Fair Trade Movement What is Fair Trade? Self-Help Crafts Ten Thousand Villages 1974: Oxfam UK started 1 st fair trade organization 1973: first import of “fairly traded” coffee from farmers’ co-operative in Guatemala.
Purpose of fair trade Effect of globalization Opening up markets or exploiting poor countries Purposes of fair trade: Alleviate poverty Sustainable development Create opportunities for marginalized producers (those disadvantaged by the traditional economic model) More money for producer Improve local economy, infrastructure, education, healthcare $0.28 $0.72 $0.89 $0.11
key elements of fair trade The producer: is paid a fair price which covers not only the costs of production but enables production which is socially just and environmentally sound. Helps develop a producer's ability to remain independent. Helps provide a safe and healthy working environment for producers. Children are not to be exploited as cheap labourers. Women's work is properly valued and rewarded. Encourages better environmental practices and responsible methods of production. http://www.cbc.ca/news/background/fair-trade/
Stats: fair trade According to the CBC, Canadians consume 40 million cups of coffee per day. 63% of Canadian adults drink coffee on a daily basis 2/3 coffee consumed in the home Under non-fair trade arrangements producers are paid approximately $0.11 per dollar spent by consumer. Under fair trade arrangements produces are paid approximately $0.28 per dollar spent by consumer In 1998, more than 21,500 kilograms of fair trade coffee was sold in Canada. By 2004, Canadians bought more than 940,000 kilograms of the product. In 2006, 3.3% percent of coffee by weight sold in the US was fair-trade. Source: TransFair USA According to Fairtrade Labelling Organizations International, a group of fair trade certifiers, consumers spent approximately $2.2 billion on certified products in 2006, a 42 percent increase over the previous year, benefiting over seven million people in developing countries. http://www.cbc.ca/news/background/fair-trade/
Fair Trade towns in Canada Wolfville, NS (April 17, 2007)La Pêche, QCLa Pêche, QC (November 9, 2007)Port Colborne, ON (April 28, 2009)Nakusp, BC (April 29, 2009)Golden, BC (June 8, 2009)Gimli, MB (July 1, 2009)Olds, AB (November 9, 2009)Revelstoke, BC (December 8, 2009)NeuvilleNeuville, QC (March 31, 2010)Mercier-Hochelaga-Maisonneuve, QCMercier-Hochelaga-Maisonneuve, QC (April 19, 2010)Vancouver, BCVancouver, BC (May 6, 2010)Barrie, ONBarrie, ON (May 10, 2010)Sainte Anne de Bellevue, QC (May 21, 2010)Canmore, AB (July 6, 2010)Sherbrooke, QC (February 9, 2011)
Market Considerations Time 3-4 years for coffee plant to produce significant quantities of coffee and up to seven years before the plant reaches peak productivity Market Volatility difficult for coffee farmers to react quickly to price fluctuations. As a result, coffee supply often increases even as market prices plummet. Effect: leads to a collective action problem, where each farmer has an incentive to increase production as price falls in order to reduce per unit cost and increase his or her margins. In aggregate, this activity creates a positive feedback loop and further depresses the world price.
Criticisms Artificial inflation fair trade attempts to set a price floor for a good that is in many cases above the market price and therefore encourages existing producers to produce more and new producers to enter the market, leading to excess supply. Through the laws of supply and demand, excess supply can lead to lower prices in the non-Fair Trade market. Fair trade certification biased towards agricultural co-ops Discriminating against individual farmers
Institute of Economic Affairs Summary: Fair Trade is part of the market economy and is not, in any way, in opposition to free trade. Fair Trade sales have grown enormously in the last few years. certain benefits to producers guaranteed prices, a social premium enforcement of particular labour conditions. Disadvantages if the market price falls below the guaranteed price level, though the guaranteed price will be paid for any Fair Trade purchases, the quantity of produce that will be bought from the producer is not guaranteed. Levy on the wholesaler Certification charge for producers (£1,570 first year) Administration costs administration of Fair Trade process involves costs of inspection, certification, campaigning for Fair Trade products and maintenance of the Fair Trade bureaucracy. Consequently, a major proportion of the Fair Trade price premium is eaten up, and therefore the net premium actually received by producers is lower than is commonly perceived
Fair Trade penetration in middle-income rather than in poor countries. The organising and managing of the Fair Trade process involves costs of inspection, certification, campaigning for Fair Trade products and maintenance of the Fair Trade bureaucracy. Consequently, a major proportion of the Fair Trade price premium is eaten up, and therefore the net premium actually received by producers is lower than is commonly perceived The benefits claimed by Fair Trade can also be obtained from the normal business relationships that exist between primary product producers and buyers. Attempts by proponents of Fair Trade to denigrate free trade and normal market practices are not helpful and distort realities. Primary product producers will often gain much more by selling speciality brands of their product than they will from adopting the Fair Trade label. Not a long-term development strategy, and the model is not appropriate for all producers. It is also unable to address structural problems within trading systems. Fair Trade’s proponents need to show some humility and accept that it is a niche market designed to benefit some producers; nevertheless, it does achieve that limited objective. http://www.iea.org.uk/publications/research/fair-trade-without-the-froth Institute of Economic Affairs
Open global market or fair trade market? Is fair trade useful? "Fairtrade focuses on ensuring that farmers in developing countries receive an agreed and stable price for the crops they grow, as well as an additional Fairtrade premium to invest in social projects or business development programmes. ” (Eileen Maybin, Fairtrade Foundation) Fair trade is more about "flattering Western shoppers" than transforming the lives of Third World farmers. (Steve Daley, WorldWrite) Fair-Trade Waterloo (FTW) http://news.bbc.co.uk/2/hi/uk_news/magazine/6426417.stm