Attribution-NonCommercial
CC BY-NC
This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.
*********************************
For links in the material below, please highlight the URL and right click if you have difficulty accessing the link.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The following article was developed by Green Comma as a discussion resource for use in grades 9-12 classrooms as well as in freshmen college classrooms. The principal writer is Douglas Houston, a lawyer living in Cambridge, MA, who frequently collaborates with Green Comma’s managing director, Amit Shah.
What Is Fair Trade?
In order to understand Fair Trade we have to know something about "trade" and how it developed. We also have to understand the more obvious benefits to Fair Trade for both producers and consumers. More importantly, we have to understand that the cost of ethical consumerism in a highly globalized world where some products that are consumed in the developed and wealthier West are produced by and large in the developing and poorer sections of the world.
When we talk about “trade” we are talking about the movement of goods. (“Services” can also be bought and sold, but for our purposes, and for the purpose of Fair Trade, we are concerned with goods).
Goods are tangible items such as books, pens, shoes and services that are provided by other people such as dentists, barbers, doctors. And that movement is not just the transporting of goods, but also the buying and selling of goods. Goods have been produced and transported for thousands of years. Marco Polo in the thirteenth century, was a famous explorer who traveled from Europe to Asia, bringing back information about the East that inspired other European explorers, like Christopher Columbus (who, you’ll remember, was headed to the East Indies). These explorers were not only bringing back information about the new lands they visited, but were also opening up trade routes for goods.
The great empires in history were all created in part from trade, and were created in order to trade in goods. The United States was an offshoot of one such empire, the British Empire, which was looking for new lands that had raw materials that it needed, as well as new markets where it could sell its manufactured goods.
Britain wanted a steady supply of tall trees to make masts for its sailing ships and needed cotton for its mills. The American colonies had vast forests that could provide the long timbers for the masts and cotton was easy to grow in the American South.
Buyers from Britain were sent over to find these tall trees, get them cut, and then have them shipped back to Britain for masts and to set up plantations where the cotton would be grown. (https://www.mainememory.net/sitebuilder/site/283/page/546/display)
The question then is, who is to get the money to supply the trees, and how much is cost? And how is the cotton to be grown and harvested to make it inexpensive to produce? These are trade issues that always have to be resolved. (In the case of trade between Britain and the Colonies, often the goods from the colonies were paid for in other goods rather than currency, but the issue still had to be resolved who got received value and how much).
How Does Fair Trade Work?
In the second half of 1700s an Englishman named Adam Smith (http://www.econlib.org/library/Enc/bios/Smith.html) wrote about how prices are established by a marketplace and the various factors that go into creating those prices. One factor is how plentiful the desired goods are, and the other factor was how much people want the goods.
Adam Smith came to the conclusion that the price of goods follows how much demand and supply there is for those goods. When demand exceeds supply, the price goes up, and when supply exceeds demand, the price goes down. He also believed that all markets grow out of self-interest. One of his most famous quotes is, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." By this he was referring to the price of the exchange between sellers and buyers.
While it is probably true that there is no such thing as a completely free market, a market with no external rules or regulations, there are proponents of free markets who believe that the freer the better.
Under Smith's principles, the seller tries to produce the goods at the lowest possible cost, and tries to sell at the highest possible price. And the buyer always tries to get the goods for the lowest price, which inevitably puts pressure on the seller to lower costs.
Under this simplified description, one can see how employers would always try to pay their workers as little as possible, or if possible nothing at all. One can also see how environmental concerns, like whether a river is polluted because of the discharge from a battery factory, would not be a valid concern of the factory owner, since cleaning up the pollution would just add to the cost of manufacturing the battery. Owners also have little incentive to make the workplace safe and hygienic. (http://www.nytimes.com/2013/01/28/world/asia/bangladesh-factory-site-of-fatal-fire-made-western-brands.htmll)
Unfortunately, different degrees of free trade have in fact had these consequences.
