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What does "fair trade" mean? You won't find one single answer. Here we look at the market profile of fair trade - the players, controversies, benefits and drawbacks.
Fair trade in international commerce has two distinct meanings. In trade negotiations, the term is used broadly to argue that subsidies and disguised barriers skew the global trade system against developing countries and commodity producers. Former World Bank chief economist and Nobel Prize winner Joseph Stiglitz, for example, argues for "fair trade for all" in the context of the latest WTO round of trade liberalization, the Doha Development Agenda.
Small share, big voice
Meanwhile, small farmers in developing countries who produce some of the world's favourite fruit and beverages still find themselves getting pennies for products that sell for several dollars in the rich world's supermarkets. Even worse, their income fluctuates violently from season to season, sometimes from day to day, depending on commodity prices. Striving against other producers to keep up their revenues when prices are dropping can lead to collective impoverishment across the globe.
This is where the other, more famous fair trade movement comes in. Unofficially reaching the age of 60 this year, this labelling, marketing and advocacy initiative seeks to ensure that producers in developing countries receive more of the profits from the price paid by consumers. This article tries to put the alternative fair trade movement into its trade development context.
Fair trade often pays the producers one-quarter to one-third more than they can get on the open market. But only Fairtrade-labelled products - that is, those certified by Fairtrade Labelling Organizations (FLO) International - imply agreement on a minimum price. Most alternative fair trade agreements speak only of giving producers an unspecified "fair price" for their products to provide a living wage and sustainable costs of production (Fair Trade in Europe 2005).
Sales through this new channel still represent less than 0.1% of all goods traded internationally, according to the United States-based Fair Trade Federation.
So can this trade have a major impact? Will it survive competition from bigger players? The European-centred FLO points out: "Fair trade products [i.e., from all the alternative fair trade bodies] can now be found in 55,000 supermarkets all over Europe and the market...