Fair Trade Movement

Beneficial or Bogus?

Corinne Kelly, Emily Rinehimer, Sarah Roggenthien, Anna Tuten

1 June 2015

Fairtrade

Definition: What is Fairtrade?

Movement which strives for fair treatment for farmers

Farmers negotiate with purchasers in order to achieve a fair price

They also aim to pay their workers a fair price

Engage in environmentally-friendly practices

Fairtrade Mark

Can be found on products like clothes,

food, drinks, cotton, etc.

All ingredients that can be sourced as

Fairtrade are Fairtrade

All usage of the Marks requireprior written

approvalfrom Fairtrade International, a
national Fairtrade organization, or a
Fairtrade marketing organization.

FLOCERT

Independent certifier for

Fairtrade

Ensures that the

relevant economic,
social, and
environmental standards
are met and that
producers receive the
Fairtrade Minimum Pric
e and Premium
.

History

1988: Max Havelaar (Dutch) launched first Fairtrade Label

First Fairtrade coffee from Mexico to Dutch supermarkets

Early 90s: several other markets across North America

and Europe

1997: Fairtrade Labelling Organizations International (FLO)

was established in Germany to unite national Fairtrade
organizations

Harmonize worldwide standards and certification

History

2002: Fairtrade International launches the international FAIRTRADE

Certification Mark

Goals:

improve visibility of the Mark on supermarket shelves

Facilitate cross border trade

Simplify export and import

2004: Fairtrade International splits into two independent

organizations

Fairtrade International: sets Fairtrade standards, provides producer support

FLOCERT: inspects and certifies producer organizations and audits traders

2007: one of seven organizations that have reached the highest

standards for defining ethical trade

Global sales increased by 47%

Fairtrade Organization

Vision

They believe

that trade can be a fundamental driver of poverty reduction and greater

sustainable development

that people can overcome disadvantage and marginalization if they are

empowered to take more control over their work and their lives

that people, businesses and civil society institutions in the developed world are
supportive of trading in this way

Mission

Our mission is to connect disadvantaged producers and consumers,

promote fairer trading conditions and empower producers to combat
poverty, strengthen their position and take more control over their lives.
Fairtrade Labelling Organizations International, e.V.

Fairtrade Organization

Tasks

1. Setting Fairtrade Standards

2. Supporting Fairtrade
producers
3. Coordinating global Fairtrade
strategy
4. Promoting trade justice

Who They Are

Three producer networks:

Fairtrade Organizations

General Assembly and Board

Members of the international Fairtrade system meet once a year at the General
Assembly

The Board of the international Fairtrade system is elected by the General Assembly

Bibliography

http://www.businessdictionary.com/definition/fair-trade.html

http://www.fairtrade.net/what-is-fairtrade.html

Fair Trade Organizations

History, Missions, Practices, Current Events

History
1989: constitution for International
Federation of Alternative Trade (IFAT)
approved by Alternative Trade
Organizations (ATOs) to provide a more
formal policy-making body
1995: Code of Practice and Strategic Plan
are adopted
1995: IFAT name officially changed to WFTO
to reflect breadth and impact

WFTO aims to improve the

livelihoods of marginalized
producers and workers,
especially in the South.

Mission
to enable producers to improve their
livelihoods and communities through Fair
Trade
Practices
Focus on the interests of producers in all
policies, governance, structures, and
decision making.

In the News: World Fair Trade Organization

World Fair Trade Organization welcomes three new members (FairMail,

Trade Aid Importers, Kiboko Leisure Wear) to Guaranteed Fair Trade
Organization status through the WFTO Guarantee System.

http://wfto.com/news/wfto-welcomes-three-new-guaranteed-members-f
airmail-trade-aid-importers-and-kiboko-leisure-wear

The 13th WFTO Biennial Conference, held from the 24 to 27 of May

2015, raised awareness of current issues and happenings within the
Fairtrade domain and included speakers from around the world.

http://wfto.com/news/workshop-speakers-13th-wfto-biennial-confere
nce

History
1997: Fairtrade Labelling Organizations International
(FLO) launches to harmonize standards/certification
2002: Fairtrade International launches the
international FAIRTRADE Certification Mark
2004: splits into two distinct organizations; FI sets
standards and provides support for producers while
FLOCERT inspects/certifies producers and audits
traders
Mission
to connect disadvantaged producers and consumers,
promote fairer trading conditions and empower
producers to combat poverty, strengthen their
position and take more control over their lives
Unlocking the Power
of the Many

Practices
Coordinate fair trade labeling and set standards at an
international level.
Support producers in gaining Fairtrade certification
and developing market opportunities.
Organize global Fairtrade strategy and advocate for
trade justice in international debates.

