Fair Trade Analysis - Essay Example

Fair Trade Analysis Table of Contents Table of Contents 2 Introduction 3 Over view of fair trade 3 Does fair trade work?4 Conclusion 6 References 8 Fair Trade Analysis Introduction Fair trade is a concept developed as a result of the growing recognition for the benefits people are accruing from trading and the growth of trading opportunities. The problem is that most of these benefits are not shared across the divide and not all people are aware of the benefits of trade within the same comparable manner as one would expect. The debate on fair trade has been an equivocal one that has been surrounded by ethical issues and the alleged implications it will have on the economy. Fair trade has achieved less than expected because of lack of stringent measures to ensure its ability to meet the growing demand for ethical utilisation of policies present. Over view of fair trade Fair trade is a social movement that aims at helping developing countries to achieve better conditions when trading with others, as well as achieve those goals that promote sustainability within their borders. In this movement, the main aim is to create an advocacy movement that seeks to impose higher prices amongst exporters, as well as ensure that the social and environmental standards are satisfied (Kadey 2005: 1). Dragusanu, Giovannucci and Nunn (2014a: 6-7) note that the settings of the fair trade commissions in the past aimed at dealing with five main attributes that would promote fair trade. The first one is pricing which aim at guarantee a minimum price for all goods in addition to a fair trade premium on all products sold. The prices and the premiums will be set separately, but with the producer in mind. The second is the aspect of the workers who must be free to associate with others, have safe working conditions, and wages that befit their legal minimum stated in the policies present. Regional balances will be drawn to ensure uniformity across a particular region. The third is the institutional structure where farmers need to create cooperatives that will make decisions democratically and transparently to effectively export products and administer premium aid. The premiums paid to the cooperatives will be accounted for by the administrators. The fourth attribute deals with the environment where harmful chemicals to the environment will be prohibited. This is to safeguard the environment and ensure good environmental practices remain etched into the farming management practices always. The last attribute deals with stability and access to credit where buyers may agree on long-term contracts and provide financial aid to promote producers when requested. Does fair trade work? In most cases, the people are aware of the impact that better trading options have on the society as a whole. However, ethical issues still arise regarding fair trade. The importance of the trading aspect only gets overshadowed by the mixed reactions gained from those practicing it. The aspect of higher prices for the traders may seem as a good idea but the main question is whether this is achieving the intended impact in the long run. Surveys conducted shows that it is true fair trade farmers do receive higher prices compared to conventional farmers (Dragusanu, Giovannucci and Nunn 2014b: 223-4). The casual minimums were different in some places because the fair trade and organic farmers could not sell all their coffee as certified, hence getting average prices of $0.56 per pound compared to the expected $0.83 per pound. The conventional farmers got $0.40 per pound compared to the expected $0.64 per pound (Dragusanu, Giovannucci and Nunn (2014a: 23-224). There is some truth, therefore, that having a fair-trade certification will earn the farmer a higher price tag compared to those without. The main question is whether it is ethical to tell people to buy commodities at a higher price so that the poor farmers can gain a higher pay. The ethicality of this act may conflict with many moral attributes that people have regarding fairness in business. Nonetheless, if the money is reaching the poor, it is easy to say that there is some ingenuity in using fair trade certification to raise the living standards of all those in involved. The question arising under the fair trade pricing strategies is whether the money attained from the sale of products actually reaches the developing nations. According to Mendoza and Bastiaensen (2004:38), only 1.6% to 18% charged on a product reached the farmer for just one product. The bigger question is what happens to the remaining percentage. It shows that the money accrued is paying for more dues that the farmer has little control over and the cooperatives are not offering the requisite information that should assist farmers. Instead, the farmers are shortchanged by institutions they expect to be transparent and accountable. For the 1.9% licensing fee charged at the wholesale points, it is only fair that at least 50% reaches the farmer, despite the evidence that even much smaller amounts reach the targeted farmer (Valkila, Haaparanta & Niemi 2010: 259-261). Seemingly, the advantages the proponents of free trade sell to other people seem to be falling short of the expected outreach. If that does not happen, the most important attribute is to deal with the price minimums and price floors as a way of ensuring that all is well for farmers expected their money at the end of the trading session. Gingrich and King (2012: 19) argue that most people do not examine the impact that these monetary