and millions of supportive consumers to transmit its message to those in power. The public is invited to act by means of such things as petitions, postcard campaigns, and public events. Since 1995 EFTA has been campaigning against the proposed directive to allow the substitution of vegetable fats for cocoa butter up to 5% by weight of chocolate. Five hundred thousand signatures have been collected and postcards protesting at the move have been sent to governments, MEPs and chocolate companies. These were presented to the European Commission in Brussels in 1995; and also during a press conference in Luxembourg in the course of the Luxembourg presidency of the EU in September 1997. The campaign has had a very significant impact in influencing the outcome of the institutional debate on this issue, the final result of which will not be known for several months. The results of the movement's campaigning are impressive. The institutions of the EU and Member State governments as well as international companies are slowly responding to the voice of a growing number of consumers and citizens who are dissatisfied with the current injustice in trade and production. They are slowly beginning to introduce measures to improve (albeit marginally) the conditions of producers in the South.
It is difficult to trace the beginnings of the Fair Trade movement. The fair trade certification label "Max Havelaar" draws its name from a book by the same title published in 1860 in which the author denounces the injustices in the coffee trade between Indonesia and the Netherlands. Perhaps, a more direct link is to recall that in the late 1950s the Oxfam UK director, visiting Hong Kong, had the idea of selling in Oxfam shops crafts made by Chinese refugees - the first product was a stuffed pin cushion. In 1964 Oxfam created the first Alternative Trading Organisation (ATO). Parallel initiatives were taking place in the Netherlands and in 1967 the importing organisation, Fair Trade Organisatie, was established. At the same time, Dutch third world groups began to sell cane sugar with the message "By buying cane sugar, you ...give poor countries a place in the sun of prosperity". These groups went on to sell handcrafts from the South, and in 1969 the first fair trade shop opened.
From the humble and diverse origins of the stuffed pin cushion forty years ago, fair trade has expanded dramatically. Fair trade importing organisations were established in several European countries and now number approximately 70 in 16 European countries (Fair trade importing organisations also exist in the Australia, Canada, Japan and the US).
Importing organisations purchase products directly from southern producer partners and sell through a variety of channels including fair trade shops, solidarity groups, mail order catalogues, voluntary representatives of the organisation, organic shops, local markets and increasingly institutional outlets (canteens, businesses, public authority offices etc.). EFTA (the European Fair Trade Association) was established in 1990. It represents 12 fair trade importing organisations and around 60% of fair trade imports in Europe.
From the 1970s onwards, fair trade shops began to spring up all over Europe. There are now over 3000 in 18 European countries of which 2500 are represented via 16 national associations, in the Network of European World Shops (NEWS!). In 1989 the International Federation of Alternative Trade (IFAT) was established, bringing together ATOs from Africa, Asia, Australia, Europe, Japan and North and South America. The objectives of the importing organisations, shops and solidarity groups are to sell fair trade products, to raise awareness of the deplorable conditions of production and trade facing producers in the South (and sometimes in the North), and to campaign for their improvement.
Until the mid-1980s the fair trade movement traded mostly in an alternative trade circuit of those committed to equity between the North and South. Thereafter, fair trade began also to exploit mainstream channels - focusing on wholesaling to institutional outlets. This trend continued in 1988 with the establishment of the first fair trade label - Max Havelaar in the Netherlands. Mainstream businesses which respect fair trade criteria and accept external monitoring by the labelling organisation, are awarded a seal of approval and the products are sold throughout mainstream outlets. Following the creation of the Max Havelaar label, other labels such as TransFair International (co-founded by EFTA) and the Fairtrade Foundation were also established. Since April 1997 all Fair Trade labelling is co-ordinated by FLO - the International fair trade Labelling Organisation and exists in 12 European countries and also Canada, Japan and the US.
Fair trade organisations now represent an important alternative trade market. In 1995 ATOs achieved a retail sales value of a quarter of a billion dollars a year and provided income opportunities for an estimated half a million artisans and workers in the South5. In Europe, fair trade products are sold through 70,000 points of sale. The annual retail turnover of the fair trade movement in Europe is over ECU 200 million. Fair trade is experiencing an average annual growth rate in Europe of 5%. In Spain retail turnover increased by 50% between 1995 and 1996 and doubled from 1994 to 1996. In France, the market almost doubled from 1994 to 1996 and in Italy fair trade is experiencing growth rates in excess of 10% per year. For certain products in specific countries there is an extremely high market penetration - fair trade bananas now represent a stable 8% of the Dutch market and 13% of the Swiss market, while fair trade organic coffee represents 70% of the organic coffee market in Austria.
