History of fair trade

History of fair trade

The fair trade movement as we know today has undergone several important changes since its early days following World War II. Fair trade, first seen as a form of charity advocated by religious organizations, has radically changed in structure, philosophy and approach: the past fifty years have witnessed massive changes in the nature of fair trade proponents, the products traded themselves and their distribution networks.

The origins of fair trade

. Many of the fundamental concepts behind fair trade actually show a great resemblance with pre-capitalist ideas about the organization of the economy and society.

The notion of the ‘old moral economy’ is a fitting example of such conceptions. E. P. Thompson, in his work on 18th century England, described a society where “notions of common well being, often supported by paternalistic traditional authorities, imposed some limits on the free operations of the market”. [Fridell, Gavin (2003). Fair Trade and the International Moral Economy: Within and Against the Market. CERLAC Working Paper Series.] Farmers were then not allowed to manipulate prices by withholding their products to wait for price increases. The actions of the middlemen were always considered legally suspect, were severely restricted and the poor were provided opportunities to buy basic staple foods in small parcels. Fair trade was already seen as a way to address market failures; although the concept mainly revolved around consumer, rather than producer, rights. [Fridell, Gavin (2003). Fair Trade and the International Moral Economy: Within and Against the Market. CERLAC Working Paper Series.]

There are also a few instances in which fair trade in the 'old moral economy' is focused on producer rights: as early as 1859, Dutch author Multatuli (the pen name of Eduard Douwes Dekker) questioned the injustice of the colonial and capitalist system towards commodity producers in his novel Max Havelaar. The fictional tale recounts the story of Max Havelaar, a Nederlandse Trade Company employee, who leaves everything to work in solidarity with local Indonesian workers. This account draws a direct correlation between the wealth and the prosperity of Europe and the poverty of the suffering of other parts of the world. [Redfern A. & Snedker P. (2002) Creating Market Opportunities for Small Enterprises: Experiences of the Fair Trade Movement. International Labor Office.]

Early fair trade initiatives

The fair trade movement as we know today was shaped in the years following World War II. Early attempts to commercialize in Northern markets goods produced by marginalised producers were initiated by religious groups and various politically oriented non-governmental organizations (NGOs).

The Mennonite Central Committee (MCC) and SERRV International were the first, in 1946 and 1949 respectively, to develop fair trade supply chains in developing countries. [International Fair Trade Association. (2005). [http://www.ifat.org/fthistory/history3.shtml Crafts and Food] . URL accessed on August 2, 2006.] The products, almost exclusively handicrafts ranging from jute goods to cross-stitch work, were mostly sold by volunteers in 'charity stores' or 'ethnic shops'. The goods themselves had often no other function than to indicate that a donation had been made. [Hockerts, K. (2005). [http://www.oikos-foundation.unisg.ch/homepage/fairtrade.pdf The Fair Trade Story] . p1]

olidarity trade

) to put the emphasis on the establishment of fair trade relations with the developing world. [International Fair Trade Association. (2005). [http://www.ifat.org/fthistory/history2.shtml Where did it all begin?] URL accessed on August 2, 2006.]

The year 1965 saw the creation of the first alternative trading organization (ATO): that year, British NGO Oxfam launched "Helping-by-Selling", a program which later developed into Bridge. The scheme sold imported handicrafts in Oxfam stores in the UK and from mail-order catalogues with a circulation of almost 100,000 copies. The program was created to support the work of cooperatives and community enterprises in the developing world. The program was highly successful: it remained one of the largest and most influential in the sector until it was shut down in 2002. [Scott, Roy. [http://www.onevillage.org/fairtrade-history.htm History of fair trade] ]

In 1969, the first Worldshop opened its doors in the Netherlands. The initiative aimed at bringing the principles of fair trade to the retail sector by selling almost exclusively goods such as handcrafts produced under fair trade terms in “underdeveloped regions”. The first shop was run by volunteers and was so successful that dozens of similar shops soon went into business in the Benelux countries, Germany and in other Western European countries.

