What is Fair Trade and Why is it Important?

In every developing country that has embraced the free market economy and entered the World Trade Organization (WTO), the first hit and hardest hit by the changes that follow are the rural communities. Changes result from economic restructuring policies required to join the WTO which emphasize the removal of state protections and safeguards of local industry and agricultural sectors parallel to the privatization of government sponsored social services. The result has been detrimental to rural communities around the world.

One of the most notable ways in which rural communities are harmed in entering the free market economy is the removal of state protections of the agricultural sector and state sponsored industries. 

When the state protections of a sector are removed a community suddenly finds itself facing challenges it never faced before. Instead of a community working together for a common goal of sustainable local livelihoods with an ability to maintain natural resources for the collective good, individuals are pitched against each other in an attempt to get ahead for private gains. Privatization of publicly owned or operated sectors encourages competition against one another rather than working together for the common good. Frequently this leads to an unfair advantage and favoritism for those who are politically connected or have access to finances in order to own and cash-in on what were once community resources. This quickly depletes natural resources  of a community with complete disregard for the environmental, communal and social consequences, just to name a few.  

A prime example of area adversely affected by the removal of state protections is in handicraft villages throughout Asia. Households find themselves competing to produce more crafts and accept lower and lower payment for their labors because they are now competing against each other rather than working together. This trend leads to the impoverishment of entire handicraft-centered communities – the cultural gems of countries like Vietnam and Thailand.  

Here is how it works: the low prices crafts-persons receive for handicraft products are dictated by outside agents and there is no room for negotiation in the take-it-or-leave-it offer presented to a household. Like the coffee farmers around the world, there are multiple layers of middlemen between the crafts-person and  the  exporter, all of whom are squeezing a profit out of their labors while the laborer lives at a subsistence level. In my work in Vietnam, I found 7 - 12 layers of middlemen between the producer and the exporter. Simply stated, at the lowest level in the value chain if they don’t accept what is offered they may lose their only income opportunity. Again, these moves only divide communities and destroy what were once sustainable community livelihoods; and handicraft villages are amongst the most vulnerable.  

Furthermore, there is frequently a gender-based discrimination that exists in much of the handicraft production. Most of the labor in processing and preparation of materials to make a handicraft goes unrecognized and unpaid because these are considered the labors of women in a household. Simply stated, it becomes a gender role. Just as housework and child rearing is all-too-often not regarded as "labor" despite the demands faced, a woman's work in support of craftsman frequently goes unpaid. 

Forming a local co-operative or community association based on Fair Trade principles addresses these gender disparities and unites a community of craftsmen and craftswomen from being disadvantaged in the local and global marketplace.

Click here: Whose Trade
by Lori
Wallach and Patrick Woodall

Fair Trade presents a social awareness not seen in the neo-liberal theories of  trade emphasized in the World Trade Organization (WTO) or in the economic reform packages forced on developing nations in the  Structural Adjustment Programs of the IMF and World Bank. There is much to be said about the disastrous effects of narrowly focused vested interests of international bankers in developing nations with development projects that primarily benefit the established elite. However, Fair Trade Advocates also need to understand the equally destructive World Trade Organization (WTO). A highly recommended and reasonably priced resource is Whose Trade Organization by Lori Wallach and Patrick Woodall. This publication by Public Citizen (http://www.citizen.org/) is a well researched, comprehensive analysis of the organization, its function, and the secretive closed-door court system which enforces international trade policies formed by Western governments in collaboration with the Multi-National Corporatocracy. 
The World Fair Trade Organization (WFTO) with a global network of Fair Trade Organizations with members in over 70 countries, has established ten principle standards a Fair Trade organization must follow. In addition, a Fair Trade Organization is required to contribute to their communities in a manner that addresses their specific social needs.

10 Principles of Fair Trade - Updated June, 2011
WFTO 10 Fair Trade Principles June2011-2

(For the WFTO Fair Trade Principles in Spanish, see below)

What does the Fair Trade look like at the local level?

Local Fair Trade Organizations in "developing nations" each have a unique shape and serve in a variety of functions. No two are identical. Organizations, co-operatives, and producers work together and benefit in ways that differ from others according to their particular community needs.  Each Fair Trade Organization is unique!

· Some Fair Trade Organizations focus on community development programs, the empowerment of the people through skills training and programs designed to enhance local integration and participation
· Other Fair Trade Organizations simply act as marketers for handicrafts they collect from villages to free producers of the hassle of finding buyers and markets, and allow them to focus on their primary sources of income, such as agriculture.
· Some Fair Trade organizations have producers who depend 100% on the revenues they generate from the sale of their products
· Most organizations use the income generated from handicraft and textile production to supplement other forms of income generation

Local Fair Trade Organizations are formed according to the needs of the community it serves.  In order to ensure social sustainability, the community must work together to form the unique aspects of the organization.  Success of a local co-operative or community association depends on the direct involvement of community members in the forming stages. With appropriate facilitation and orchestration with various stakeholders, it is possible to create a community-based farmers co-operative or association of craftsmen and craftswomen to address many of the economic and social challenges the community currently face and the prepare for the unforeseen challenges in the years to come.

How does Fair Trade Address the Real Needs of a Community?

A few examples of where Fair Trade Organizations step in to address the social and livelihood needs of a community are:

· Utilizing the proceeds from the co-operative to provide adequate education for their children by sponsoring schools or school programs
· Developing community centers, women’s health care clinics, training centers or libraries
· Addressing social issues such as
o   supporting a community-based childcare center
o   providing for healthy school lunches and after school child development programs
o   support a home for victims of domestic abuse
o   or as one cooperative in India addresses the cultural issue surrounding the payment of an expensive dowry for a young bride, the organization provides the dowry for the daughters born to cooperative members who may otherwise abort the female fetus out of future economic concerns
· Providing an economic opportunity in a refugee camp where opportunities are few and outright physical or sexual exploitation is the only other opportunity afforded them outside the camp where they face great risk of deportation if captured by the immigration authorities
· As a community, intervening in market fluctuations of raw material availability and prices by purchasing in bulk at fair prices
· In communities too poor to borrow from banks, they establish community savings plans and provide low interest micro-finance programs for their members. In cases of emergency, they provide 0% interest funds for families in need

Essentially local Fair Trade Organizations are made of community members who define their community needs and identify the means to address those needs, by  creating  development projects and supporting local activities to better their community. 

Mitch Teberg, MA © 2007
For those who prefer reading black on white, here is the downloadable PDF format: 
What is Fair Trade and Why It is Important

Los Diez Principios Comercio Justo June2011