People need to know more about the relevance of fair trade
People need to know more about the relevance of fair trade
Epik Pranasari, Market Access Coordinator, Oxfam GB/Indonesia,
mepik@oxfam.org.uk
Ratri Kustanti, Justice & Peace Institute, (Yayasan Samadi),
samadi@solonet.co.id
There is a paradox in international trade. Though trade has
caused poverty to the people of the South for centuries, people
may learn that trade is also an important factor in poverty
eradication. This is the belief that underlies the concept of
fair trade that has been developed since the 1960s and puts it
into practice, with all possible endeavors that make it possible.
Figures show that had developing countries increased their
export market share by only 5 percent, they could have gained
additional income of up to US$ 350 billion -- seven times higher
than the total sum of aid they now receive. Africa could have
raised its income up to $70 billion, five times higher than the
total sum of aid and debt relief programs, only by managing a
one-percent increase in its export market share (Oxfam
International, Rigged Rules and Double Standards: Trade,
Globalisation, and the Fight Against Poverty, 2002).
Yet developed countries still have protectionist trade
policies, but require or even force developing countries to
liberalize. According to the United Nations, such trade systems
cause developing countries an annual loss of up to $100 billion.
Fair trade finds its context in the current international
trade system, and opts to put poor and marginalized local
producers at the center of the movement. Fair trade aims to
provide security to small and medium producers from poor and
developing countries, which would guarantee them fair prices for
their products and long-term purchasing contracts.
Fair trade seeks to shorten distribution chains that stretch
between Third World producers and consumers of developed
countries, particularly for primary products and handicrafts.
Fair trade products that are traded with facilitation from
fair trade organizations -- which act as importers -- or directly
with fair trade importers are distributed through fair trade
outlets in developed countries. This model has proven effective
in eliminating intermediaries as well as opening and securing
international markets for products vulnerable to market
exploitation.
One priority is direct access to markets, which is highly
difficult in conventional trade systems. Once reaching fair trade
organizations or fair trade importers, the products are directly
distributed through fair trade store chains in both fair trade
and conventional markets.
To small producers, fair trade offers a number of practical
benefits, namely advance payments, product development
facilitation, market information and capacity building, and trade
facilities.
Fair trade system requires advance payment, usually 50 percent
or so of the total price or cost, after the agreement between
producer and importer is made, or after the signing of contracts.
This requirement is necessary to ensure that small/medium
producers would not depend on loan or credit from a third party
to start production.
Fair trade organizations also provide producers with financial
and technical facilitation, including in information on possible
target markets. Targeting producers and their employees, capacity
building through training is expected to enhance their capacity
and skill so that they can be self-reliant to improve their
products. Fair trade requires a safe and healthy working
condition not only because it is necessary to improve production
capacity, but also for protection of workers.
To open up market access, fair trade organizations always
encourage and facilitate producers to participate in business
fairs or events of the same kind. In this way, producers are
expected to gain direct access to new markets.
The fair trade movement has established a reliable alternative
market, but goes beyond it. Since the 1980s, this movement has
embarked on the purchase of processed products from developing
countries, namely coffee, chocolate, tea and other snack foods
through the world's giant supermarket chains such as K-Mart,
Tesco, Sainsbury, Coles, and Aldi, in developed countries.
This activity may bear two positive effects for Third World
farmers/producers. It certainly opens up direct access for Third
World farmer/producers to supermarkets in developed countries. At
the same time, it hinders them from exploitation by world-
dominating multinationals.
Stepping into the mainstream market, therefore, implies that
while protecting weak producers of the Third World, the movement,
writes David Ransom, extends its targets to multinational
retailers in order that the latter would be willing to receive
products directly from farmers or small producers.
Fair trade as an empowerment movement has also spread to
Indonesia. This development is reflected in the ever-growing
number of organizations and groups that adopt a Fair Trade model
as a strategy to empower marginalized communities and most
importantly in the growing market in fair trade products.
By the end of the 1990s, Western Europe, New Zealand and
Australia estimated the annual volume in fair trade to be $400
million to $500 million. Fair trade market growth in Europe is
estimated to reach 5 percent per year. Spain noted an increase in
the turnover of fair trade products to 50 percent during the
period of 1995-1996. Fair trade products in Italy grow by 10
percent per year. In some countries, certain products were even
reported to manage remarkable market penetration. Fair trade
bananas maintain stable market shares of 8 percent in the
Netherlands and 13 percent in Switzerland. Meanwhile, fair trade
organic coffee holds a share of 70 percent in the Austrian
organic coffee market, according to latest figures.
Such impressive development, however, does not mean
elimination of challenges. Consumers' awareness of fair trade and
recognition of its products are decisive factors as well as the
toughest challenge in the development of fair trade.
We may also ask ourselves whether we are willing to pay higher
for fair trade products that are ethically produced and
environment-friendly or whether we prefer goods with lower prices
that are produced by damaging the environment and violating human
rights.
Giving a preference to fair trade and its products may
contribute significantly to the efforts of poor and the
marginalized, particularly in the South.