Gains Of Fair-Trade: Groups Involved In Fair-Trade System - Essay Example

Gains Of Fair-Trade: Groups Involved In Fair-Trade System In a world of economic and gross social inequalities that is leading many individuals to live without basic needs like water, food, education, housing and healthcare. Also, millions of small-scale farmers are significantly affected by international trade policies, globalization, and third world debt. It is making them lose their livelihoods, farms and their efforts to provide for their families fail to produce the needed results (Mankiw 2007). Similarly, landless employees are facing worsening working conditions, unsafe working environments and low pay as their developing countries are offering cheap labor to attract or keep foreign investors. Fair-trade acts as an alternative trade system which counteracts international free trade system, global policies, and corporate control by awarding workers and farmers a living wage based on their work. Living wage creates opportunities for economic and social developments and also sustains them. Fair-trade system has different players, various agreements that are adhered to so as to qualify different products as fair-trade. But, analysts believe that the Fair-trade system is improbable for many developing nations mainly in Africa and Asia to favor those in Latin America (Worldcentric.org 2014). Groups involved in fair-trade system A fair-trade system consists of three different groups that have different arrangements between them. They are; Producers; composed of farmers, workers, artisans and cooperatives that are producing products like; tea, coffee, honey, cocoa, and handicrafts. Such producers have to accept to the following agreements to ensure that their products qualify for fair-trade. To be branded certified fair-trade, producer organizations, associations, and cooperatives must show that fair-trade revenue will promote economic and social development to workers. They must have a democratic structure that is run by workers. They must show no signs of gender, sex, color, religion or political discrimination. Companies or producers must have the technical and logistical ability to bring products to the market. They must have steps to protect the environment and prohibit forced or child labor. Must allow workers to form unions, pay fair wages and provide safe working conditions (Worldcentric.org 2014). Importers, these are individuals or companies that import fair-trade commodities to their countries. These products can be sold or further processed by other processors or themselves. For example, importers may introduce fair-trade tea that would be sold to a fair-trade processor who will sell it to the retailer. Importers and processors must adhere to the following standards and agreements to brand them fair-trade importers or processors (Mankiw 2007). They must pay a certain price to the producers to cater for the cost of sustainable living and production; this is known as living wage. They must pay in advance especially when the producer asks for it. Pay a certain premium where farmers can invest economic and social developmental projects. Allow the signing of contracts that gives the producer a guarantee that the product will be bought; it allows for long-term planning and sustains the practices of production. Fair-trade certifiers are organizations that certify importers and producers as fair-trade by following fair-trade requirements and guidelines. A fair-trade labeling organization is an entity that certifies producers from all over the globe as fair-trade. They also ensure that producer’s fair-trade standards are followed (Worldcentric.org 2014). Challenges Facing Fair-Trade Gains of fair-trade are unequally distributed with the major flaws emanating from the characteristics of the certification. Certification system creates a twofold bias against the world’s poorest developing nations. First, the cost of certification is found to be more expensive for the disadvantaged countries, all the other things are relatively equal. Sliding scale structure creates an avenue where certification becomes less costly for the large consumer organizations than their smaller counterparts. Also, costs of compliance with fair-trade standards that include alterations in the administrative and agricultural practices that lead to an overall rise in working hours are higher for smaller organizations. It is due to the lower economies of scale and lower productivity (Sylla 2014). Findings Fair-trade certified articles are mainly based on products exported by Latin America nations. Coffee has a 36 percent certification demand, tea 9.3 percent demand; bananas have an 8 percent demand and vegetables stand at 9.1 percent. These products were the top certified products of the year 2009. One out of two fair-trade certified products is cocoa, coffee or bananas. Coffee is the most sold fair-trade product standing at 47 percent, bananas come second at 18.8 percent. These two products amount to two-thirds of the export revenue generated by fair-trade. Latin America nations account for 263 of the 317 coffee certifications awarded in 2009 and 70 of the 71 banana certifications (Sylla 2014). Compared with Africa and Asia, Latin America enjoys double benefits, it, therefore, means that certification is cheaper, and their products dominate the fair-trade market. Therefore, Latin American nations account for 56 percent of certification demand compared to 29 percent for Africa, 14 percent for Asia and 1 percent for Oceania. It is widely known that Latin America nations are among the most unequal globally, but they are not the poorest. For example, Mexico is the first country where fair-trade was introduced, it contributes close to a quarter of Latin America and Caribbean GDP. Mexico’s GDP is higher than that of the group of counties that form sub-Saharan Africa. It shows that the fair-trade was biased from its inception (Sylla 2014). Fair-trade excludes the poorest nations. Effective certification demand in the fair-trade system is directly related to the country’s income. Nations that have been awarded the middle-income status by the World Bank account for 54 percent of the producer organizations that have obtained fair-trade certification to 21 percent of low-income nations. Also, the least developed countries account for a mere 13 percent of certification demand. Countries that rely on exporting limited fair-trade products are underrepresented while those with diversified exports tending to be overrepresented (Mankiw 2007). For example, coffee that has a major distributive advantage is produced by small producer organizations. Burundi and Ethiopia are two countries that rely on coffee that accounts for 26 percent and 34 percent of revenue from exports respectively. In these two countries, only three fair-trade certifications were awarded in 2009. On the other hand, Peru and Mexico obtained 57 and 42 certifications respectively. It represents almost 31 percent of the effective certification demand of this product worldwide. A closer look at Peru and Mexico shows that they are much diversified with coffee accounting for less than 2 percent of their export revenue (Sylla 2014). In conclusion, the gains of fair-trade only favor the Latin America nations. Globally, fair-trade does not support the poorest countries and only serves a plutocratic logic rather than that of international redistribution. There should be an overhaul of this system that is seen to favor Latin countries; these changes should support all stakeholders to ensure that all countries get a fair share of certifications. Also, countries that rely on exports of fair-trade products should be properly represented. It will give them an equal chance to grow their GDP. Works Cited Mankiw, N G. Macroeconomics. New York: Worth Publishers, 2007. Print. Sylla, Ndongo Samba. 'Fairtrade Is An Unjust Movement That Serves The Rich | Ndongo Samba Sylla'.the Guardian. N.p., 2014. Web. 2 Dec. 2014. Worldcentric.org,. 'Fair Trade | World Centric'. N.p., 2014. Web. 2 Dec. 2014. Appendix Fair Trade Organizers who hold Fair-trade certificates Certified Products 1st product 2nd product 3rd product 4th product All certified products Percentage Region Banana 29 1 30 (24) 5% South America Sugar Cane 14 1 2 17 (10) 3% South America Coffee 23 12 1 1 37 (25) 7% South America & West Africa Coffee 267 3 270 (223) 49% South America & Central America Dried Fruits 9 1 10 (7) 2% North Africa Vegetables 17 5 22 (31) 4% West Africa Fruit Juice 11 3 1 15 (9) 3% East and South Africa Read More