In the News: Fairtrade International

Fairtrade Foundation launches Equal Harvest

report to highlight the benefits of more active
female participation within Fairtrade organizations
and their suppliers.

http://www.fairtrade.net/single-view+M5ea9277333
a.html

Fairtrade International launches Fairtrade Brasil to

bolster support for South-South trade and create the
opportunity for Fairtrade producers to connect with
consumers in a local market.

http://www.fairtrade.net/single-view+M5496614651
0.html

History
Roots from yearly conferences dating back to the
1970s for individual alternative trade
organizations.
Formally incorporated in 1994 as the North
American Alternative Trade Organization (NAATO).
Mission
to support farmers and artisans in developing
countries through the practice of fair trade

Great Products.
Tremendous Impact.

Practices
Enforce adopted Code of Practice to determine
membership eligibility and stimulate the growth
of fully committed fair trade organizations.
Offer advance payment to farmers and artisans to
allow them to purchase raw materials without
taking out high-interest loans.
Focus on forming long-term relations with
farmers and artisans.

In the News: Fair Trade Federation

The Leakey Collection (a FTF member) is providing job opportunities to upwards of

1,500 Kenyans creating sustainable products that are purchased around the world.

http://www.delmartimes.net/news/2015/apr/16/leakey-collection-fair-trade-federation/

http://www.leakeycollection.com/

FTF 9: Nine Principles of Fair Trade embodied by the Fair Trade Federation

1.

Create Opportunities for Marginalized Producers

2.

Develop Transparent Relationships

3.

Build Capacity

4.

Promote Fair Trade

5.

Pay Promptly and Fairly

6.

Support Empowering Working Conditions

7.

Ensure Childrens Rights

8.

Cultivate Environmental Stewardship

9.

Respect Cultural Identity

http://www.fairtradeprinciples.org/

History
Founded in 1989 by the Christian Entrepreneurs Social Union (USEC) to support the sales of
Chilean craftsmen and food producers
Certified by World Fair Trade Organization in 1995
Opened two fair trade stores in Santiago
As a result, nearly 30 countries trade in Chilean handicraft today and over 400 people have
received support
Mission
to promote fair trade and high quality craftwork and food products from Chile, ensuring
practices to preserve dignity for economically disadvantaged producers through education,
support and connections that will increase their income and living conditions
Practices
Integration of four activities: development, promotion, export, and technical assistance
Works as a bridge between small/medium sized producers and retailers in international and
local markets
Provides training programs to enhance the management and production skills of producers
Offers workshops in which designers and producers collaborate on product design

In the News: Comparte

Co-organized the seminar Los Desafos del Comercio Justo y las Empresas
Sociales en Chile with the Centro de Reflexin y Accin Social (CREAS) in
order to attract small producers and educate them on the benefits and
support available through the Fair Trade movement.

http://www.uahurtado.cl/noticias-universitarias/2012/03/comercio-justo-y-r
se-es-tema-central-en-encuentro-organizado-por-la-uah
/

Hosts a Fair Trade blog where employees and artisans can share their
experiences working with Comparte.

http://www.compartesano.com/

Bibliography

http://wfto.com

http://wfto.com/news/wfto-welcomes-three-new-guaranteed-members-fairmail-trade-aid-importer
s-and-kiboko-leisure-wear

http://wfto.com/news/workshop-speakers-13th-wfto-biennial-conference

http://www.fairtrade.net

http://www.fairtrade.net/single-view+M5ea9277333a.html

http://www.fairtrade.net/single-view+M54966146510.html

http://www.fairtradefederation.org

http://www.delmartimes.net/news/2015/apr/16/leakey-collection-fair-trade-federation/

http://www.fairtradeprinciples.org /

http://www.comparte.cl

http://www.uahurtado.cl/noticias-universitarias/2012/03/comercio-justo-y-rse-es-tema-central-en
-encuentro-organizado-por-la-uah
/

http://www.compartesano.com/

Pros of the
Fairtrade
Movement

Fair trade: The Success Story

Encourages sustainable practices

Helps fight poverty and corporate competition

How does pricing work?

Guaranteed minimum price=always above market price

Floor, not ceiling

Floor=Cost of production+cost of living+cost of complying with Fair Trade

standards

+Premiums (Average $0.20 premium for development,

another $0.30 for organic)

Higher

profits, even cents, mean greater production

capacity and higher reinvestment

Consumer preferences
When asked whether they would pay a little more for free trade brands...

