what is fair trade and why it is important

8/4/2019 What is Fair Trade and Why It is Important

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Mitch Teberg, MAAssociate Member

Journey for Fair Trade:

What is Fair Trade and Why is it Important?In every developing country that has embraced the free market economy and entered the World

Trade Organization (WTO), the first hit and hardest hit by the changes that follow are the rural

communities. Changes result from economic restructuring policies required to join the WTO

which emphasize the removal of state protections and safeguards of local industry and

agricultural sectors parallel to the privatization of government sponsored social services. The

result has been detrimental to rural communities around the world.

One of the most notable ways in which rural communities are harmed in entering the free

market economy is the removal of state protections of the agricultural sector and state

sponsored industries.

When the state protections of a sector are removed a community suddenly finds itself facing

challenges it never faced before. Instead of a community working together for a common goal of

sustainable local livelihoods with an ability to maintain natural resources for the collective good,

individuals are pitched against each other in an attempt to get ahead for private gains.

Privatization of publicly owned or operated sectors encourages competition against one another

rather than working together for the common good. Frequently this leads to an unfair advantageand favoritism for those who are politically connected or have access to finances in order to own

and cash-in on what were once community resources. This quickly depletes natural

resources of a community with complete disregard for the environmental, communal and social

consequences, just to name a few.

A prime example of area adversely affected by the

removal of state protections is in handicraft villages

throughout Asia. Households find themselves

competing to produce more crafts and accept lower

and lower payment for their labors because they are

now competing against each other rather thanworking together. This trend leads to the

impoverishment of entire handicraft-centered

communities – the cultural gems of countries like

Vietnam and Thailand.

http://www.globalexchange.org/campaigns/wto/OpposeWTO.html









Here is how it works: the low prices crafts-persons receive for handicraft products are dictated

by outside agents and there is no room for negotiation in the take-it-or-leave-it offer presented toa household. Like the coffee farmers around the world, there are multiple layers of middlemen

between the crafts-person and the exporter, all of whom are squeezing a profit out of their

labors while the laborer lives at a subsistence level. In my work in Vietnam, I found 7 - 12 layers

of middlemen between the producer and the exporter. Simply stated, at the lowest level in the

value chain if they don’t accept what is offered they may lose their only income opportunity.

Again, these moves only divide communities and destroy what were once sustainable

community livelihoods; and handicraft villages are amongst the most vulnerable.

Furthermore, there is frequently a gender-based discrimination that exists in much of the

handicraft production. Most of the labor in processing and preparation of materials to make a

handicraft goes unrecognized and unpaid because these are considered the labors of women ina household. Simply stated, it becomes a gender role. Just as housework and child rearing is

all-too-often not regarded as "labor" despite the demands faced, a woman's work in support of

craftsman frequently goes unpaid.

Forming a local co-operative or community association based on Fair Trade principles

addresses these gender disparities and unites a community of craftsmen and craftswomen from

being disadvantaged in the local and global marketplace.

Whose Trade Organizationby Lori Wallach and Patrick Woodall

Fair Trade presents a social awareness not seen in the neo-liberal theories of trade emphasized

in the World Trade Organization (WTO) or in the economic reform packages forced on

developing nations in the Structural Adjustment Programs of the IMF and World Bank. There is







much to be said about the disastrous effects of narrowly focused vested interests of

international bankers in developing nations with development projects that primarily benefit theestablished elite. However, Fair Trade Advocates also need to understand the equally

destructive World Trade Organization (WTO). A highly recommended and reasonably priced

resource is Whose Trade Organization by Lori Wallach and Patrick Woodall. This publication by

Public Citizen (http://www.citizen.org/ ) is a well researched, comprehensive analysis of the

organization, its function, and the secretive closed-door court system which enforces

international trade policies formed by Western governments in collaboration with the Multi-

National Corporatocracy.

The World Fair Trade Organization (WFTO) with a global network of Fair Trade Organizations

with members in over 70 countries has established ten principle standards a Fair Tradeorganization must follow. In addition, a Fair Trade Organization is required to contribute to their

communities in a manner that addresses their specific social needs.