Workers have been underpaid or not paid at all, and the environment has been harmed because of the pressure to lower costs. In terms of governmental policies, the desire to find the lowest cost for raw goods and labor led to establishing colonies where, because the colonies were under the control of the mother country, the price paid for the raw goods could be kept very low and workers could be forced to work at the lowest cost possible, or in the case of slavery, work would be performed at no cost at all.( An example of how a mother country could control a colony to the colony's detriment was England's enactment of the Staples Act, which created regulations which favored Britain at the expense of the Southern Colonies, controlling who the Colonies could sell to and buy from. (see:http://www.digitalhistory.uh.edu/teachers/lesson_plans/pdfs/unit1_4.pdf)
One of the effects of rules of manufacturing and farming, such as cleaning rivers and setting fair wages, is that they add costs to the goods. If you have to carefully get rid of waste that costs more money than just throwing the waste out the back door. If you can't use children to make goods, if there is a minimum wage and workers have a right to bargain collectively, the costs of goods increases.
Globalization and "Free Trade"
As the cost of production in developed nations, like the United States and Europe, rose because of the increased regulations and labor standards, the desire to find places where the costs would be cheaper also increased. The developed nations turned to the developing nations, found mostly in South America, Africa, and parts of Asia, to decrease their costs. The reason the developed nations turned to the developing nations for cheaper goods was that one of the things that distinguishes developing from developed nations was that developing nations have fewer regulations concerning labor, manufacturing, farming, and the environment. And even if they have regulations, the governments may not be strong enough to enforce those regulations. So that many of the inequities and problems the developed nations had solved still exists in the developing nations. (http://www.nytimes.com/2016/08/07/opinion/sunday/the-rage-against-trade.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-left-region®ion=opinion-c-col-left-region&WT.nav=opinion-c-col-left-region)
Free Trade May Not Be Fair Trade
It was not long after this wave of goods began to flow more freely between countries that had at one time seemed so far away, that people began to realize that although the price of their goods that they bought at the stores and markets were cheaper, someone else was paying the cost ꟷthe workers and citizens of those countries where the goods were produced.
This spread of information and the resulting concern for citizens of another country has spawned many international movements that cross national borders. One such movement is the fair trade movement.
Brief History of Fair Trade
The first sign of a fair trade movement was in the 1940s and 1950s by various religious groups that brought goods from the South and Puerto Rico and sold them through church markets. In Europe the Fair Trade movement began in the late 1950s when OXFAM UK (originally named Oxford Committee for Famine Relief) began selling in its shops handcrafted goods made by Chinese refugees. Almost all of the goods sold through fair trade organizations were handcrafts.
In the 1980s the focus on agricultural products like coffee and tea and expanding their market from their own shops to large chains began. The next step in the growth of fair trade was the labeling of goods, which could then be sold through fair trade and non-fair trade shops, in other words in the general marketplace.
The Growth of Labeling and the "Mark"
This labeling initiative began in 1988 in the Netherlands with the Max Havelaar Foundation that created a fair trade label for coffee grown in Mexico and sold in regular supermarkets in the Netherlands. The label signified that the buying and selling of the product aimed to improve "the living and working conditions of small farmers and agricultural workers in disadvantaged regions". http://www.greeneconomycoalition.org/know-how/max-havelaar-netherlands
Along with the advent of the labeling system, many fair trade advocates came to agree on certain principles. While at first there were several separate labeling initiatives, in 1997 the Fairtrading Labeling Organizations International (FLO) joined the various groups and came to an agreement as to general principles and standards. In 2002 the FLO launched the first International Fairtrade Certification Mark which is used in over 50 countries and by 25 member organizations. The "Mark" is the symbol that signifies a product on the shelf of a market and for sale was produced following the principles and standards of the FLO.
The Standards for Fair Trade
The FLO standards are a long and complicated set of standards for products found at this website: http://www.fairtrade.net/standards.html
There are several sets of standards:
http://www.fairtrade.net/standards/our-standards.html
The purpose of the standards is to "support the sustainable development of small producer organizations and agricultural workers in the poorest countries in the world." (http://www.fairtrade.net/standards/aims-of-fairtrade-standards.html)
Fair Trade Principles
The standards are guided by the Fair Trade principles. There are common principles that apply to all standards; these principles are divided into four areas (See Fairtrade International's website: http://www.fairtrade.net/standards/aims-of-fairtrade- standards.html
There are 10 principles listed on the World Fair Trade Organization website, but they follow very similar ideals as the four listed here. http://wfto.com/fair-trade/10-principles-fair-trade
Social Development Principles
Fair Trade social development principles for small-scale producers require that:
The social development principles for hired labor require that:
Economic development principles require that buyers pay a Fair Trade minimum price and/or a Fair Trade premium to the producers, which covers the cost of sustainable production. The premium is for the producers or workers to invest to improve the quality of their lives. This improvement includes health, education, and the environment. The economic principles also include requiring buyers to pay some money in advance if the producers ask for it.
