Fair Trade Movement - the Rules of World Trade Should Be Altered across the Board - Term Paper Example

Running Head: THE 'FAIR TRADE' SOCIAL MOVEMENT AS A MECHANISM The 'Fair Trade' Social Movement as a Mechanism to Reduce Global Inequalities [Writer's Name] [Institution's Name] Table of Content The 'Fair Trade' Social Movement as a Mechanism to Reduce Global Inequalities Introduction 'Implicit in all these demands is the recognition which has slowly begun to seep through our movement [the 'global justice movement' and related 'anti-globalisation movements'] that globalization itself is not so much of a problem as an opportunity' (Monbiot, 2003). 'Our task is surely not to overthrow globalization, but to capture and use it as a vehicle for humanity's first global democratic revolution' (Monbiot, 2003). While poor countries and development agencies have been battling at international conferences for a change in world trade rules, a parallel initiative has emerged that aims to harness Western consumers' addiction to coffee and chocolate in the fight against poverty. From humble beginnings in the Netherlands with the Max Havelaar label, the concept of fair trade has now grown into an international movement that buys produce direct from farmers and cooperatives in 48 countries across Africa, Asia and Latin America. The promise of fair trade is simple: that the producer will be paid a fair price for his or her product over a guaranteed long-term period, protecting farmers in poor countries from the vagaries of a volatile world market. Fair-trade labelling schemes now operate in 19 countries. Growth has been so rapid that an international coordinating body -- the Fair-trade Labelling Organisation -- has been established to monitor and maintain standards. In the UK, the certification body is called the Fairtrade Foundation, which now gives its stamp of approval to hundreds of products, from snacks such as chocolate brownies to consumer desirables such as t-shirts and footballs. (Barrientos 2006) Growth rates in the fair-trade market would make even the most seasoned capitalist giddy -- sales were up 51 per cent in 2004, and an impressive 140million rang through shop checkouts under the Fairtrade label in the UK. According to the Fairtrade Foundation, three million fair-trade hot drinks are brewed in the UK every day. There is even a fair-trade lifestyle magazine, New Consumer. All this despite the fact that fair-trade products -- almost by definition -- are more expensive than their conventional competitors. This 'premium' is essentially the price Western consumers are prepared to pay to know that their purchasing decisions are ethically sound. Fair trade has become a major high-street brand, communicating certain ethical qualities about the product to the consumer in a same way that brands such as Gap and Nike sell themselves on beauty and celebrity. Not for nothing are fair-trade products often covered with pictures of smiling farmers explaining how their fair deal has become a lifeline for themselves and their families. Rather than simply giving money to charity, fair-trade consumers feel that they are participating in a less paternalistic, more sustainable two-way exchange. (Cooper 2005) In addition, fair trade is now going mainstream. The charity Oxfam is taking on the might of Starbucks with a new chain of coffee shops under the name Progreso, stocked entirely with fair-trade lattes, cappuccinos, teas and cakes. (Davies 2003) Tesco recently launched an own-label range of fair-trade products, including coffee, chocolate and fresh fruit, much to the consternation of some campaigners, who have accused the giant retailer of profiteering by marking up fair-trade produce by more than the premium that goes to producers. Even Starbucks, long a target for anti-globalisation protesters, now does a flourishing line in fair-trade coffees. Cafedirect, which pioneered fair-trade coffee in the UK, is now Britain's sixth-largest coffee brand, and recently launched a sizeable share issue on the open market. However, in financial terms, fair trade remains a niche market, concentrated on an overwhelmingly middle-class consumer base. It seems unlikely that it can break out into a wider market, which is characterised by cost-cutting supermarkets, ruthless competition and cheap processed food. (Jaspars 2006) Moreover, fair trade remains concentrated on a relatively small number of items -- the day when an ethical shopper can buy a whole week's groceries stamped with the Fairtrade label seems a long way off. In addition, fair-trade coffee is still struggling to throw off an image problem that for many years hinted that consumers would lose in taste what they gained in conscience. (Jenkins 2002) However, Harriet Lamb, director of the Fairtrade Foundation, beleives these concerns are a short shrift. "Arguments that fair trade can never be more than a niche market have been disproved," she argues. "In the context of an unfair global trade system, UK consumers are making a positive difference to the lives of tens of thousands of farmers in developing countries by choosing to buy fair-trade coffee for the home, the workplace and in coffee shops. Fair trade is proven as a viable commercial model in which producers, roasters, retailers and consumers can participate." Discussion On the other hand, fair trade's version of alternative development has also gone somewhat 'pop' by shifting its cultural economic theatre to incorporate aspects of the Euro-American consumption-scope: from coffeehouses, multiples, the charity shop, and the candy aisle at one's alternative grocer, to the high tea and the breakfast table. The place (and pace) of Northern opposition to global economic inequality and its bedfellows of