10 Principles of Fair Trade - Updated June, 2011

Principle One: Creating Opportunities for EconomicallyDisadvantaged Producers

Poverty reduction through trade forms a key part

of the organization's aims. The organization

supports marginalized small producers, whether

these are independent family businesses, or

grouped in associations or co-operatives. It seeks

to enable them to move from income insecurity

and poverty to economic self-sufficiency and

ownership. The organization has a plan of action

to carry this out.

http://www.citizen.org/



http://www.wfto.com/index.php?option=com_frontpage&Itemid=1








Principle Two: Transparency and Accountability

The organization is transparent in its management

and commercial relations. It is accountable to all

its stakeholders and respects the sensitivity and

confidentiality of commercial information supplied.

The organization finds appropriate, participatory

ways to involve employees, members and

producers in its decision-making processes. It

ensures that relevant information is provided to all

its trading partners. The communication channels

are good and open at all levels of the supply

chain.

Principle Three: Fair Trading Practices

The organization trades with concern for the social,

economic and environmental well-being of

marginalized small producers and does not maximize

profit at their expense. It is responsible and

professional in meeting its commitments in a timely

manner. Suppliers respect contracts and deliver

products on time and to the desired quality and

specifications. Fair Trade buyers, recognizing the

financial disadvantages producers and suppliers face,

ensure orders are paid on receipt of documents and

according to the attached guidelines. A pre payment

of at least 50% is made if requested.

Where southern Fair Trade suppliers receive a pre payment from buyers, they ensure that this

payment is passed on to the producers or farmers who make or grow their Fair Trade products.

Buyers consult with suppliers before canceling or rejecting orders. Where orders are cancelled

through no fault of producers or suppliers, adequate compensation is guaranteed for work

already done. Suppliers and producers consult with buyers if there is a problem with delivery,

and ensure compensation is provided when delivered quantities and qualities do not match

those invoiced.




The organization maintains long term relationships based on solidarity, trust and mutual respect

that contribute to the promotion and growth of Fair Trade. It maintains effective communicationwith its trading partners. Parties involved in a trading relationship seek to increase the volume of

the trade between them and the value and diversity of their product offer as a means of growing

Fair Trade for the producers in order to increase their incomes. The organization works

cooperatively with the other Fair Trade Organizations in country and avoids unfair competition. It

avoids duplicating the designs of patterns of other organizations without permission.

Fair Trade recognizes, promotes and protects the cultural identity and traditional skills of small

producers as reflected in their craft designs, food products and other related services.

Principle Four: Payment of a Fair Price

A fair price is one that has been mutually agreed by all through dialogue and participation, which

provides fair pay to the producers and can also be sustained by the market. Where Fair Trade

pricing structures exist, these are used as a minimum. Fair pay means provision of socially

acceptable remuneration (in the local context) considered by producers themselves to be fair

and which takes into account the principle of equal pay for equal work by women and men. FairTrade marketing and importing organizations support capacity building as required to producers,

to enable them to set a fair price.

Principle Five: Ensuring no Child Labour and Forced Labour

The organization adheres to the UN Convention on the Rights of the

Child, and national / local law on the employment of children. The

organization ensures that there is no forced labour in its workforce

and / or members or homeworkers. Organizations who buy Fair

Trade products from producer groups either directly or through

intermediaries ensure that no forced labour is used in productionand the producer complies with the UN Convention on the Rights of

the Child, and national / local law on the employment of children.

Any involvement of children in the production of Fair Trade products

(including learning a traditional art or craft) is always disclosed and

monitored and does not adversely affect the children's well-being,

security, educational requirements and need for play.




Principle Six: Commitment to Non Discrimination, Gender Equity and

Freedom of AssociationThe organization does not discriminate in hiring, remuneration, access to training, promotion,

termination or retirement based on race, caste, national origin, religion, disability, gender, sexual

orientation, union membership, political affiliation, HIV/Aids status or age. The organization

provides opportunities for women and men to develop their skills and actively promotes

applications from women for job vacancies and for leadership positions in the organization. The

organization takes into account the special health and safety needs of pregnant women and

breast-feeding mothers. Women fully participate in decisions concerning the use of benefits

accruing from the production process.