"There is always someone poorer than the poor man - the poor man's wife"
Women experience systematic social and economic discrimination from the cradle to the grave. 70% of those living in absolute poverty are women. There is a considerable gap between the return women get, and the role they play in society.
Women are central to the fair trade movement, representing up to 80% of volunteers working in shops and a significant part of the production of fair trade producer groups. Practically all fair trade organisations now include respect for the role of women in their criteria, both North and South, and undertake to provide training and education on this issue. Fair trade organisations aim to recognise the work of women; to secure their employment, to improve their income level, to ensure access to technology, credit and the decision-making process.
By importing products from groups made up of women only or mixed groups, fair trade organisations support them in their struggle for economic, social and political emancipation. Apart from the fact that fair trade gives women a chance to stay financially afloat, working in their own organisation offers more advantages. A female producer from Zimbabwe states: "Fair trade stimulates equal rights, this creates a better atmosphere in our organisation and the women get a say in what is going on. It does not just create jobs, buts also provides education on all kinds of subjects".
In Bangladesh, at the end of the civil war in 1971, many widows and single mothers found themselves alone to bring up their children. Several organisation were set up to promote women, one of which was Jute Works. It works with 214 co-operatives today, grouping 6000 members and supports various social programmes (house building, water supplies, reforestation). Most of the women work in isolated villages in 16 districts and use their traditional know-how to produce articles from materials available locally. Firoza says "I have been making crafts for Jute Works since 1981 when the group in our village began. Being a member of a group means I must save part of my earnings with the group. The group also lends money to members. Since becoming a member I have been able to buy enough land for us to grow rice for our family. I have been involved in a calf rearing scheme. I bought a pair of bullocks to help my husband in his work and a bullock cart. I have bought chickens, goats and a milking cow and can earn money from all of these. With a loan from the Jute Works, we have been able to buy the equipment to build a toilet just behind our house. I hope that my daughter will carry on with her studies and get a degree at the university. I would like my son also to go on to further education and get a good job."
Perhaps the most well-known aspect of the whole fair trade system is the "fair price". The fair trade price, like all other criteria, is arrived at by a process of discussion. The price should cover the full cost of producing the good, including social and environmental costs. This price must be sufficient to provide the producers with a decent standard of living and a margin for investment in the future. In general, importing organisations accept the calculations proposed by the producers. In the case of primary products like coffee or cocoa where the price is determined on international commodity exchanges, the fair trade movement pays the international price, which has little bearing on the costs of production, plus an additional margin. A minimum price is guaranteed, regardless of the vagaries of the market.
Liberal economists point out that this intervention in the market is "unfair" and will lead to an increase in production of products already in over-supply. However, the concept of a more just exchange between North and South is not a new idea. The economist, John Maynard Keynes, suggested in the 1940s that the proper economic prices should be fixed not at the lowest possible level, but at the level sufficient to provide producers "with proper nutritional and other standards in the condition in which they live.... it is in the interest of all producers alike that the price of a commodity should not be depressed below this level, and consumers are not entitled to expect that it should". The internalisation of social and environmental costs in the price of a product has been on the agenda of international organisations such as the United Nations (UN) and the European Union (EU) ever since, and is the cornerstone of the environmental movement's "eco-tax". In practice, evidence from nearly 40 years of fair trading suggests that very few producers have expanded production due to the higher price paid - given the tiny parcels of land they possess and the lack of working capital and resources, it is almost out of the question. Fair prices to producers need not always imply above average prices to the consumer - approximately half the prices for fair trade products are higher than the market price and half are lower. Many products are highly competitive - as is the case for the recently launched fair trade bananas in the Netherlands and Switzerland. This is possible due to the lack of intermediaries in the distribution chain and the invaluable contribution of the movement's volunteers. Not all consumers expect that the price should be lower than that which guarantees a decent standard of living to producers. Surveys reveal that the European public are becoming increasingly discerning in their choice of goods and increasingly willing to pay a higher price for a product reflecting criteria they believe important. For example, in the UK 68% of consumers declared they were willing to pay a higher price; in Sweden 64%. In the UK 86% of consumers are now aware of fair trade, in Sweden the figure is 84% while in the Netherlands and Belgium 66% and 62% respectively are aware of fair trade labelled products.