The Environmental Principles
The environmental principles require environmentally sound agricultural practices.
While this does not require organic certification, organic production is promoted and rewarded by higher Fair Trade Minimum Prices.
Prohibition of Forced Labor
And finally the prohibition of forced labor and child labor is a key principle of Fair
Trade.
Fair Trade Today
We now see how Fair Trade developed, in part as a solution to the consequences of Free Trade. Instead of a market that was guided by an invisible hand of greed, and supply and demand, the market would be governed, at least in some cases, by principles like economic fairness, democratic principles of governance, and concern for the environment and human safety.
There are many issues both pros and cons for Fair Trade to become the gold standard of global trading. One of the cons is the cost. The Fairtrade premium is the money over and above what it costs to produce the goods, which goes into a communal fund for workers and farmers to use to improve their social, economic and environmental conditions. To explore further, sites such as http://www.globalissues.org/issue/61/fair-trade are suggested.
FURTHER SUGGESTED READING. THIS IS TO SPUR DISCUSSION AND IS NOT MEANT TO BE CONSIDERED A RECOMMENDED LIST.
CC BY-NC
This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.
*********************************
For links in the material below, please highlight the URL and right click if you have difficulty accessing the link.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The following article was developed by Green Comma as a discussion resource for use in grades 9-12 classrooms as well as in freshmen college classrooms. The principal writer is Douglas Houston, a lawyer living in Cambridge, MA, who frequently collaborates with Green Comma’s managing director, Amit Shah.
What Is Fair Trade?
In order to understand Fair Trade we have to know something about "trade" and how it developed. We also have to understand the more obvious benefits to Fair Trade for both producers and consumers. More importantly, we have to understand that the cost of ethical consumerism in a highly globalized world where some products that are consumed in the developed and wealthier West are produced by and large in the developing and poorer sections of the world.
When we talk about “trade” we are talking about the movement of goods. (“Services” can also be bought and sold, but for our purposes, and for the purpose of Fair Trade, we are concerned with goods).
Goods are tangible items such as books, pens, shoes and services that are provided by other people such as dentists, barbers, doctors. And that movement is not just the transporting of goods, but also the buying and selling of goods. Goods have been produced and transported for thousands of years. Marco Polo in the thirteenth century, was a famous explorer who traveled from Europe to Asia, bringing back information about the East that inspired other European explorers, like Christopher Columbus (who, you’ll remember, was headed to the East Indies). These explorers were not only bringing back information about the new lands they visited, but were also opening up trade routes for goods.
The great empires in history were all created in part from trade, and were created in order to trade in goods. The United States was an offshoot of one such empire, the British Empire, which was looking for new lands that had raw materials that it needed, as well as new markets where it could sell its manufactured goods.
Britain wanted a steady supply of tall trees to make masts for its sailing ships and needed cotton for its mills. The American colonies had vast forests that could provide the long timbers for the masts and cotton was easy to grow in the American South.
Buyers from Britain were sent over to find these tall trees, get them cut, and then have them shipped back to Britain for masts and to set up plantations where the cotton would be grown. (https://www.mainememory.net/sitebuilder/site/283/page/546/display)
The question then is, who is to get the money to supply the trees, and how much is cost? And how is the cotton to be grown and harvested to make it inexpensive to produce? These are trade issues that always have to be resolved. (In the case of trade between Britain and the Colonies, often the goods from the colonies were paid for in other goods rather than currency, but the issue still had to be resolved who got received value and how much).
How Does Fair Trade Work?
In the second half of 1700s an Englishman named Adam Smith (http://www.econlib.org/library/Enc/bios/Smith.html) wrote about how prices are established by a marketplace and the various factors that go into creating those prices. One factor is how plentiful the desired goods are, and the other factor was how much people want the goods.
