The Fair Trade movement is rapidly becoming an emerging and dynamic strength to respond to the negative influence of globalization, or rather, to the contemporary international trade injustice. While on the other hand, there is criticism on fair trade, claiming that fair trade is not fair and it goes against free market theory. This term paper aims at introducing the development of fair trade, justifying its economical and ethical significance on the international trade and production chain, and also reflecting on its limitations from different respective.
The term paper is structured starting from conceptual framework, which focuses on defining the term of “fair trade”, introducing the related international organizations, and a brief overview of its current development. And then, the paper takes a close look at how fair trade functions under its own standards and price system. Furthermore, both the benefits and criticism of fair trade on producers, consumers and the intermediary are discussed, finally the conclusion is defined that fair trade is an effective marketing exercise but is not the mainstream market model.
Although there is no universally accepted definition of fair trade, Fair trade Labelling Organisations International (FLO) most commonly refer to a definition developed by FINE, an informal association of four international fair trade networks (Fair trade Labelling Organizations International, World Fair Trade Organization - formerly International Fair Trade Association, Network of European Worldshops and European Fair Trade Association): fair trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair trade organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade (FINE, 2001).
Sushil Mohan (2010) also defines Fair Trade as “an organized social movement which promotes environmental and labor standards and social policy objectives in areas related to the production and trading of Fair Trade labeled and unlabelled goods”.
By comparing the two definitions, it should be noted that the former one explicitly mentions political and ethical objectives. Besides, it’s crucial to know that the fair trade movement is not involved directly in commodity production or trade, but rather it provides producers and workers with particular forms of market structure and contractual terms that bring benefits to them. And also, it focuses in particular on exports from developing countries to developed countries.
During the past 50 years, the mainstreaming of fair trade product catalog goes beyond traditional products such as coffee, cocoa, tea, handicrafts, honey, etc. Fair trade is making inroads into other commodities as well. These new products include minor food items (quinoa), perishable fruits and vegetables (bananas, fruits, vegetables, nuts and seeds and horticultural produce), processed products (juices, wine, beer, chocolate, rice and sugar) and non-food products (Sushil Mohan, 2010, p. 23).
In 2009, fair trade certified sales amounted to approximately 73.4 billion (about ￡2.8 billion) worldwide, produced by over 1.2 million producers and workers; producers also benefited from pre-financing of around 7100 million (￡83 million) (FLO, 2009). The table below (FLO, 2009) shows the level and growth in the sales of a sample of main fair trade products from 2004 to the end of 2009.
Table 1 Growth in sales of some fair trade products, 2004–09 |2004 |2005 |2006 |2007 |2008 |2009 | |Coffee sales in metric tonnes |24.22 |33.99 |52.06...