Fair Trade, Not Free Trade

by Deborah James

excerpted from the book

Globalize This

edited by Kevin Danaher and Roger Burbach

Common Courage Press, 2000


More and more people are demanding that corporations must pay living wages in order for people to buy their products. After a few years of sweatshop exposes and increased global labor struggles, most people in the United States would rather buy a product made under fair trade conditions than under sweatshop labor conditions.

According to a recent consumer study, 78 percent of consumers would rather purchase a product associated with a cause in which they believe, and 54 percent said that they would pay more for a product that supports their cause. A 1997 consumer study by TransFairUSA revealed that 49 percent of specialty coffee drinkers surveyed said they would buy Fair Trade coffee.

We rightly resist allowing ourselves to be defined primarily as consumers in a society based on consumption. We resist the marketers and free trade advocates who try to define freedom as the freedom to consume the most or cheapest or most luxurious products. Yet to deny our power as consumers is to abandon an immense influence that, when organized, we can use for positive change.

Historically consumer organizations have existed to protect consumers from fraudulent product marketing, such as quack medicine or false nutrition claims. They have also served to demand increased car safety, organic foods, fire-resistant children's clothing, nutrition labeling, truth in advertising and much more.

Recently consumer associations have been a leading force in the debate around the safety of genetically modified organisms in our food supply. But the question remains, can we organize ourselves as consumers to demand not only safer and better quality products for ourselves, but safer, healthier and more just working conditions for the producers of the products we buy?

Fair Trade, thrust into popular consciousness during the WTO protests in Seattle, means different things to different people. As an oppositional ideology to free trade, its essence is an approach to trade policies that benefit workers, communities and the environment, rather than multinational corporations. This approach demands change of the existing multilateral structures and agreements. Another aspect seeks to propose alternative agreements such as the HOPE for Africa Bill or the Alternative Agreement for the Americas, which include provisions such as debt cancellation, labor rights and environmental protections. A third aspect of Fair Trade, however, involves bypassing the existing structures and creating our own model of global trade, based on economic justice and community development.

Fair Trade means an equitable and fair partnership between marketers in North America and producer groups in Asia, Africa, Latin America and other parts of the world. Fair Traders agree to abide by the following criteria:

* Paying a fair wage in the local context;

* Offering employees opportunities for advancement;

* Providing equal employment opportunities for all people;

* Engaging in environmentally sustainable practices;

* Being open to public accountability;

* Building long-term trade relationships;

* Providing healthy and safe working conditions within the local context;

* Providing financial and technical assistance to producers whenever possible.

In the United States, the Fair Trade Federation is the national alliance of retailers, wholesalers, producers and consumers who support living wages for artisans and farmers according to Fair Trade criteria. Fair Traders are actively involved in educating their customers about the working conditions of the people who produce the products they sell.

The amount and quality of Fair Trade goods brought into the United States has increased dramatically over the last several years. Products include those based on primarily traditional skills such as textile weaving, pottery and silversmithing, as well as products designed specifically for environmental conservation such as paper handmade from local renewable plants.

"United to Live Better" (UPAVIM) expresses the activities of a group of women in the poverty-stricken barrio of La Esperanza (in Guatemala City) who organized themselves into a community organization. UPAVIM oversees the development and operation of health and education programs which benefit the people of La Esperanza, including medical and dental clinics and a laboratory, a well-baby program, a breast-feeding program directed by the La Leche League of Guatemala, a day care center, and a children's scholarship and tutoring program that sends more than 500 children to public school and provides the tutoring support to keep them there. Key to the UPAVIM programs is the production and sale of the crafts and clothing marketed through fair trade groups. Sale of these items provides direct income for the women as well as crucial financial support for the various programs.

While the percentage of total world trade that is Fair Trade is quite small, it represents both an important model as well as important income for the hundreds of thousands of producers worldwide who receive fair wages for their work.

The Fair Trade movement is many times stronger in Europe than in the United States. Over 2,500 stores are part of the Network of European World Shops. The European wholesaler alliance (the European Fair Trade Association) has member organizations from nine countries who import from 550 producer groups around the world. And the International Federation for Alternative Trade includes 143 Fair Trade organizations in 47 countries.

Setting up an alternative network of distribution may not be the answer in every sector: it may work for traditional craft products but it is not likely to be a solution for the steel industry. Yet Fair Trade does demonstrate that it is possible to operate a business and import from developing countries while empowering workers and conserving the environment.

The Coffee Alternative

There is one highly-traded commodity for which there is an international system of Fair Trade certification that is making its debut in the United States-coffee.

Coffee is the world trading system's second most valuable legal commodity (behind oil), with over 10 billion pounds exported each year from over 70 countries. With over 130 million North Americans drinking coffee, the United States consumes over one-fourth of the world supply.