Finally, in response to the criticism that by nature of the higher prices of fair trade products, the movement excludes less financially secure consumers in Europe, it should be borne in mind that the marginalisation of many citizens and consumers in Europe is a result of the same forces of globalisation and market liberalisation that exclude small-scale Southern producers. This criticism should not be directed at fair trade but rather at the same factors that fair trade seeks to combat.
Ambassadors of Fair Trade - Choice of Products Fundamental characteristics of fair trade products are their consistently high quality and the increasing variety and range available.
In the early years, the product choice consisted almost exclusively of handicrafts. Over the intervening years the range of handicraft products has developed and now includes jewellery, clothing, toys, pieces of art, giftware, and household items (such as bed-linen, wall-hangings, rugs, kitchen utensils, and glassware). Parallel to the expansion in this sector, the choice of food items has steadily increased and now includes coffee, tea, cocoa, chocolate, sugar, wine, fruit juices, nuts, spices, rice and other cereals. On average, food products represent more than 60% of retail turnover (of which half (or 30% of the total fair trade market) is made up of coffee sales).
"Handicraft is more a method of production than just a range of products. The products, which can be items of practical use or of immense cultural value, are extraordinarily varied. The materials reflect the diverse know-how and local resources". These are the products that attract customers. The variety of these "artisanal" products also reflects the situation of their producers. For textiles and batik work, for example, production is dominated by women while for others like glass, pottery, and brass-ware production is primarily done by men. In some cases crafts are produced as a sideline and can be important as a means of supporting impoverished agricultural labourers with seasonal orders that supplement their income. On the other hand, for many producers of these non-food items this production is their main income-earning activity carried out either by hand or in factories with appropriate tools and machinery. Crafts also support indigenous people in their efforts to maintain their culture and to control the marketing of their own traditional crafts.
If products such as coffee, cocoa, tea, bananas, and sugar represent a crucial part of national income and foreign exchange to many of the Southern countries, they represent basic survival to the millions of small farmers who produce them. The crisis in the commodity sector rendered it imperative that fair trade contribute to the improvement of conditions for these producers by importing food products. In 1973 coffee was introduced for the first time and quickly became one of the fair trade range's anchor products. Importing of food products must not jeopardise local food security, and local processing must be encouraged where possible, and diversification into specialised products like organic products or other products with better market potential must be supported.
EU regulations demand increasingly strict control of product quality, health and safety requirements, and consumer information. An increasingly competitive climate for many products, along with recession in Europe, and increasingly specific consumer tastes and fashions, has necessitated a significant investment in assisting producers to provide the desired products at acceptable standards. Now the movement can boast a choice of up to 2,500 products and products of superior quality. They include chocolate with extra high cocoa content; chocolate that is guaranteed free of genetically modified soya; coffee that competes with the highest quality coffees in mainstream markets, an increasing range of organic products, and textiles printed with vegetable dyes rather than chemical dyes.
What we have achieved by trading with fair trade organisations since 1990
"The Kagera Co-operative Union Ltd. was born in 1984. All along, the co-operative union usually moved coffee from the farms to the processing plant, to the port for railage from Bakoba (around Lake Victoria) to Tanga Port. Samples were picked at the port and presented to the auction for selling. So for the farmer, knowledge of where coffee goes usually ended at the auction point.
In 1990 the idea of exporting coffee ourselves had already grown strong, but we did not have the customers. As fortune would have it, we were visited by the first fair trade organisation who promised to be in partnership with our Union. We could not try to export without reliable partners abroad - with fair trade we broke the ice. Since then, we have fully participated in the auction's bidding with other giant coffee exporters. Advantages of participating at auctions, are that exporters cannot agree on prices among themselves, because as the owners of the coffee, we are able to outbid others setting the price to the prevailing world market price provided we also have customers. We might only buy 3 lots at the auction but this affects even our other 20 or 30 lots which have been purchased by other coffee exporters. In the process they are compelled to bid a fair price at auction; leading to higher incomes to the producers.
When prices are generally low, it means we sell at a loss, failing to recover the costs. This is the case with most of our sales to the conventional market; but the sales we make to the fair trade movement have always saved the farmer from complete despair. Costs are fully recovered let alone the premium paid.
Education to the farmers regarding coffee marketing and the market forces in general is now available through our deals with Fair Trade organisations. It is currently not uncommon in Kagera to be asked about the London market, while one is in the villages. This language of New York and London market was in the past not common with farmers... When prices in general are very low, 50% or even more of the surplus price will be paid directly to the farmers to assist them pay for the production and processing costs. When the prices for the season are satisfactory, the farmers suggest reserving the surplus for development projects like coffee quality improvement projects. The surplus is also used for education, health care, shelter and clothing. Farmers are encouraged to continue with coffee production and maintenance of their farms - there was a tendency to neglect coffee farms when the second and final payment was not forthcoming because of low prices.
