Fair trade

Last updated: June 18, 2010.

Everyone likes a bargain, but you have to wonder about a T-shirt that costs only five dollars. How is it possible for someone to grow the cotton, harvest it, make it into a shirt, transport it, sell it on to a retailer, and still make a profit for a price like that? The answer should be blindingly obvious, but we choose to ignore it. Cut-price clothes and food are all too often produced by exploiting people in developing countries, who make the cheap goods we've come to love by working long hours for low pay, often in appalling conditions. We try not to put up with this in our countries, but when the label says "Made in India" or "Made in Chile", we conveniently push it to the back of our minds. Fortunately, many people are waking up to the basic unfairness of world trade and demanding a better deal for the people who do our dirty work. It's called "fair trade". Let's find out why it's important and how it works.

Photo: Fair trade coffee (left) and tea (right) sold by The Co-operative, one of the UK's leading fair trade retailers.

Bargain... or exploitation?

It's easy to find cheap goods on Main Street, but finding out why they cost so little isn't always so easy:

• How about that cotton T-shirt you just bought for $5? Oxfam tells us: "A typical cotton producing household in West Africa has about 10 family members, an average life expectancy of about 48 years and an adult literacy rate of less than 25 percent. Cotton is often the only source of cash income for these families who live on less than $1 a day per person." [1]
• What about the oranges from Chile you just put in your basket? Oxfam again: "In the fruit-picking sector, 75% of women work more than 60 hours a week in season, on temporary contracts, and a third of them do not earn even the minimum wage." [2]
• Maybe you fancy a nice bunch of cut flowers for your mom? Co-op America tells us that over two thirds of American flowers are imported, typically from countries where cheap labor and poor regulation of toxic pesticides is commonplace: "In Ecuador, nearly 60% of flower workers surveyed showed poisoning symptoms, including headaches, dizziness, trembling hands and blurred vision." And these are some of the less extreme examples, before we even start talking about child labor and sweatshops. [3]

Why do we put up with this kind of thing? According to Co-op America, the answer is obvious: "Ultimately, sweatshops exist because the human links of the supply chain are hidden from us when we shop. If working conditions at producer factories were visible to consumers at the point of purchase, it would be harder to convince shoppers that cheaper goods are worth the price of worker abuse." [4]

That's another way of saying "out of sight, out of mind."

Photo: Brands like NO SWEAT are thriving by rejecting unfair, sweatshop labor. Unlike some footwear brands, these popular sneakers are made by trade-union members who earn a decent wage and work in good conditions.

Why "free trade" often means "unfair trade"

Globalization—the tendency of companies to treat the world as one giant kingdom of potential profit, without all those pesky borders—is largely to blame. If a company can sew its jeans in Honduras for a fraction the price it can do it in Chicago, the decision to outsource is a no-brainer. And if competitors have already packed their factory bags and cut their costs, and you hold out for "Made in the USA" and higher prices, guess where your business might be heading?

"Free trade" is a part of globalization and it sounds great in theory: if we removed all barriers to trade, such as import tariffs (the taxes companies have to pay to get their goods into another country and sell them there), all countries could compete on a level playing field—and what could be fairer than that? In practice, it doesn't work out quite like that. Some countries are inevitably far more powerful than others and they want things to stay that way. Even while promoting "free trade", they use all kinds of tactics to ensure some they can trade more freely than other people.

You might have heard of a practice called dumping? That's where an industrialized country subsidizes production of finished goods, which it then exports to a developing country at a price that's lower than the goods the developing country can produce at home. The developing country has to cut the prices of its own goods to a level that makes it impossible for poorer people to support themselves. Another tactic is for rich countries to impose high tariffs on finished goods but low tariffs on basic, raw materials. That gives poorer countries no option but to export raw materials: they can't turn those materials into high-value finished goods themselves because they won't be able to export them. The rich countries import the low-value, raw materials, make them into high-value finished goods wherever it suits them, then export the finished goods back to the poor countries. Practices like this mean "free trade" is all too often a synonym for "unfair trade". (You can read more about the rigged rules of free trade on Oxfam's Trade campaign website.)