Throughout the 1960s and 1970s, important segments of the fair trade movement worked to find markets for products from countries that were excluded from the mainstream trading channels for political reasons. Thousands of volunteers sold coffee from Angola and Nicaragua in Worldshops, in the back of churches, from their homes and from stands in public places, using the products as a vehicle to deliver their message: give disadvantaged producers in developing countries a fair chance on the world’s market, and you support their self-determined sustainable development. The alternative trade movement blossomed, if not in sales, then at least in terms of dozens of ATOs being established on both sides of the Atlantic, of scores of Worldshops being set up, and of well-organized actions and campaigns attacking exploitation and foreign domination, and promoting the ideals of Nelson Mandela, Julius Nyerere and the Nicaraguan Sandinistas: the right to independence and self-determination, to equitable access to the world’s markets and consumers.

Handcrafts vs. agricultural goods

prices on poor producers. Many then believed it was the movement's responsibility to address the issue and to find innovative remedies to address the ongoing crisis in the industry.

In the subsequent years, fair trade agricultural commodities played an important role in the growth of many ATOs: successful on the market, they offered a renewable source of income for producers and provided Alternative Trading Organizations the perfect substitute to the stagnating handicrafts market. The first fair trade agricultural products were tea and coffee, quickly followed by dried fruits, cocoa, sugar, fruit juices, rice, spices and nuts. Coffee quickly became the main growth engine behind fair trade: between 25 to 50 % of the total alternative trading organization turnover in 2005 came from coffee sales. [International Fair Trade Association. (2005). [http://www.ifat.org/fthistory/history4.shtml Market Access and Fair Trade Labeling] . URL accessed on August 2, 2006.]

While in 1992, a sales value ratio of 80 % handcrafts to 20 % agricultural goods was the norm, in 2002 handcrafts amounted to 25.4 % of sales while commodity food lines were up at 69.4 %. [Nicholls, A. & Opal, C. (2004). Fair Trade: Market-Driven Ethical Consumption. London: Sage Publications.] The transition to agricultural commodities was further highlighted in 2002, when Oxfam decided to abandon its loss-making handcrafts trading program after 27 years of existence. Oxfam’s move had significant consequences on the entire fair trade movement. Some ATOs saw this as an opportunity to restructure and partner up with mainstream businesses in an effort to find economic efficiencies and broaden their appeal, while others (such as Alternativ Handel in Norway), unable to adjust to the market and plagued by financial difficulties, were forced to close.

Today, many ATOs still sell exclusively handcrafts - which they judge culturally and economically preferable to agricultural commodities. While these are still considered fair trade flagship products, academics have described them as a niche market that now only appeals to relatively small segments of the population, mostly fair trade core supporters who buy products on the basis of the story behind the product. [Redfern A. & Snedker P. (2002) [http://www.ilo.org/dyn/empent/docs/F1057768373/WP30-2002.pdf Creating Market Opportunities for Small Enterprises: Experiences of the Fair Trade Movement] . International Labor Office. p6]

Rise of labelling initiatives

"Note: Customary spelling of Fairtrade is one word when referring to product labelling" Sales of fair trade products however only really took off with the arrival of the first Fairtrade labelling initiatives. Although buoyed by ever growing sales, fair trade had been generally contained to relatively small Worldshops scattered across Europe and to a lesser extent, North America. Some felt that these shops were too disconnected from the rhythm and the lifestyle of contemporary developed societies. The inconvenience of going to them to buy only a product or two was too high even for the most dedicated customers. The only way to increase sale opportunities was to start offering fair trade products where consumers normally shop, in large distribution channels. [Renard, M.-C., (2003). Fair Trade: quality, market and conventions. Journal of Rural Studies, 19, 87-96.] The problem was to find a way to expand distribution without compromising consumer trust in fair trade products and in their origins.

A solution was found in 1988, when the first Fairtrade label, Max Havelaar, was launched under the initiative of Nico Roozen, Frans van der Hoff and Dutch ecumenical development agency Solidaridad. The independent certification allowed the goods to be sold outside the worldshops and into the mainstream, reaching a larger consumer segment and boosting fair trade sales significantly. The labeling initiative also allowed customers and distributors alike to track the origin of the goods to confirm that the products were really benefiting the producers at the end of the supply chain. [Redfern A. & Snedker P. (2002) [http://www.ilo.org/dyn/empent/docs/F1057768373/WP30-2002.pdf Creating Market Opportunities for Small Enterprises: Experiences of the Fair Trade Movement] . International Labor Office. p7]

On the producer end, the Max Havelaar initiative offered disadvantaged producers following various social and environmental standards a fair price, significantly above the market price, for their crop. The coffee, originating from the UCIRI cooperative in Mexico, was imported by Dutch company Van Weely, roasted by Neuteboom, sold directly to world shops and, for the first time, to mainstream retailers across the Netherlands.