Fair trade has benefited from significant support from the European Commission for awareness raising programmes. This approach should be continued. However, it is essential also that the Commission co-ordinate its activities within and between services to mobilise resources to support fair trade.
Support for producers could take the form of
Support for fair trade organisations in the North could include
The EU should recognise existing fair trade labels, now globally harmonised under one organisation, FLO. This recognition would enhance the labels status and make it more attractive to companies. The EU should promote this issue within the WTO.
Promotion of sustainable trade and development between North and South
In the year 2000 the fourth Lom Convention between the EU and ACP (African, Caribbean and Pacific) states which governs the EU's agreements on trade and aid with these countries expires.
This presents an ideal opportunity to rethink the EU's relations with all developing countries and to integrate the principles of fair trade into its development policy. Fair Trade principles could be used as a model on which to build a coherent trade policy focusing on the:
It is essential that policies developed to support trade that promotes sustainable development in the South not be frustrated by policies introduced by the EU and Member States on agriculture, industry, fisheries etc.
EFTA calls for the abolition of all measures that frustrate sustainable trade development in the South e.g. the common agricultural policy (CAP); quota systems; escalating tariffs etc. EFTA advocates the adoption of a system of preferences which takes account of the different level of development of producers in different developing countries and allows marginalised communities to improve their trading position.
EFTA advocates producer participation in international negotiations on commodity trade. For example, the Latin American association of small coffee producers, the Frente Solidario, should have a seat in the International Coffee Organisation and producers should be represented in policy-making bodies of the WTO, UNCTAD etc.
Commodity markets are in disarray. Protectio-nism on the northern markets, declining and unpredictable prices and terms of trade, speculation and concentration of the market in the hands of TNCs are forcing producers to abandon their farms and move to the cities. In recent years EFTA and the fair trade movement have chosen two particular subjects on which to campaign. The demands of these campaigns noted below are crucial in themselves and also serve as a symbol of the multitude of problems facing all primary products that must be addressed:
The EU must not allow its development policy to be overshadowed by the might of TNCs. The EU must maintain the current ban on the use of vegetable fats other than cocoa butter in the production of chocolate. The fate of eleven million people in West Africa depending on cocoa cannot be sacrificed to the profits of a handful of TNCs.
Since the collapse of the International Coffee Agreement in 1989, the coffee market has been in turmoil. EFTA proposes a European Coffee Agreement with the aim of stabilising the market through price controls. A diversification fund should be included to provide capital for coffee farmers wishing to upgrade their coffee or to convert to other crops. While the EC did not accept outright proposals made by EFTA on this issue in 1994, in collaboration with the Belgian government it did state that it would study the proposal and include them in discussion of the review of Stabex now taking place.
1991: European Parliament adopts "Resolution on coffee consumption as a means of active support for small Third World coffee producers and the introduction of that coffee within the European institutions".
1994: European Parliament adopts "Resolution on promoting fairness and solidarity in North South trade" .
1994: European Commission prepares "Memo on alternative trade" in which it declares its support for strengthening fair trade in the South and North and its intention to establish an EC Working Group on Fair Trade.
1994: APROMA, an EC/ACP think tank on commodities, invites mainstream coffee roasters and fair trade organisation to a meeting on "Coffee: Alternative Trade - Status and Outlook".
1994: Economic and Social Committee of the European Community adopts an "Opinion on the Effects of the Uruguay Round" and draws attention to fair trade labelling as a supplementary route to raising ethical and social standards in developing countries. It calls on the EU to fund these initiatives and help them to expand.
1996: Economic and Social Committee of the European Community adopts an "Opinion on the European "Fair Trade" marking movement"
1997: European Parliament adopts a resolution on the banana sector, calling on the Commission to facilitate access of new fair trade operators.
1997: European Parliament adopts a "Resolution on Social Labelling" welcoming the initiatives of the NGOs behind the Clean Clothes Campaign and Rugmark and the other fair-trading initiatives.
1992-1995: Four Fair Trade Days and a Fair Trade Lunch were organised by EFTA at the European Parliament to introduce MEPs to fair trade.
Several European countries now include fair trade as part of their development co-operation policy while public offices in many countries are now purchasing fair trade products. Discussions on parliamentary resolutions (at regional and national level) and on government action plans to support fair trade are also gaining momentum in a number of countries.