The organization respects the right of all employees to form and join trade unions of their choice

and to bargain collectively. Where the right to join trade unions and bargain collectively are

restricted by law and/or political environment, the organization will enable means of independent

and free association and bargaining for employees. The organization ensures that

representatives of employees are not subject to discrimination in the workplace. Organizations

working directly with producers ensure

that women are always paid for their

contribution to the production process,

and when women do the same work as

men they are paid at the same rates as

men. Organizations also seek to ensure

that in production situations where

women's work is valued less highly thanmen's work, women's work is revalued to

equalize pay rates and women are

allowed to undertake work according to

their capacities.




Principle Nine: Promoting Fair Trade

The organization raises awareness of the

aim of Fair Trade and of the need for

greater justice in world trade through Fair

Trade. It advocates for the objectives and

activities of Fair Trade according to the

scope of the organization. The organization

provides its customers with information

about itself, the products it markets, and the

producer organizations or members that

make or harvest the products. Honest

advertising and marketing techniques are

always used.

Principle Ten: Respect for the Environment

Organizations which produce Fair Trade products maximize the use of raw materials from

sustainably managed sources in their ranges, buying locally when possible. They use

production technologies that seek to reduce energy consumption and where possible use

renewable energy technologies that minimize greenhouse gas emissions. They seek to

minimize the impact of their waste stream on the environment. Fair Trade agricultural

commodity producers minimize their environmental impacts, by using organic or low pesticide

use production methods wherever possible.

Buyers and importers of Fair

Trade products give priority to

buying products made from raw

materials that originate from

sustainably managed sources,

and have the least overall impact

on the environment.

All organizations use recycled or

easily biodegradable materialsfor packing to the extent

possible, and goods are

dispatched by sea wherever

possible.




What does the Fair Trade look like at the locallevel?

Local Fair Trade Organizations in "developing nations" each have a unique shape and serve in

a variety of functions. No two are identical. Organizations, co-operatives, and producers work

together and benefit in ways that differ from others according to their particular communityneeds. Each Fair Trade Organization is unique!

Some Fair Trade Organizations focus on community development programs, the

empowerment of the people through skills training and programs designed to enhance

local integration and participation

Other Fair Trade Organizations simply act as marketers for handicrafts they collect fromvillages to free producers of the hassle of finding buyers and markets, and allow them to

focus on their primary sources of income, such as agriculture.

Some Fair Trade organizations have producers who depend 100% on the revenues they

generate from the sale of their products

Most organizations use the income generated from handicraft and textile production to

supplement other forms of income generation

Local Fair Trade Organizations are formed according to the needs of the community it serves.

In order to ensure social sustainability, the community must work together to form the unique

aspects of the organization. Success of a local co-operative or community association depends

on the direct involvement of community members in the forming stages. With appropriatefacilitation and orchestration with various stakeholders, it is possible to create a community-

based farmers co-operative or association of craftsmen and craftswomen to address many of

the economic and social challenges the community currently face and the prepare for the

unforeseen challenges in the years to come.

How does Fair Trade Address the Real Needs ofa Community?

A few examples of where Fair Trade Organizations step in to addressthe social and livelihood needs of a community are:

Utilizing the proceeds from the co-operative to provide adequate education for their

children by sponsoring schools or school programs

Developing community centers, women’s health care clinics, training centers or libraries




Addressing social issues such as

o supporting a community-based childcare centero providing for healthy school lunches and after school child development

programs

o support a home for victims of domestic abuse

o or as one cooperative in India addresses the cultural issue surrounding the

payment of an expensive dowry for a young bride, the organization provides the

dowry for the daughters born to cooperative members who may otherwise abort

the female fetus out of future economic concerns

Providing an economic opportunity in a refugee camp where opportunities are few and

outright physical or sexual exploitation is the only other opportunity afforded them

outside the camp where they face great risk of deportation if captured by the immigration

authorities As a community, intervening in market fluctuations of raw material availability and prices

by purchasing in bulk at fair prices

In communities too poor to borrow from banks, they establish community savings plans

and provide low interest micro-finance programs for their members. In cases of

emergency, they provide 0% interest funds for families in need

Essentially local Fair Trade Organizations are made of community members who define their

community needs and identify the means to address those needs, by creating development

projects and supporting local activities to better their community.

Mitch Teberg, MA © 2007, 2009, 2011International Consultant

Sustainable Development / Fair Trade

Researcher / Trainer / Consultant

www.journeyforfairtrade.blogspot.com

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what is fair trade and why it is important

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