How fair is fair trade?

John Madeley, in his book Trade and the Poor, argues that the current system of international trade is biased in favour of wealthy northern nations. It was British economist John Stuart Mill who said, "Colonies should not be thought of as civilisations or countries at all, but as agricultural establishments whose sole purpose was to supply the larger community to which they belong."

Today, in a similar approach, international financial institutions reinforce the emphasis on export driven economies in developing nations. Countries who receive loans from them are typically encouraged or required to gear their economies toward export of commodities. Different types of trade regulations, including tariffs and the lack of capital, make it difficult for developing nations to move from simple commodity production to a more diverse economy. Madeley writes, "While most primary commodities are allowed into the markets of industrialised nations without restrictions, the doors of the North are closed to all but a comparatively small amount of Third World manufactured goods".

These barriers are designed to hamper competition between industrialised and Third World workers. Developing country governments, burdened with heavy debt and encouraged by western dominated lending institutions to reduce social spending and end agriculture subsidies, are unlikely candidates to provide much needed investment capital. Consequently, capital-intensive manufacturing is very difficult to establish.

Farming and then handicraft production make up the largest sources of income for rural producers in the Third World. However, farmers are finding it increasingly difficult to earn an adequate living. In addition to seeing low prices for commodities, we see the withdrawal of government price supports, technical and other advisory programmes, and virtually all state-sponsored protection for agriculture. This has happened in the face of direct and often inequitable competition from imports. Changes in banking systems and an end to state support for agriculture credit have also meant a rise in exploitative loans and the consequent privatisation of land via forfeitures. In other cases, land is being abandoned, with migration away from rural areas to the cities being the sole option. These circumstances have lead to greater reliance on craft production for much needed income in rural areas. As Littrell and Dickson write, "Shifts to craft production are closely linked with dramatic declines in access to land as a source of income. Family holdings have suffered through subdivision, overexploitation, soil erosion, and adverse climatic conditions".

However, artisans, like small farmers, face serious challenges to participation in the global economy. Lack of capital, distribution channels, an adequate transportation infrastructure, and market information regarding demand, pricing, and country specific regulations all contribute to making entering global markets almost impossible.

There have been various efforts to find alternatives to this unequal trade regime. Alternative trade puts special emphasis on improved quality of life for struggling producers in non-industrialised nations. In their book Social Responsibility in the Global Market: Fair Trade of Cultural Products, Mary Ann Littrell and Marsha Ann Dickson describe the ideological focus of paying "as much as possible rather than as little as possible". This is in sharp contrast to mainstream business. The authors describe an emphasis on social responsibility where careful consideration is given to how business transactions will affect issues including natural resources, cultural traditions, working conditions, worker income, and business sustainability.

The key to alternative trade is a sense of 'fairness' in the exchange between producer and buyer. Alternative traders believe that through producing various goods and selling them at fair prices, Third World producers can finance their own rise from poverty and in the process, build skills, confidence, and self-esteem.

Despite a diverse mixture of fair trade throughout the world, some shared goals permeate the majority of organisations. The primary method fair trade organisations utilise in their effort to help small producers in non-industrial nations is providing valuable income through the purchase of goods. Another advantage of cooperatives is that they are able to pool earnings and invest in areas such as education, health care, infrastructure development, and so on. This trade mobilisation also promotes community health services, education, affordable housing, and influencing area politics. Empowerment of individuals, especially women, is another means of improving living standards.

The most important role of the fair trader may be in helping small-scale producers to get organised, to become a stable group and to join up with other local groups. Second, the fair trader must provide information which will almost certainly not be available locally - about prices, markets, styling, packaging, quality control, health and safety standards, new uses for old products, transport and shipping and tools, machines and plant for processing - all based on an open and fair basis. Fair trade seeks ways to add value to producer products. This includes things like "manufacturing garments from cotton, furniture from timber. Another way fair trade assist producers is by providing credit. By providing credit at reasonable rates of interest and by paying 50 percent when orders are made, fair trade helps producers make necessary business decisions, which affect growth and efficiency.

The shrinking viability of farming has lead to more reliance on the craft industry. The effect of this has been described aptly in the book Crafts in the World Market: The Impact of Global Exchange on American Artisans, edited by June Nash, which states, "As a result of the increase in price of raw materials, they [artisans] must either charge more or reduce the quality of their work which leads to dilution of their cultural methods that make them unique and thus marketable." Similar problems have occurred from a flood of cheaply made, machine produced crafts, which are in competition with handmade products. One way fair trade has dealt with these concerns is through the use of cultural advisers or design consultants, who determine how traditional methods can be used to meet consumer demand.

Fair traders take special care to ensure environmental impacts of craft production and farming. For example, fair trade encourages the use of natural dyes, which are locally available and do not negatively impact the environment (Social Responsibility in the Global Market:  Fair Trade of Cultural Products).

In the eyes of many, alternative trade offers a creative and efficient means of improving life for rural producers in the Third World. A common criticism of development efforts is that they are reactionary and are unable to challenge basic structures that are believed to be the root of much poverty and suffering.

Are fair traders justified in saying that they provide a 'fair' system, and implying or stating outright that others do not? They themselves are not in full agreement on what the standards of 'fairness' are. Some fair traders pay whatever the asking price is. Others make sure to pay higher than the local average. A reasonable split of profits between the retailer and producer is another used criterion. What if the price paid is not enough to supply a healthy standard of living for the worker, is it still fair? These are some questions worth considering even now.

Fair traders, however, are working for greater equity in international trade, for better training conditions, and for securing the rights of marginalised producers and workers. They believe that in order for trade to be sustainable, social, environmental and economic costs of goods and services must be taken in account. As for the disputes, we need to remember that we live in an interdependent world, where regardless of our preference, we will be influenced by each other.

The writer is Knowledge Management Coordinator, CARE Bangladesh.