The initiative was groundbreaking as for the first time Fairtrade coffee was sold in supermarkets and mass-retailers, therefore reaching a larger consumer segment. Fairtrade labelling also allowed consumers and distributors alike to track the origin of the goods to confirm that the products were really benefiting the farmers at the end of the supply chain.The initiative was a great success and was replicated in several other markets: in the ensuing years, similar non-profit Fairtrade labelling organizations were set up in other European countries and North America, called “Max Havelaar” (in Belgium, Switzerland, Denmark, Norway and France), “Transfair” (in Germany, Austria, Luxemburg, Italy, the United States, Canada and Japan), or carrying a national name: “Fairtrade Mark” in the UK and Ireland, “Rättvisemärkt” in Sweden, and "Reilu Kauppa" in Finland. Initially, the Max Havelaars and the Transfairs each had their own Fairtrade standards, product committees and monitoring systems. In 1994, a process of convergence among the labelling organizations – or “LIs” (for “Labelling Initiatives”) – started with the establishment of a TransMax working group, culminating in 1997 in the creation of Fairtrade Labelling Organizations International. FLO is an umbrella organization whose mission is to set the Fairtrade standards, support, inspect and certify disadvantaged producers and harmonize the Fairtrade message across the movement.

In 2002, FLO launched a new International Fairtrade Certification Mark. The goals of the launch were to improve the visibility of the Mark on supermarket shelves, facilitate cross border trade and simplify export procedures for both producers and exporters.

The Fairtrade Certification Mark harmonization process is still under way – today, all but two Labelling Initiatives (namely Transfair USA & TransFair Canada) have adopted the new International Fairtrade Certification Mark. Full transition to the new Fairtrade Mark should become reality as it gradually replaces the old certification marks at various speeds in various countries.

In January 2004, Fairtrade Labelling Organizations International was divided into two independent organizations: FLO International, which sets Fairtrade standards and provides producer business support, and FLO-CERT, which inspects and certifies producer organizations. The aim of the split was to ensure the impartiality, the independence of the certification process and compliance with ISO 65 standards for product certification bodies.

At present, over 20 Labelling Initiatives are members of FLO International. There are now Fairtrade Certification Marks on dozens of different products, based on FLO’s certification for coffee, tea, rice, bananas, mangoes, cocoa, cotton, sugar, honey, fruit juices, nuts, fresh fruit, quinoa, herbs and spices, wine and footballs etc.

IFAT and the FTO Mark

In an effort to complement the Fairtrade certification system and allow for example handcraft producers to also sell their products outside worldshops, the International Fair Trade Association (IFAT) launched in 2004 a new Mark to identify fair trade organizations (as opposed to products in the case of Fairtrade). Called the FTO Mark, it allows consumers to recognize registered Fair Trade Organizations worldwide and guarantees that standards are being implemented regarding working conditions, wages, child labour and the environment.

The FTO Mark gave for the first time Fair Trade Organizations (including handcrafts producers) definable recognition amongst consumers, existing and new business partners, governments and donors.

Fair trade today

Global fair trade sales have soared over the past decade. The increase has been particularly spectacular among Fairtrade labelled goods: In 2007, Fair trade certified sales amounted to approximately €2.3 billion (US $3.62 billion) worldwide, a 47% year-to-year increase. [Fairtrade Labelling Organizations International (2008). http://www.fairtrade.net/single_view.html?&cHash=d6f2e27d2c&tx_ttnews [backPid] =104&tx_ttnews [tt_news] =41. URL accessed on May 23, 2008.] As per December 2006, 569 producer organizations in 58 developing countries were FLO-CERT Fairtrade certified and over 150 were IFAT registered.. [Fairtrade Labelling Organizations International (2007). www.fairtrade.net. URL accessed on May 24, 2007.] [IFAT. (2006) [http://www.ifat.org/theftomark.shtml The FTO Mark] . URL accessed on October 30, 2006.]

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