cultural and environmental destruction in the South is beginning to encompass the ethically- and politically-charged grocery line as much as the direct-action frontline. (Nicholls and Opal 2005) Broadly, the fair trade movement seeks to fill the void left by Northern civil society's aid fatigue, or, as U2's Bono puts it, a "certain distrust of aid" (CNN, 2002), that has deepened since the heady days of LiveAid and BandAid ( Valentine, 1999). The fair trade model has quickly become the weapon of choice for the coalition of NGOs supporting the Third World debt-reduction goals of the Jubilee 2000 campaign (for which Bono is a spokesperson), and for other Northern development-minded organizations that see fair trade promoting "trade, not aid" and challenging the "ways of trading that keep people poor" ( Oxfam, 2002a). Through the application of rewards and sanctions, the principal labelling institutions control access to the filire, or the ability to market a certified product, such that quality indicators act as a barrier to entry (Valceschini and Nicolas, 1995). Any market niche strategy attempts to adjust production to concord with demand to preserve a premium price. This logic, for example, underlies geographic indicator labels (appellations de origin) and other specified quality labels. However, fair trade has not provided a policy of production reduction, which would run counter to its core politics of providing support to the greatest possible number of producers (Renard, 1999b). In fact, the original project was far more ambitious than simple market niche formation: it proposed to use the power of consumers to exert pressure on the dominant market players (in this case giant corporations in the (coffee) agro foods sector) to obligate them to improve prices and conditions of coffee purchases (Roozen and VanderHoff, 2002). Consumer action was thought to constitute a signal, political as well as commercial, favouring a new form of relationship between peoples (Renard, 1999a). This new relationship, however, relied on earning and maintaining a market volume that was sufficiently high to enable this pressure. (Ransom 2001) Simply put, fair-labelling policy does not seek to reduce the amount offered by producers but the opposite. Current niche market mechanisms may have the effect of limiting access to cooperatives with sufficient organizational capacity to maintain consistent quality, to meet the demands of international trade, and to conform to democratic administrative principles. Nevertheless, the philosophic stance of fair trade is to offer aid to newly formed producer cooperatives so that they may meet democratic and economic principles and open (new) opportunities for more producers. In the end, FLO intends that fair trade emerge from the status of an NGO alternative to become an instrument to encourage development-through-commerce. In the next few decades' years, their vision is to transform global production and marketing to conform to fair trade principles (FLO, 2003). This contradiction between philosophy and practice, between principles and political economy, has led the fair trade commercial model to a crossroads. Fair trade market expansion, rapid at first, has become relatively stagnant and, at present, represents an average of 1.2% of national sales in European countries (3% in Holland, 8% in Switzerland). Sales are increasing in a more dynamic manner in the US and Canada where fair trade products are of more recent introduction. Nevertheless, an eventual ceiling similar to that in the EU is anticipated (Murray et al., 2003). In short, production is outstripping the growth of demand. (Singh 2001) Fair trade organizations are unable to adopt control mechanisms appropriate to a niche strategy due to the character and philosophy of the initiative. Without doubt, producers are attracted to the fair trade market by the advantages it offers. Producer cooperatives concur in saying that the major advantage in fair trade is the price offered for their product (at times double market price). In the epoch of the coffee sector crisis, this premium price makes the difference between the collapse of the cooperative or its survival. Higher fair trade prices insure the loyalty of producer associates and, as such, organizational integrity (Renard, 1999a). Earnings are reinvested in the creation of training initiatives, programs for credit and collective infrastructure development (transport, coffee processing mills) (VanderHoff, 2002; Aranda and Morales, 2002; Prez-Grovas and Cervantes, 2002; Murray et al., 2003). In addition, fair trade network participation brings other important advantages: co-ops develop long-term relationships with importers and roasters, receive pre-financing to pay their producers up front for coffee (an appreciable advantage in a smallholder sector without access to credit), and acquire market knowledge (Renard, 1999a). For these reasons, many producer co-ops wish to sell under fair trade conditions and sell the greatest possible quantity of coffee. (Stern 2005) Unfortunately, the fair trade market is unable to sell all of the coffee that producers offer. Co-ops on the fair-trade register fail to sell, on average, more than 20% of their production to fair trade importers. (Stiglitz 2002) This unsold coffee must be sold at market price, sometimes as low as one-half the fair trade price. Only some of the earliest co-ops to adopt fair trade practices, the best organized, and those that have developed strong trust relations with toasters and importers manage to sell more than half of their harvest to fair trade markets, thereby achieving some protection from market fluctuations (Renard, 1999a; VanderHoff, 2002; Prez-Grovas and Cervantes, 2002; Aranda and Morales, 