About half of all coffee worldwide is produced by small farmers. These farmers own and farm their own small plots of land, but have little or no control over the export system for their coffee. "Free trade" in the coffee industry means farmers generally receive between 30 and 50 cents per pound of coffee that retails for as much as $10-$12 per pound in gourmet coffee markets. Small farmers working without the benefit of an organized export cooperative are forced to sell to exploitative middlemen who generally pay them less than half of the export price. This export price is based on the New York "C" Contract spot price and is usually around $1 per pound, but fluctuates wildly. Like most raw export commodities, when the price goes up, the exporters benefit and consumers pay more; when the price goes down, the farmers gets gouged yet consumer prices often remain high.

Fair Trade seeks to correct these imbalances by setting a minimum price per pound. This international Fair Trade price, $1.26 per pound, is set by the Fair Trade Labeling Organizations International (FLO) which includes farmer cooperatives. When market prices go above this level, farmers get the market price plus a five cent premium. But when market prices are below $1.26 per pound, as they have been for most of the last decade, the farmers still get the floor price: a living wage. Rather than operating on a charity model, where donations are made based on net profits of a company, Fair Trade changes the entire business model to include fair wages for workers as an integral part of the business arrangement. When prices are at $.85 per pound, as they were on November 30, 1999, Fair Trade can easily make the difference between keeping and losing the farm.

TransFairUSA is the national licensing agency that certifies importers and roasters here in the United States. They are the U.S. section of FLO, which includes monitors from 17 different countries. The International Fair Trade Registry certifies over 300 cooperatives in 20 different producer countries, representing over 550,000 farmers. The monitors in other countries-but not yet in the U.S.-also certify cocoa, honey, sugar, tea and bananas.

Fair Trade coffee goes beyond simply paying a fair price for hard work, as the workers actually own the means of production (especially land) and have much more control over the means of distribution (direct export). For a farmer group to get on the International Fair Trade Registry, they have to meet two basic criteria; they have to be small farmers (the Fair Trade system does not certify plantation estates) and they have to be organized. This means that they have their own system for ensuring democratic distribution of profits and providing for community development. Monitoring then, serves not as a substitute for independent labor organizing, but as a way to ensure that importers and roasters are adhering to Fair Trade criteria of paying a fair market price to worker-owned production cooperatives.

Fair Trade criteria also address the needs for credit and technical assistance. In addition, serious Fair Traders such as Equal Exchange and Thanksgiving Coffee (pioneer Fair Trade coffee companies) build long-term relationships with farmers and treat them as equals in the business partnership.

Other key issues in coffee production include organic and shade grown methods of production. These primarily address environmental concerns, but have significant advantages for small producers because farmers often receive premiums for organic and shade grown coffee. Farmers also obviously benefit by working on land free of pesticide pollution, increasing financial security through crop diversity, and being less beholden to expensive inputs of chemical fertilizers and pesticides. Most of the regions that produce organic and shade grown coffees also participate in Fair Trade cooperatives: primarily Mexico, as well as Central America and the Andean countries of South America. While 85 percent of coffee produced by Fair Trade cooperatives is organic and shade grown, a large part of the coffee grown under organic and shade conditions are not sold at Fair Trade prices.

Fair Trade cooperatives last year together produced over 60 million pounds of coffee, yet were only able to sell half of that coffee at Fair Trade terms. That means there are over 30 million pounds still available in the Fair Trade market. The big gap is U.S. consumption; U.S. importers purchase one in every four pounds in the world market but most are not buying Fair Trade. Dozens of small roasters have already signed on to be Fair Trade Certified; but there are over 1,000 coffee roasters-including the major chains such as Starbucks-that have yet to sign on. We need to demonstrate to them that there is a serious demand for Fair Trade in the coffee industry by organizing Fair Trade campaigns in every town together with campuses, churches, unions, farmers, environmental and solidarity groups.

WTO Challenges

Various efforts have been made by industry leaders in past years to limit the use of voluntary labels. Timber and paper corporations have sought to ban labels such as "sustainably harvested" and "recycled" by getting them declared WTO-illegal on the basis that they unfairly prejudice consumers towards certain products based on methods of production. World Trade Organization rules do not allow differential treatment of a product based on its method of production. But these labels are voluntary, not obligatory, and they are as important for consumer choice as product content and nutritional information.

Don't we have a right to know if a product we buy was produced in a sweatshop or with living wages? We have the right to know how a product affects our own bodies, so shouldn't we have the right to know how it affects the earth and how it affects the people who produced it? Shouldn't companies that voluntarily follow sustainability and social justice criteria be legally able to communicate that message to consumers eager to make consumer choices according to their beliefs about the importance of living wages?

Making Fair Trade a viable economic system and a widespread consumer preference through coffee is a strategically important effort. It demonstrates that there are consumers willing to shift purchasing preferences based on conditions of production. It demonstrates that workers in the U.S. stand in solidarity with workers and farmers in developing countries in demanding living wages and just economic systems. It demonstrates that environmentalists recognize the links between living wages and ecology. And it enables us to demonstrate that there is a viable way of conducting global trade based on economic justice and environmental sustainability rather than corporate profits, cheap labor and resource extraction.

Globalize This

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