Adam Smith came to the conclusion that the price of goods follows how much demand and supply there is for those goods. When demand exceeds supply, the price goes up, and when supply exceeds demand, the price goes down. He also believed that all markets grow out of self-interest. One of his most famous quotes is, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." By this he was referring to the price of the exchange between sellers and buyers.
While it is probably true that there is no such thing as a completely free market, a market with no external rules or regulations, there are proponents of free markets who believe that the freer the better.
Under Smith's principles, the seller tries to produce the goods at the lowest possible cost, and tries to sell at the highest possible price. And the buyer always tries to get the goods for the lowest price, which inevitably puts pressure on the seller to lower costs.
Under this simplified description, one can see how employers would always try to pay their workers as little as possible, or if possible nothing at all. One can also see how environmental concerns, like whether a river is polluted because of the discharge from a battery factory, would not be a valid concern of the factory owner, since cleaning up the pollution would just add to the cost of manufacturing the battery. Owners also have little incentive to make the workplace safe and hygienic. (http://www.nytimes.com/2013/01/28/world/asia/bangladesh-factory-site-of-fatal-fire-made-western-brands.htmll)
Unfortunately, different degrees of free trade have in fact had these consequences.
Workers have been underpaid or not paid at all, and the environment has been harmed because of the pressure to lower costs. In terms of governmental policies, the desire to find the lowest cost for raw goods and labor led to establishing colonies where, because the colonies were under the control of the mother country, the price paid for the raw goods could be kept very low and workers could be forced to work at the lowest cost possible, or in the case of slavery, work would be performed at no cost at all.( An example of how a mother country could control a colony to the colony's detriment was England's enactment of the Staples Act, which created regulations which favored Britain at the expense of the Southern Colonies, controlling who the Colonies could sell to and buy from. (see:http://www.digitalhistory.uh.edu/teachers/lesson_plans/pdfs/unit1_4.pdf)
One of the effects of rules of manufacturing and farming, such as cleaning rivers and setting fair wages, is that they add costs to the goods. If you have to carefully get rid of waste that costs more money than just throwing the waste out the back door. If you can't use children to make goods, if there is a minimum wage and workers have a right to bargain collectively, the costs of goods increases.
Globalization and "Free Trade"
As the cost of production in developed nations, like the United States and Europe, rose because of the increased regulations and labor standards, the desire to find places where the costs would be cheaper also increased. The developed nations turned to the developing nations, found mostly in South America, Africa, and parts of Asia, to decrease their costs. The reason the developed nations turned to the developing nations for cheaper goods was that one of the things that distinguishes developing from developed nations was that developing nations have fewer regulations concerning labor, manufacturing, farming, and the environment. And even if they have regulations, the governments may not be strong enough to enforce those regulations. So that many of the inequities and problems the developed nations had solved still exists in the developing nations. (http://www.nytimes.com/2016/08/07/opinion/sunday/the-rage-against-trade.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-left-region®ion=opinion-c-col-left-region&WT.nav=opinion-c-col-left-region)
Free Trade May Not Be Fair Trade
It was not long after this wave of goods began to flow more freely between countries that had at one time seemed so far away, that people began to realize that although the price of their goods that they bought at the stores and markets were cheaper, someone else was paying the cost ꟷthe workers and citizens of those countries where the goods were produced.
This spread of information and the resulting concern for citizens of another country has spawned many international movements that cross national borders. One such movement is the fair trade movement.
Brief History of Fair Trade
The first sign of a fair trade movement was in the 1940s and 1950s by various religious groups that brought goods from the South and Puerto Rico and sold them through church markets. In Europe the Fair Trade movement began in the late 1950s when OXFAM UK (originally named Oxford Committee for Famine Relief) began selling in its shops handcrafted goods made by Chinese refugees. Almost all of the goods sold through fair trade organizations were handcrafts.
In the 1980s the focus on agricultural products like coffee and tea and expanding their market from their own shops to large chains began. The next step in the growth of fair trade was the labeling of goods, which could then be sold through fair trade and non-fair trade shops, in other words in the general marketplace.