2002). Co-ops that have only recently registered as fair trade producers struggle to sell their coffee in this market niche. (Stiglitz 2006) Herein arise new proposals and paths that, in exchange for market growth, may risk the benefits achieved in terms of higher prices and consumer confidence in the fair-trade model, and more profoundly, have led participants to debate the core mission of fair trade. Under conditions of oversupply, one may address the question of sales, looking to increase them, or to supply, seeking reductions. The former may be accomplished by attracting a greater number of consumers through lower prices, advertising campaigns, new products (differentiation), or opening new market areas. Demand reduction may be obtained by increasing barriers to market entry, which impedes the entry of new producers into the market niche, an approach that runs counter to the philosophic principles of the fair-trade movement. The governing board of FLO has proposed to increase sales by decreasing the minimum guaranteed price paid to producers, and additionally by differentiating this price by country. This proposal has been rejected by the majority of cooperatives, who have criticized the FLO leadership for an excessive orientation toward marketing in detriment to the central role of producers in the fair-trade project. (Stiglitz and Charlton 2005) Toasters in the US and EU have also joined this critique, with an eye to protecting the differentiation rent and argue that lower prices may damage the reputation of fair labelling insofar as it would be difficult to explain why 'fair' prices are lower. Producers, from their side, struggle to protect their market access and avoid application of the 'in and out' principle, which would reduce their market share as other producers enter as first-time sellers, and are again aided by toasters that have established long-term commercial relations with producer groups, as required by fair-trade principles. Another point of disagreement revolves around a possible broadening of the fair-trade concept to include plantation agriculture, particularly in coffee where most fair-trade production originates in small-producer groups. This last discussion is directly tied to the problematic entry of translational corporations into fair-labelled markets. The effect of this translational entry would be felt in a strong growth in fair-labelled markets and increased licensing revenues for national fair-labelling initiatives. This is in fact the route presently pursued by Transfer USA that has offered fair-trade licensing to Starbucks and Folgers Coffee (see below). However, in order to meet the supply needs of the large corporations, these fair-trade groups propose to include coffee plantations on the all-important fair-labelling registry. This proposal has encountered strong opposition from co-ops worried that this initiative would lead to (downward) price pressures and reduced market access. What is at stake is the very definition of fair trade: many question the narrowness of its present definition and defend a revaluation to include more workers and producers under a social-justice rubric (Goodman, 2004), while others argue that if these new participants are not admitted then they will simply join up with competing initiatives (see below). To the contrary, other groups criticize the notion of placing market expansion above the ideals on which the initiative was founded, the dilution of the fair-trade message and the possibility that large corporations will appropriate the language and label of fair trade. Meanwhile, some co-ops, in search of markets, and have already reached agreements to sell their coffee via alliances with large distributors. Some co-op leaders suggest that fair trade is at the beginning of a 'third stage' (post-alternative trade and certified label) in which organizations will deal directly with large corporations or supermarkets (VanderHoff, 2002). This argument parallels the adoption, by a few large players in the agro food chain, of a new political stance with respect to fair trade. Although consumer purchases of Max Havelaar or Transfer products are insufficient to create a parallel alternative market, the market niche is large enough to be economically attractive and also provides an opportunity to enter the fair-trade scene while retaining corporate criteria, at times with the help of national fair-trade initiatives. In the following case studies, we will examine three examples showing how the search for greater market volume, when combined with this corporate politics, substantially modifies the politics of the fair-trade network. Conclusion Fair Trade movement is a very significant aspect of the rapidly globalizing world. Whatever the truth, it is clear that the fair-trade movement alone has little chance of altering the terms of trade for the majority of farmers and workers who earn living exporting low-value commodities to the industrialised world. In order to really make poverty history, the rules of world trade will have to be altered across the board, not simply short-circuited by a few ethically conscious Western consumers. And this means that people in rich countries will need to get politically active -- taking to the streets and following up on the huge awareness-raising success of Make Poverty History and Live8 -- rather than simply choosing between different supermarket coffee brands, if they want fair trade to become a reality for the whole world. Bibliography Aranda and Morales, 2002 J. Aranda and C. Morales, Poverty alleviation through participation in Fair Trade coffee networks: the case of CEPCO, Oaxaca, and Mxico. In: D. Murray, L. Raynolds and P. 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