Source: Statista on Fair Trade in the US

Taking advantage of the trend

Appreciation for handmade goods, respect for workers,

sustainable practices

Bringing isolated growers to the world market

Source: Stanford Social Innovation Review

Premiums have power

2013
US premiums
alone grew to
almost $60 MM

Microfinance

Community Support

Premiums get to fair trade communities to aid

development of schools, medical clinics, wells, equipment
and training, organic certification

2011: $21,861,570 worldwide went to 1,030 fair trade organizations

(Source: Fair Trade USA)

Source: Stanford Social Innovation Review

Sustainability

Profits go to worker control

funds

Independent decision making

by worker groups

Distributed to pay for

education, organic
certification, equipment

Provide better healthcare

Production AND Consumption

A Synergistic Approach

Bibliography

http://www.fairtrade.net/benefits-of-fairtrade.html

http://www.ssireview.org/blog/entry/fair_trade_a_model_for_sustainable_d
evelopment

http://
www.fairtrade.net/fileadmin/user_upload/content/2009/resources/2010-12-31_
flo-sustainability-position-paper.pdf

Cons of the
Fairtrade
Movement

Fairtrade International 2012-2013

Products and labels offered

202

labels last decade

424

overall

 The fair trade movement has lost its way

Aiden McQuade

Breaches in Standards
A.

Child Labor

Harvesting cocoa in Ghana later certified and sold to Cadbury

Burkina Fasos cotton crop and Victorias Secret

B.

(Mainstreaming)

As demand for fair trade increases, farmers face lack of labor resources.

Company selling the product might not be entirely ethical

Starbucks brews fair trade coffee but was brought to court for tip-sharing
allegations

Companies might even lie about fair trade

Marketing Tactic

What does it take to become certified?

Costs $0.03/ lb (University of California)

Costs cancel out benefits in the long run

Production restrictions

Labor standards, faming inputs (fertilizers), etc.

LOWER yields, HIGHER costs

Have to be landowners to participate

Not the case for some of the most marginalized and disadvantaged regions

Pricing Mechanism

Price floor

Protects growers

Covers average production

costs even if market prices
fall

Higher wages

Better working conditions

Sustainable practices

Transfer of Value

Most of the benefit from fair-trade produce seems to stay where it is

consumed (Ndongo Samba Sylla)

1 5%
of every dollar

stays in the
producing
country
Most profits are used to
cover Fair Trade
administrative operations
75 + %

Flaws in the Pricing Mechanism

A.

MORE farmers want to sell fair trade products

B.

Floods the marketplace (Supply >>> Demand)

Drive market prices down

Hurt poor farmers growing in conventional market

Harder for new farmers to enter fair trade cooperative exclusive

membership

Farmer produces coffee sells to both fair trade and the

market

Fair trade guarantees price level >> sell them lower quality beans

Higher quality beans command higher price in market

Inefficient allocation of resources

Stakeholders

Fair trade artificially pushes prices up

Benefits poor farmers

What happens to poor consumers?

HIGHER prices in DCs and LDCs

Fair Trade needs to broaden its stakeholders.

Flaws in the Overall System

Perpetuating the problem

Relationship of dependence with charity minded shoppers in the West.

Western consumers pay premiums for fair-trade products

Agriculture is not a sustainable industry for poorer countries

Face extreme price and quality competition from developed nations exports

Solutions

Development projects may reach more producers

including non-landowners

Should shift from agriculture (low price) to more higher

priced exports bananas to avocados

Bibliography

http://www.washingtonpost.com/business/fair-trade-products-turn-profits
-creating-problems-for-a-movement/2011/12/27/gIQAYy31SP_story.html

http://freakonomics.com/2010/06/30/fair-trade-and-the-food-movement/

http://www.bloomberg.com/news/articles/2011-12-15/victoria-s-secret-reve
aled-in-child-picking-burkina-faso-cotton

http://www.huffingtonpost.com/bruce-wydick/10-reasons-fair-trade-coffe
e-doesnt-work_b_5651663.html

http://www.theguardian.com/environment/green-living-blog/2011/feb/28/c
offee-chains-ethical

http://www.oecd.org/tad/agricultural-policies/46838106.pdf

http://www.economist.com/news/business-books-quarterly/21606248-easing
-consciences-good-thing-or-bad

http://www.griffithsspeaker.com/Fairtrade/Ethical%20Objections%20to%20
Fairtrade%20web.pdf