The Growth of Labeling and the "Mark"
This labeling initiative began in 1988 in the Netherlands with the Max Havelaar Foundation that created a fair trade label for coffee grown in Mexico and sold in regular supermarkets in the Netherlands. The label signified that the buying and selling of the product aimed to improve "the living and working conditions of small farmers and agricultural workers in disadvantaged regions". http://www.greeneconomycoalition.org/know-how/max-havelaar-netherlands
Along with the advent of the labeling system, many fair trade advocates came to agree on certain principles. While at first there were several separate labeling initiatives, in 1997 the Fairtrading Labeling Organizations International (FLO) joined the various groups and came to an agreement as to general principles and standards. In 2002 the FLO launched the first International Fairtrade Certification Mark which is used in over 50 countries and by 25 member organizations. The "Mark" is the symbol that signifies a product on the shelf of a market and for sale was produced following the principles and standards of the FLO.
The Standards for Fair Trade
The FLO standards are a long and complicated set of standards for products found at this website: http://www.fairtrade.net/standards.html
There are several sets of standards:
http://www.fairtrade.net/standards/our-standards.html
- standards for small producer organizations,
- standards for hired labor,
- standards for contract production,
- trader standards,
- climate standards, and
- textile standards.
The purpose of the standards is to "support the sustainable development of small producer organizations and agricultural workers in the poorest countries in the world." (http://www.fairtrade.net/standards/aims-of-fairtrade-standards.html)
Fair Trade Principles
The standards are guided by the Fair Trade principles. There are common principles that apply to all standards; these principles are divided into four areas (See Fairtrade International's website: http://www.fairtrade.net/standards/aims-of-fairtrade- standards.html
There are 10 principles listed on the World Fair Trade Organization website, but they follow very similar ideals as the four listed here. http://wfto.com/fair-trade/10-principles-fair-trade
- social development,
- economic development,
- environmental development, and
- forced labor.
Social Development Principles
Fair Trade social development principles for small-scale producers require that:
- the organization structure allows the producers to bring the products to market,
- the organization makes its decisions democratically, and
- the organization is transparent so that the members can see how decisions are made and make sure that no members are discriminated against
The social development principles for hired labor require that:
- the company brings social rights and security to its workers.
- Workers must be provided with training opportunities,
- non-discriminatory employment practices,
- no child labor,
- no forced labor,
- access to collective bargaining,
- employment conditions must exceed legal minimum standards,
- adequate safety and health conditions, and
- sufficient facilities for the workforce to manage the Fairtrade premiu
Economic development principles require that buyers pay a Fair Trade minimum price and/or a Fair Trade premium to the producers, which covers the cost of sustainable production. The premium is for the producers or workers to invest to improve the quality of their lives. This improvement includes health, education, and the environment. The economic principles also include requiring buyers to pay some money in advance if the producers ask for it.
The Environmental Principles
The environmental principles require environmentally sound agricultural practices.
While this does not require organic certification, organic production is promoted and rewarded by higher Fair Trade Minimum Prices.
Prohibition of Forced Labor
And finally the prohibition of forced labor and child labor is a key principle of Fair
Trade.
Fair Trade Today
We now see how Fair Trade developed, in part as a solution to the consequences of Free Trade. Instead of a market that was guided by an invisible hand of greed, and supply and demand, the market would be governed, at least in some cases, by principles like economic fairness, democratic principles of governance, and concern for the environment and human safety.
There are many issues both pros and cons for Fair Trade to become the gold standard of global trading. One of the cons is the cost. The Fairtrade premium is the money over and above what it costs to produce the goods, which goes into a communal fund for workers and farmers to use to improve their social, economic and environmental conditions. To explore further, sites such as http://www.globalissues.org/issue/61/fair-trade are suggested.
FURTHER SUGGESTED READING. THIS IS TO SPUR DISCUSSION AND IS NOT MEANT TO BE CONSIDERED A RECOMMENDED LIST.
- http://www.fairtraderesource.org/learn-up/recommended-reading/
- http://www.morningsidecenter.org/teachable-moment/lessons/globalization-free-trade-fair-trade-jobs-justice
- https://www.theguardian.com/commentisfree/cif-green/2009/dec/12/fair-trade-fairtrade-kitkat-farmers
- http://www.centrosaluteglobale.it/fair-trade-pros-cons/
- https://fee.org/articles/is-fair-trade-a-fair-deal/
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