FAIR TRADE: Why to buy Fair Trade products?

December 8, 2005

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Why buy Fair Trade?

"Before you've finished your breakfast this morning, you'll have relied on half the world" - Martin Luther King

An interesting thought. And a depressing one, when you realise that those people you've relied on for your coffee and muesli are almost certainly being exploited and oppressed by the unfair power balance in world trade.

But what can you do? Surely it's beyond your control? Wrong. You can buy Fair Trade products. And you can add your voice to the Big Noise.

Fair Trade is a growing, international movement which ensures that producers in poor countries get a fair deal. This means a fair price for their goods (one that covers the cost of production and guarantees a living income), long-term contracts which provide real security; and for many, support to gain the knowledge and skills that they need to develop their businesses and increase sales.

Fair Trade and the Make Trade Fair campaignThe Fair Trade movement has been one of the most powerful responses to the problems facing commodity producers. It gives consumers an opportunity to use their purchasing power to tilt the balance, however slightly, in favour of the poor. But Fair Trade alone can't address the crisis faced by the millions of small-scale farmers and producers whose livelihoods are threatened by low commodity prices and unfair competion from rich countries.

This can only be achieved by changing the unfair rules of world trade so that they work for small-scale producers as well as rich multinationals.

In the meantime, for hundreds of thousands of people, Fair Trade means the difference between a hand-to-mouth existence, and being able to plan for the future.

In the past decade, the Fair Trade movement has really taken off, as consumer awareness of - and indignation at - the treatment of producers in poor countries has increased. More retailers than ever are stocking Fair Trade goods, the number of products on offer continues to grow as demand increases, and more poor communities are feeling the benefits.

MORE INFO:

http://www.maketradefair.com

http://www.fairtrade.net

http://www.fairtradefederation.org/mft.html

Fair Trade Facts

Worldwide, fair trade sales total $400 million each year. In North America, fair trade retail sales totaled $35 to 40 million in 1998. Of $3.6 trillion of all goods exchanged globally, fair trade accounts for only .01%. Fair trade businesses return 1/3 to 1/4 of profits back to producers in developing countries. According to the National Labor Committee, a Haitian sewing clothing for the U.S. market may earn less than 1% of the retail price. Sales for Ten Thousand Villages, the largest fair trade organization in the United States, grew from nearly $3 million in 1985 to nearly $12 million in 1998. Ten Thousand Villages' Canadian operations reported another $3 million. Combined, that represents the creation of the equivalent of 12,500 full-time jobs for disadvantaged artisans and farmers. Of its $5.2 million in sales for 1998, SERRV International returned nearly $2 million directly to producers. North American consumers pay $4 to $11 a pound for coffee bought from growers for about 80 cents a pound. Growers who sell to fair trade organizations earn $1.12 to $1.26 a pound. Sixty to seventy percent of the artisans providing fair trade hand-crafted products are women. Often these women are mothers and the sole wage earners in the home.

How Fair Trade Organizations Differ from Commercial Importers

Their goal is to benefit the artisans they work with, not maximize profits. By reducing the number of middlemen and minimizing overhead costs, FTOs return up to 40 percent of the retail price of an item to the producer.

They work with producer co-operatives that use democratic principles to ensure that working conditions are safe and dignified, and that producers have a say in how their products are created and sold. Co-operatives are encouraged to provide benefits such as health care, child care and access to loans.

They encourage producers to reinvest their profits into their communities. Many producers who work with FTOs have committed time and money to build health clinics and support other community projects in their villages.

Some Fair Trade Organizations work to shift processing and packaging activities to the developing world, so that as much work as possible will remain in the producer country. Often, such activities are performed abroad, depriving the neediest countries of the opportunity to boost their incomes.

Why Fair Trade?