According to advocates of globalization, free trade has brought greater wealth to people in poorer nations, giving them a foothold on the ladder of progress and prosperity. On that view, wealth gradually "trickles down" society from the richest to the poorest, making everyone's lives better in the long run. The trouble is that very often it doesn't. Big corporations haven't outsourced their operations to low-wage economies in developing countries through any desire to alleviate poverty; they've done it to keep prices down and compete in a marketplace where everyone else is outsourcing too. Now there are many good examples of companies working respectfully with partners in developing countries, providing fair prices that help communities gain access to such vital things as education and basic healthcare. But there are many more corporations supporting a shadowy world of sweatshops, where working conditions are appalling and wages are too little to meet even basic daily needs, never mind climb out of poverty. Unchecked, globalization swiftly becomes a "race to the bottom." If "trickle-down" theory works, why are so many of the world's people still in poverty?

What is fair trade?

Photo: Fair trade goods have to be properly labelled through a recognized licensing scheme such as the FAIRTRADE mark, licensed by the Fairtrade Foundation.

Fair trade is a different system that starts from the premise that workers lives have a value; this social benefit is partly what you pay for when you buy something. Fair trade doesn't just means farmers and producers receive more money so they can support their families in the short term—though that's vitally important. It also means they work under long-term contracts so their communities have enough security to invest in improvements both to their businesses (with more land or animals or better machinery) and their societies (with things like schools or health clinics). Typically, fair-trade producers are small cooperatives of workers using no child or forced labor, using organic or environmentally sustainable methods, and having high standards of animal welfare. Workers are free to join unions and bargain collectively to help improve their lives. Typically, fair trade producers sign up to some sort of labelling scheme that guarantees things have been made under good conditions. You can read some typical standards from the Fairtrade Labelling Organizations and from OneVillage (a UK-based retailer of artisan goods from developing countries and a long-established pioneer of fairer trade).

Is fair trade as good as it seems?

Fair trade sounds brilliant—and it's now very big business. In the UK alone, annual sales of fairtrade products topped half a billion pounds (one billion dollars) in 2008 [8]. Between 2006 and 2007, the UK saw a massive, 127% growth in volume of fairtrade coffee (+33%), tea (+21%), wine (+47%), and flowers (+71%) [9]. But fair trade is not without its drawbacks. One obvious problem is that fairly traded goods can cost significantly more; though the difference between a fair-trade candy bar and an ordinary one is often marginal, fair-trade clothes or household items can be significantly more expensive than goods traded in the usual way. Many people, especially those struggling on low incomes, cannot afford to pay the difference—which is perhaps a bit ironic: if fair trade really is purporting to help poorer people and make the world more equitable, shouldn't it be aiming to help poorer consumers as well as poorer producers? Do we care about poverty in our own countries?

Unless it reaches mass markets, there's a danger that fair trade remains a token gesture, more about making middle-class, liberal-leaning consumers feel less guilty than about fundamentally reforming the relationships between producers and consumers. If you return home from the store with a bag of fair-trade coffee in your shopping, and feel good about it, maybe you won't worry that the other 99 percent of your shopping has been produced by dubious, unfair trade practices? While some grocery stores (such as the UK's Co-op) have embraced fair trade in a very big way, and apparently quite sincerely, others have used it to suggest they're perhaps more ethical than they really are.

There's little doubt that the term "fair trade" can be hijacked and used cynically. One often-cited problem of the UK Fair trade symbol is that it certifies only raw materials and not finished goods. You can buy a T-shirt made from fair-trade cotton that could, in theory, have been made into a finished article in a sweatshop. There's nothing to stop the manufacturer advertising this as an ethical shirt and branding it with a fair-trade logo. According to Mark Engler, writing on sweatshops for New Internationalist: "Consumers who think they are choosing an ethically untainted product might actually be buying clothing sewn with child labour or finished in a dangerous overheated factory."[6]

It's for reasons like this that OneVillage, a pioneering UK retailer of artisan-made items, shuns the term fair trade altogether. According to founder Roy Scott: "There remains an enormous discrepancy between pay, conditions, and opportunity that Europeans would regard as acceptable, compared with those of the producers of most products being bought. Claims of 'fair trade' are therefore inaccurate and misleading. To say 'This is fair trade' to such workers whose pay is insufficient to enjoy an adequate quality of life—or is grossly out of step with those of the owners of the businesses in which they work, or those of the buyers—to claim and say 'This is fair' is shocking and in itself a great injustice." [7]

