What is fair trade?
The fair trade movement began in the late 1950s as an attempt to aid Chinese refugees in the US. Today, the International Fair Trade Association includes over one million producers and 3,000 organisations in 50 countries.
Fair trade is a response to increasing globalisation. According to Oxfam and other fair trade advocates, large, developed nations like the US, UK and even Australia, pay their farmers to overproduce crops like coffee, corn and wheat. This overproduction drives crop prices down. The excess is then sold to underdeveloped or developing nations at absurdly low prices. This drives local farmers out of business, because they can’t compete.
The fair trade movement aims to give these small local farmers a chance. Fair trade organisations work with local producers to sell goods on a global scale. Fair traders produce everything from earrings to chocolate to flour and wheat. So if you’re in the market for an organic, ecologically and economically friendly cup of joe, an organisation can act a agent between you and a coffee farmer in Honduras. Through fair trade, you can buy coffee from that farmer, and she or he will get most of the profits, instead of large corporations.
The fair trade movement also supports equal pay for women, eco-friendly modes of production and safe, healthy work environments.
In this way, the main goal of fair trading is to end world poverty by establishing millions of successful, independent, local producers in developing countries such as Ghana, India, Sri Lanka, Mexico and dozens more. Fair trade is now recognised by many as a way of combating global poverty.
Is ‘fair trade’ just another way of saying ‘ethical trade’?
Although it seems like these two terms can be used interchangeably, fair trade is a specifically regulated form of ethical trade. A Fair Trade Organisation (FTO) must work with marginalized and disadvantaged groups by helping them to find a place within the world market. While all FTOs are ethical, not all ethical organizations meet the criteria for ‘fair trade’.
Obstacles and criticisms
Fair trade advocates often argue that their biggest obstacle is the World Trade Organisation (WTO). The WTO is an organisation of 153 member nations that meet regularly to discuss global trade agreements. Many of the member nations put high taxes on imported goods and subsidies for domestic farmers in order to promote their own economies, with the cooperation of the WTO.
Fair traders argue that, while these trade decisions may be beneficial for one or two nations, they are detrimental to the global economy and are the reason why many developing nations are still impoverished. Fair traders believe the WTO has a responsibility to promote fair trade rather than a trade system that benefits only a few wealthy nations.
In February 2008, the Adam Smith Institute (a leading UK think tank) released a report which questioned the benefits of the Fairtrade system. They claimed that only 10% of the premium paid for Fairtrade products is returned to the farmers, with the rest going directly to retailers. The Fairtrade Foundation responded by saying that the report was misinformed and oversimplistic.
Fair trade in Australia
Although it is taking awhile, the concept of fair trade is beginning to resonate with consumers and businesses. In 2007, Australians spent $8.5 million on Fairtrade certified coffee and $3 million on other Fairtrade products (mainly chocolate). Coles and Woolworths now stock Fairtrade coffees along with their other stock, and in July 2008 Wild Bean Café became the first national coffee chain to commit to selling 100% Fairtrade coffee.
This page was updated by kate elise
How do I know this?
Clougherty, Tom, ‘Unfair Trade’, the
Adam Smith Institute, 25 February 2008
http://www.adamsmith.org/blog/globalization/unfair-trade-20080225957/
IFAT: The International Fair Trade Association,
http://www.ifat.org/
Make Trade Fair,
http://www.maketradefair.com
Oxfam Australia,
http://www.oxfam.org.au
Peace Coffee,
Barriers to Fair Trade: The WTO,
https://www.peacecoffee.com/pcfg/0308/wto.html
Readfearn, Graham, ‘Fair trade in the coffee business’,
Courier Mail, 1 April 2008
http://www.news.com.au/couriermail/story/0,23739,23459916-5013511,00.html