A Brief Look at Free Trade in the Global Economy

From around the world, we hear heart-wrenching stories about mistreated and abused workers who earn meager wages. Or worse, we hear about millions of children sold into servitude or forced to work in unsafe conditions for pittance wages to contribute to their family's survival. Unfortunately, these stories are all too common in the new global economy where competitiveness and profits to stockholders are paramount, and poverty is rising. Increasing globalization, along with U.S. government support for free-trade and investment agreements, are exacerbating three intractable problems that now plague almost every nation on earth: income inequalities, job losses and environmental damage. Around the world, production, trade and retailing of most goods and services are increasingly concentrated under the control of a small number of corporations. Economist John Cavanagh and Frederick Clairmonte have calculated that just over a quarter of the world's production comes from General Motors, Mitsubishi, Shell, Philip Morris and 200 of the other largest firms. These firms are the primary beneficiaries of the world's rapidly growing trade. As they compete with one another to capture global markets, their primary mode of reducing costs has been through cutting jobs, wages and benefits. Between 1979 and 1992, for example, the Fortune 500 largest firms in the U.S. cut 4.4 million workers from their payrolls globally to remain competitive and keep profits high. Backed by conventional economists, large corporations have convinced most of the world's governments that they should maximize global competitiveness through freer trade. Corporate and government officials often theorize that free trade will be beneficial for workers, whose wages and benefits can rise as foreign markets expand for their goods and for consumers who can buy cheap foreign imports. Following this theory, new regional trade agreements, like the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) are reducing barriers to trade and investment for firms. These free trade agreements offer firms global protection for their intellectual and property rights but there are currently no equivalent enforceable global standards to protect workers and the environment. Furthermore, as barriers to entering local markets are removed, large scale manufacturers edge small businesses and local cooperative enterprises out of the market. Local economies suffer when these firms' profits are channeled out of the country rather than being reinvested locally. According to World Bank figures, roughly half of the new foreign direct investment by global corporations in the South in 1992 quickly left those countries as profits. As a result of these trends, the gap between the rich and the poor has increased dramatically in recent decades. Today, the richest 20% of the world's population has 60 times the income of the poorest 20%. The benefits of trade are similarly concentrated among the wealthiest segments of the world's population and only a handful of developing countries. For example, of the $102 billion in private investment that went to developing countries between 1970 and 1992, 72% went to only 10 countries. Most of those ten were the emerging markets such as China, Hong Kong Singapore, South Korea and Taiwan. Even in many countries that are currently experiencing high growth rates from expanded trade, the benefits of growth are not trickling down to the poor. Another problem is that the bulk of exports from developing countries tends to be in primary product commodities, such as sugar, cocoa, coffee, etc., whose prices generally rise much more slowly than the prices of manufactured goods imports. This "terms of trade" decline was particularly sharp between 1985 and 1993 when the real prices of primary commodities fell 30%. This translates into losses of billions of dollars. Free trade agreements do little to enhance the trading positions and commodity prices of these poor countries. In many cases, the world market price for commodities such as coffee and cocoa falls below the cost of production, forcing farmers to sustain huge losses. Fair Trade organizations offer a crucial alternative by paying farmers a price that always covers at least production costs. FAIR TRADE HAS NEVER BEEN MORE IMPORTANT. The business generated by Fair Trade Organizations in Europe and the U.S. now accounts for an estimated US$400 million, just .01 % of all global trade. Small as it may be, the rapidly growing alternative or fair trade movement is setting standards that could redefine world trade to include more social and environmental considerations. Fair traders believe that their system of trade, based on respect for workers' rights and the environment, if adopted by the big players in the global economy, can play a big part in reversing the growing inequities and environmental degradation that have accompanied the growth in world trade. Hilary French, author of Costly Tradeoffs: Reconciling Trade and the Environment, reflects the views of many Fair Trade Organizations: "Trade is neither inherently good nor bad. But how it is conducted is a matter of great concern-and an unprecedented opportunity. Trade can either contribute to the process of sustainable development or undermine it. Given the rapidly accelerating destruction of the earth's natural resource base, there is no question what the choice must be." For Fair Trade Organizations, the choice is simple. Whether trade is good for producers and consumers depends entirely on how the goods are made and how they are sold. Fair Trade brings the benefits of trade into the hands of communities that need it most. It sets new social and environmental standards for international companies and demonstrates that trade can indeed be a vehicle for sustainable development. Today, a growing movement of workers, environmentalists, consumers, farmers and social movements worldwide is calling for a different framework for trade. They want a global trading system that promotes workers' rights, protects the environment and sustains the ability of local producers to meet community needs. Together, as consumers, they can make a huge difference by demanding significant changes in the ways goods are produced, and vote with their dollars for a more just and environmentally sound trading system. This article was written by John Cavanagh, co-director of the Institute for Policy Studies.

Make Trade Fair Surpasses 11.6 Million Signatures

December 8, 2005

We have some great news to report. Oxfam's Big Noise petition to Make Trade Fair has surpassed our goal of 10 million signatures and now stands at 11.6 million! This shows the overwhelming support worldwide for fair trade policies, which could lift millions of people out of poverty. Oxfam America’s eCommunity played an important role in increasing our numbers, and we thank you for your support.

Oxfam will deliver these signatures to key decision makers at the World Trade Organization (WTO) meeting in Hong Kong later this month. This meeting represents an important opportunity to make global trade work for poor countries. For example, the WTO has already ruled that US cotton subsidies hurt developing countries’ and their ability to compete. Oxfam will be in Hong Kong to make sure US leaders address this ruling. And we will ask world leaders to stick to other commitments, which could help millions of small-scale farmers make a decent living.

What do we want?

An end date to the kinds of subsidies, which encourage rich countries to overproduce their crops and dump them on the world market. These subsidies make it extremely difficult for small-scale farmers in developing countries to make money off their own crops.

The space for developing countries to decide if, when, and how quickly they open up their own markets.

Meaningful increases in access to rich country markets for the poorest countries.

These steps could reduce poverty by removing barriers that keep poor countries from competing fairly in the global marketplace.

Thank you for your interest in creating lasting solutions to poverty, hunger, and social injustice! Oxfam will update you on the results of the WTO meeting.

Sincerely,Vicky RateauTrade Campaign Manager