Fair or free trade - the facts

New Internationalist, April, 2000

Free trade is nothing of the sort -- it enslaves a relatively weak and powerless majority to world markets that are controlled by a small, rich and powerful minority. Fair trade shows that there are alternatives.

Fair trade

The fair-trade movement began with craft and `solidarity' products -- like Nicaraguan coffee. In recent years food products sold through conventional retail outlets have increased in importance. Fair trade in industrially manufactured products, like toys or footwear, has yet to begin.

Who's involved

In 1997 Fairtrade Labelling Organizations International (FLO) brought together all the major national labels selling through conventional outlets, to harmonize criteria. By the end of 1999 fair-trade producers on the FLO Register included the following:

Fairtrade food products(1)

BANANAS 6 co-ops & 2 plantations in Colombia, Costa Rica, the Dominican Republic, Ecuador and Ghana.

COCOA 7 co-ops in Belize, Bolivia, Cameroon, Costa Rica, the Dominican Republic, Ecuador and Ghana.

COFFEE 181 co-ops in Central America & the Caribbean (126), S America (41), Asia (3) and Africa (11).

HONEY 23 co-ops in Mexico, Guatemala, Chile, Nicaragua, Uruguay, Vietnam and Tanzania.

ORANGE JUICE 4 co-ops in Brazil and Mexico.

SUGAR 6 co-ops in Costa Rica, Philippines, Paraguay, Ecuador and the Dominican Republic.

TEA 7 co-ops & 37 plantations in India, Sri Lanka, Nepal, Vietnam, Tanzania, Zimbabwe, Uganda and the Seychelles.

How much

There are as yet no reliable figures showing all the fair trade there is worldwide, or how much it is growing. Many fair-trade products are sold through alternative trading organizations (ATOs). A recent survey of just 30 buyer and 84 producer organizations revealed:(8)

Sales 1998-99: $138 million

Number of buyer staff: 355 men, 605 women

Number of Southern partner organizations: 1,414

Number of producer-organization staff (47 organizations): 567 men, 655 women; working with 31,892 men and 84,048 women producers whose average monthly wage was $89 for men and $66 for women

Benefits of fair trade identified in a survey of 43 producer organizations:

*Training (technical, quality control etc): 61%

*Healthcare/medical allowance: 35%

*Product development: 26%

*Loans (for raw materials, equipment etc): 23%

*Organizational development: 21%

*Annual profit sharing: 19%

*Insurance protection: 19%

*Production bonus: 19%

Free trade

Multinational corporations are responsible for two-thirds of world trade -- and half of this is between different parts of the same corporation.

Unfair shares

The value of a product, in terms of its final price, is added to as it passes through the market to the consumer. Free trade concentrates this value in the hands of rich corporate merchants, processors and retailers in the North. Producers in the South are paid only a tiny part of the final price.

Prime cut

Many of the poorest Southern countries still depend on the age-old pattern of exporting basic raw materials to the North. The prices of these `primary commodities' have been falling sharply -- not least because Southern debt has forced producers to export more and more, creating a glut on world markets. Prices also fluctuate wildly -- coffee is a good example -- in part because of speculation by Northern traders.

Terms of trade

When the price of exports falls against the price of imports, the `terms of trade' are said to have deteriorated -- and incomes fall too. In Africa, some of the world's poorest countries have been feeling the effects.

Unequal exchange

A few large corporations dominate most of the markets where fair-trade products are sold.

(1) FLO Information no 1, October 1999. (2) New Internationalist 271. (3) New Internationalist 304. Note that the `brand' percentage refers here to Green and Black's fair-trade chocolate: in the conventional trade, the share of farmers is even smaller, and of the `brand' considerably larger. (4) New Internationalist 317. (5) New Internationalist 302. (6) Trade and Development Report 1999, UNCTAD. (7) Human Development Report 1999, UNDP. (8) IFAT, September 1999. The survey is based on responses from 30 out of a total 56 Northern buyers, and 48 out of a total 84 Southern producers.