benefits have towards the farmer based on guaranteed and local market prices’ differences. The differences, they note, in the guaranteed prices compared to local payments does not reflect the intended benefits to the farmers because it is difficult to ascertain the reality of the usefulness of the money to the farmer. Determining the success of fair-trade, therefore, will imply having an accurate representation of sufficiently large monetary benefits to traders compared to the normal income levels. An issue that continues to hurt the farmers, more so the small scale farmers, is the fact that the plantations are getting more certified leaving out the small farmers who need the money more. This means that the farmers, essentially targeted by the fair trade regulations, miss out on the expected increase of earnings, but do not attain that which they expect due to vested interests (Dragusanu, Giovannucci and Nunn 2014a: 35). Most of these plantations are known to disregard the set out provisions for fair treatment of employees. The goal is to come up with regulations that protect the workers as stipulated in the policies formulating fair trade and ensure minimum wages and regulated working hours. In most of the poor developing countries, it is difficult for such provisions to be empathically implemented due to lack of goodwill amongst the people in authority (Griffiths 2010: 42). An issue that Dragusanu, Giovannucci and Nunn (2014a: 32) examine is the fact that some of the farmers have multiple certifications for their products. The implication is that each certificate will amount to a certain higher percentage that will disadvantage those with lesser certifications. The question is whether the fair trade attributes require farmers to gather as many certificates as they can to ensure they gain better advantages over their competitors. This is unethical because the term “fair” is missing in such a provision, yet the poor farmers are expected to benefit. If, for instance, plantations get more than six certifications and continue to produce larger quantities of the same product as the conventional farmer with one certification, what criteria will the cooperatives use to ensure fair play? One problem as Dragusanu, Giovannucci and Nunn (2014a: 32) note is the fact that distinguishing between one program and the other could be difficult for the poor farmers, yet the cooperatives continue to let their members receive a watered-down version of what they ought to earn. The many standards and certification schemes present should be separated, and the farmers given a better deal. The plantations need to receive stiffer penalties and that will make it easier to give conventional farmers a chance to get as much advantage as possible. This will avoid confusion amongst farmers and allow them to get as much assistance as they can (Dragusanu, Giovannucci and Nunn 2014a: 32) Nonetheless, Kadey opines that the fair trade deals are beneficial because they provide farmers with an ideal working space for the farmers (2005: 1). Once the purchases are made directly from the farmers, it is quite easy to transfer the benefits to the farmer. The fair trade premiums are directly attributed to the farmers, raising their living standards and compensating them for their work. Another benefit enjoyed by the farmers is the relationship they have with credit facilities. These facilities provide them with a fair deal that ensures they get fair credit at reasonable interest rates, making it easier for them to avoid huge debts. Dealing with fair trade also allows the environment to flourish without any hindrance because farmers have to plant trees to protect flora and fauna as well as integrate agro-forestry into their farming sessions (Kadey 2005: 1). Conclusion It gets more difficult to understand the full benefits of fair trade. The only issue is to determine whether the benefits are ideally reaching the targeted client that is the farmers. The environment has suffered a lot despite the fair trade attributes. The impact is adversely affecting the way people conduct their businesses. The important attribute, nonetheless, is to understand the ideals that could boost political aspects as well as realise the intended goals of the fair trade mantra. If this is done, it will be easy to account for the benefits accrued over time. The goal is open up the market for fair trading and increased transparency. References DRAGUSANU, R., GIOVANNUCCI, D. & Nunn, N. 2014b. "The Economics of Fair Trade", Journal of Economic Perspectives, vol. 28 no. 3, pp. 217-236. DRAGUSANU, R., GIOVANNUCCI, D. and Nunn, N. 2014a. "The Economics of Fair Trade", Journal of Economic Perspectives, pp.1-41 GINGRICH, C.D. & KING, E.J. 2012. "Does Fair Trade Fulfill the Claims of its Proponents? Measuring the Global Impact of Fair Trade on Participating Coffee Farmers", Journal of Cooperatives, vol 26, pp.17-39 GRIFFITHS, P. 2011. ‘Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade’, Economic Affairs, pp.103-4. KADEY, M. 2005. “Fair Trade = Fair Deal,” Canadian journal of dietetic practice and research vol 66, p.1 MENDOZA, R. & BASTIAENSEN, J. 2003. “Fair Trade and the Coffee Crisis in the Nicaraguan Segovias,” Small Enterprise Development, vol. 14, no.2, 36–46. PEDERSON, A. 2014. "Viewpoint: Fair Trade and Human Rights in the End-to-End Supply Chain", Supply Chain Management Review, vol. 18, no. 6, pp. 44-48. Valkila, J., Haaparanta, P. & Niemi, N. 2010. “Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumers,” Journal of Business Ethics, vol.97, pp.257-270. Read More