Fair Trade Structures

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The Basics of Fair TradeMs. Claribel DavidAFTF
ConvenorNovember 18, 2006
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The Basics of Fair Trade
Engine of Growth Helps raise wages/salaries
Key to alleviation of poverty in developing
nations
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The Basics of Fair Trade

• The trade theory is based on the ff assumptions

• perfect market information

• perfect access to markets and credit

• strong capacity to adapt production techniques
  and outputs in response to market information

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The Basics of Fair Trade

• However, these conditions.
• perfect market information
• perfect access to markets and credit
• strong capacity to adapt production techniques
  and outputs in response to market information

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The Basics of Fair Trade

• Fair trade - an alternative model which attempts
  to address the failures of conventional trade by
  
• assuring producers a stable price for their crop
• providing them better trading conditions,
  business support and access to markets in
  developed countries

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The Basics of Fair Trade
Definition of Fair Trade a trading
partnership which seeks greater equity in
North-South trade. It contributes to
sustainable development by offering better
trading conditions to, and securing the rights
of, disadvantaged producers in the South.
supports producers in - raising awareness -
campaigning for changes in the rules and
practice of international trade
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The Basics of Fair Trade

• History of Fair Trade
• First fair trade activities began in the late
  1940s in America a volunteer from a church
  based organization called the Mennonite Central
  Committee (MCC), started the Self-Help Crafts of
  the World

• in 1996, it was renamed as Ten Thousand
  Villages with a network of 150 fair trade shops
  in America today.

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The Basics of Fair Trade

• History of Fair Trade
• Late 1950s in Europe Oxfam started to sell in
  the U.K. crafts made by Chinese refugees in
  Hongkong.
• First product a stuffed pin cushion.
• Parallel initiatives took place in Netherlands.
  Civic groups started to sell cane sugar with the
  message By buying cane sugar, you give poor
  countries a place in the sun of prosperity.

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The Basics of Fair Trade

• History of Fair Trade
• 1967 first fair trade importing organization was
  established in the Netherlands. This is the Fair
  Trade Organisatie (FTO) now known as Fair Trade
  Original.
• At the same time, the first fair trade retail
  shop known as WorldShop was opened

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The Basics of Fair Trade

• History of Fair Trade
• For many years, fair trade was confined to this
  alternative trading circuit

Producer Organizations
Importing Organizations
Consumers
Worldshops
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The Basics of Fair Trade

• History of Fair Trade
• Late 1970s unregulated competition
  significantly decreased commodity prices and
  drove millions of small producers down the
  poverty line
• As a response, a fair trade certification
  labeling system were developed based on the
  concept of social premium pricing

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The Basics of Fair Trade

• History of Fair Trade
• In 1988, the Max Havelaar labeled coffee began
  to be sold in supermarkets and other commercial
  retail outlets in Netherlands.

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The Basics of Fair Trade

• History of Fair Trade
• Following the example in Netherlands, other
  countries created their own national labeling
  initiatives.
• 1997, the Fairtrade Labeling Organization
  International (FLO) was created as an umbrella
  organization of national labeling initiatives

FLO
Labeling Initiatives
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Fair Trade Structures
Producer Organizations
Importing Organizations
Consumers
Supermarkets and Commercial Retailers
Worldshops
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Fair Trade Structures

• PRODUCER
• ORGANIZATIONS
• the heart of the Fair Trade System they are
  fair trades reason for being
• cultivate and produce a wide variety of
  marketable products (food products and
  handicrafts)
• export products to the consumer countries

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Fair Trade Structures

• IMPORTING ORGANIZATIONS
• Buy products from producer organizations at a
  fair price
• Operate as wholesalers or retailers, or a
  combination of both
• Assist producer partners capacity building
• Participate in campaigns aimed at raising
  consumer awareness

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Fair Trade Structures

• WORLDSHOPS
• are specialist shops for Fair Trade products
• sell products directly to consumers
• organize consumer awareness campaigns

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Fair Trade Structures

• NATIONAL LABELING INITIATIVES
• Responsible for giving license to importers and
  distributors in their countries to use the
  Fairtrade Label
• Fairtrade Label guarantees that the product
  conforms to Fairtrade standards

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Fair Trade Structures

• COMMERCIAL PARTNERS
• Commercial partners ? exporters, importers,
  processors and distributors
• Are the major driving forces behind the enormous
  growth of the past five years
• bridge the gap between Fairtrade producers and
  supermarket customers

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The Basics of Fair Trade

• The Fair Trade Market Today

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Net Retail Value of Fair Trade Products
both labeled and unlabeled
US 450-M in Y2000
US 1.5-B in Y2005
20 -average annual growth
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Estimated Net Retail Value
of Fair Trade Products in
2005 1.5-B
North America the Pacific Rim
30
70
Europe
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Labeled and Non-Labeled Products
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Labeled products carry a fair trade mark and are
mostly agricultural commodities
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200 importer-distributors dealing exclusively
Fairtrade products
1500 commercial importer-distributors selling a
certain of Fairtrade products
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3000 Worldshops in Europe almost exclusively
retailing Fairtrade products
80,000 supermarkets in Europe, North America and
Pacific Rim carrying fair trade products on their
shelves
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In 2005, the fair trade system benefited 1
million workers and farmers in Africa, Asia and
Latin America
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The Basics of Fair Trade

• Principles of
• Fair Trade
• Creation of opportunities for economically
  disadvantaged producers
• Transparency and accountability
• Capacity building
• Payment of a fair price
• Safe and healthy working conditions
• Environmental sustainability
• Promoting fair trading

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The Basics of Fair Trade

• Challenges of
• Fair Trade
• Ensuring that benefits of fair trade accrue to
  the disadvantaged producer
• Maintaining the credibility and integrity of the
  fairtrade certification and labeling system
• Increasing market share and developing new
  markets

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End of Presentation
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Open Forum/ Questions 1. On transparency Is
it really possible for the supplier to give us
information on the price and profits? yes,
under the fairtrading system, transparency on
these types of information should be
available2. What about in Asia? ? How does it
work in Asia? ? Asia is a producer region, 60 of
handicrafts comes from Asia, but we do not have
significant consumer market in Asia there is
great potential that can be tapped in HK, Phil,
and ___ also in China and India ? this is how
fairtrade started to grow in Europe? a consumer
base started to advocate for the expansion of
fairtrade market ? Japan has its own labeling
system --gt it grew out of the links with producer
group (started as a response to issues of
producer groups bananas)3. From a Beijing
Journalist - Rice market in Beijing is from
rural cooperative ? produced with considerations
of environmental hazards? what is fairtrade for
the common people? ? how can they exactly
benefit from it? ? Fairtrade market 01 of
total global trade ? very small fairtrade
products being traded in the market4. The
impact of fairtrade on the day2day lives of an
ordinary producer/farmer to be discussed by
Ashenafi5. Do we need to sell to the
supermarket, or just sell it to any other
retailer? ? do we need to do that in retail or in
big values ? the key is to pack it in a form that
will allow the producer to ask for a higher
price6. In organic products supermarket ? they
are buying the product because of the profit, not
because it is organic ? what happens when big
supermarkets come in to sell organic products,
but with no consideration for the value of the
product being organic ? how do we enhance
consciousness with respect to the value of the
product being a fairtrade product and exoand
market without losing the integrity of the
product being a fairtrade product