New Internationalist

The Facts

Issue 322

New Internationalist 322 [image, unknown] [image, unknown] [image, unknown] April 2000

Fair or Free trade - The Facts

 

Fair trade
The fair-trade movement began with craft and
'solidarity' products - like Nicaraguan coffee. In recent
years food products sold through conventional retail outlets have
increased in importance. Fair trade in industrially manufactured
products, like toys or footwear, has yet to begin.


Who’s involved
In 1997 Fairtrade Labelling Organizations International (FLO) brought together all the major national labels selling through conventional outlets, to harmonize criteria. By the end of 1999 fair-trade producers on the FLO Register included the following:

Fairtrade food products1
------------------------------------------------------------------------
Photo: David Ransom Bananas 6 co-ops & 2 plantations in Colombia, Costa Rica, the Dominican Republic, Ecuador and Ghana.
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Cocoa 7 co-ops in Belize, Bolivia, Cameroon,
Costa Rica, the Dominican Republic, Ecuador and Ghana.
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Coffee 181 co-ops in Central America & the Caribbean
(126), S America (41), Asia (3) and Africa (11).

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Honey 23 co-ops in Mexico, Guatemala, Chile,
Nicaragua, Uruguay, Vietnam and Tanzania.
------------------------------------------------------------------------
Orange juice 4 co-ops in Brazil and Mexico.
------------------------------------------------------------------------
Sugar 6 co-ops in Costa Rica, Philippines,
Paraguay, Ecuador and the Dominican Republic.
------------------------------------------------------------------------
Tea 7 co-ops & 37 plantations in India, Sri Lanka, Nepal, Vietnam, Tanzania, Zimbabwe, Uganda and the Seychelles.

How much
There are as yet no reliable figures showing all the fair trade there is worldwide, or how much it is growing. Many fair-trade products are sold through alternative trading organizations (ATOs). A recent survey of just 30 buyer and 84 producer organizations revealed:8

Photo: DAVID RANSOM Sales 1998-99: $138 million
Number of buyer staff: 355 men, 605 women
Number of Southern partner organizations: 1,414
Number of producer-organization staff (47 organizations): 567 men, 655 women; working with 31,892 men and 84,048 women producers whose average monthly wage was $89 for men and $66 for women
Benefits of fair trade identified in a survey of 43 producer organizations:
• Training (technical, quality control etc): 61%
• Healthcare/medical allowance: 35%
• Product development: 26%
• Loans (for raw materials, equipment etc): 23%
• Organizational development: 21%
• Annual profit sharing: 19%
• Insurance protection: 19%
• Production bonus: 19%

fairtrade food products

 

Free trade
Multinational corporations are responsible for
two-thirds of world trade – and half of this is between
different parts of the same corporation.


Unfair shares
The value of a product, in terms of its final price, is added to as it passes through the market to the consumer. Free trade concentrates this value in the hands of rich corporate merchants, processors and retailers in the North. Producers in the South are paid only a tiny part of the final price.

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jeans coffee jar chocolate bar banana [image, unknown]

Prime cut
Many of the poorest Southern countries still depend on the age-old pattern of exporting basic raw materials to the North. The prices of these ‘primary commodities’ have been falling sharply – not least because Southern debt has forced producers to export more and more, creating a glut on world markets. Prices also fluctuate wildly – coffee is a good example – in part because of speculation by Northern traders.

selected world primary-commodity prices 1995-1996

Terms of trade
When the price of exports falls against the price of imports, the ‘terms of trade’ are said to have deteriorated – and incomes fall too. In Africa, some of the world’s poorest countries have been feeling the effects.

terms of trade in Africa

Unequal exchange
A few large corporations dominate most of the markets where fair-trade products are sold.

[image, unknown]

 

1 FLO Information no 1, October 1999.
2 New Internationalist 271.
3 New Internationalist 304. Note that the ‘brand’ percentage refers here to Green and Black’s fair-trade chocolate: in the conventional trade, the share of farmers is even smaller, and of the ‘brand’ considerably larger.
4 New Internationalist 317.
5 New Internationalist 302.
6 Trade and Development Report 1999, UNCTAD.
7 Human Development Report 1999, UNDP.
8 IFAT, September 1999. The survey is based on responses from 30 out of a total 56 Northern buyers, and 48 out of a total 84 Southern producers.

 

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