OneVillage promotes its products as a step "towards fairer trade"; ultimately, that's perhaps the only honest approach. Buying fair-trade products is almost always preferable to buying (implicitly unfair) alternatives, but it's only a starting point. Trade is about long-term relationships, not just between producers and consumers but between entire countries and regions of the world. Achieving truly fair trade means seeing the world in a different way, as a planet of partnership and mutual prosperity rather than plunder and exploitation. Fair trade is not about paying 50 cents more for your coffee; it's about caring for your "neighbors"—even when they're on the other side of the world.

Further reading

Fair trade advocates and campaigns

Want to find out more about fair trade? These campaign groups and organizations are worth a visit:

• Behind the Label: Probes the activities of well-known companies producing branded goods.
• Co-op America: Runs a campaign to end sweatshops throughout the world.
• Fairtrade Foundation: An organization that certifies fair trade products in the UK and raises awareness of fair trade issues.
• Fairtrade Labelling Organizations International: Fairtrade labelling standards around the world.
• Global Exchange: Building fairer links across the world.
• No Sweat: Retailer of footwear and clothing made by workers in decent conditions.
• Oxfam Trade Campaign: UK based aid and development agency campaigning for fair trade.
• Traidcraft: Christian fair trade organization based in the UK.

Criticisms of fair trade

• OneVillage: UK-based pioneer of artisan-made craft goods produced through fairer trade. Website includes a discussion of whether fair trade is always as fair as it seems.
• Fair Trade for who? A counter view to the Fair Trade Debate: A thoughtful look at the world of fair trade coffee from Stephen Leighton of Has Bean Coffee.
• You Ask, They Answer: TraidCraft: The Christian trading organization answers direct questions about fair trade posed by concerned Guardian readers.
• Wake up and smell the biodynamic coffee: Andrew Purvis explores Floresta Coffee and suggests direct trade between consumers and producers can be a better model than fair trade.
• How fair trade can work out unfair: Riverford's Guy Watson presents a short audio slideshow describing a trip to see fair trade fruit growers in Togo. He explains how the community was let down badly when the market for their products collapsed (because it was cheaper for big buyers to get their "fair trade" bananas from Costa Rica).

In defense of free trade

Is free trade really such a bad thing? These advocates argue not:

• The argument for free trade, BBC News, February 2003: A short summary of how free trade brings benefits to the world.
• Globalization and Developing Countries, by Aaron Lukas, Cato Institute: A robust defense of the benefits of free trade: "From rising wages to improved working conditions, the competition and cooperation that accompany liberalization are proving to be powerful forces for good."
• In Defense of Globalization, Free-Trade and Free-Market, by David Storobin, Mercy Corps/Global Envision
• Is fairtrade really fair by Sameh El-Shahat, The Telegraph, September 2008: Argues that "fairtrade is totally unfair, keeping Africa poorer while keeping our conscience clearer".

News articles

• Embroidered T-shirt. Price: £4. Cost: Misery, BBC News Magazine, June 2008: How child labor helps retailers to keep prices down.
• Inside China's sweatshops, by Lucy Ash, BBC News, July 2002: Exploring the problem of cheap labour in China.
• Spotlight on Indonesian sweatshops, BBC News, March 2002: The hidden misery behind the goods we love.
• I was wrong about trade by George Monbiot, The Guardian, June 2003: How free trade can become fairer trade.

References

1. Reform of US cotton subsidies could feed, educate millions in poor west African countries, Oxfam International press release 22 June 2007
2. Chilean fruit-picking workers' story, Oxfam International campaign page
3. Fair trade: Flowers, Co-op America
4. Guide to Ending sweatshops, Co-op America (PDF file)
5. Sweatshops: What to know, Co-op America briefing
6. Sweating over sweatshops, Mark Engler, New Internationalist, November 2006
7. "Fair trade: At least that's what they say", OneVillage.org.
8. Fairtrade sales reach half a billion pounds, Fairtrade foundation press release, 25 Feb 2008
9. Facts and figures on Fairtrade, Fairtrade foundation