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1 WHAT IS FAIR TRADE

By James Robinson,2014-03-22 06:50
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Work with marketing chains facilitation of market linkages, setting up of alternative marketing chains, consultancy on ethical issues, advocacy,

1: WHAT IS FAIR TRADE? AIMS, TYPES OF INTERVENTION AND

    STAKEHOLDERS

    Impact assessment of Fair Trade is potentially more contentious than many other areas of enterprise development. A summary of commonly agreed aims, types of intervention and stakeholders is given in Box 2. The commitment to ethical aims raises a number of difficult and inherent challenges:

    ; The very breadth of the aims, the range of different levels of project and policy intervention and the number of different stakeholders involved make any blueprint for impact assessment inevitably problematic.

    ; As with impact assessments of other types of intervention there are inevitably sensitivities about the implications of findings for funding, and hence the danger of IAs being seen as a policing rather than a learning function.

    ; In Fair Trade there are also commercial implications in view of the increasing competition between Fair Trade organizations and the private commercial sector on ethical credentials and market share.

    ; Given the aims of Fair Trade, stakeholder participation is an essential part of all stages of the impact assessment.

    It is particularly crucial that impact assessments are well planned in relation to the aims, activities and capacities of the organisations concerned. It is also essential that the findings are analysed in relation to contextual opportunities and constraints offered by the relevant markets, economic and social and political environments.

1.1 AIMS OF FAIR TRADE

    The most widely agreed definition of Fair Trade is that of the umbrella organization FINE (See above, Footnote 3 and Box 1). FINE has agreed six underlying principles to which Fair Trade Organisations should aspire. IFAT (International Federation for Alternative Trade) has also established broad principles for its members and FLO (Fair Trade Labelling Organisations International) stipulates precise benefits and prices to producers for those wishing to qualify for Fair Trade labels in specific commodities (See Appendix 2).

    The underlying understanding in Fair Trade is that the ways in which international, national and local markets are structured has critical implications for people's livelihoods. This means that economic growth in itself is not necessarily sufficient for poverty reduction. Fair Trade is not a critique of private sector enterprises per se,

    some of which may already be operating ethically or attempting to do so. Rather it is a critique of the structures and systems governing market relations which may increase poverty, social injustice and harm the environment. It is based on

    convincing critiques of free market theory which have demonstrated that markets as they currently operate are frequently either:

    ; 'unfair ' in that the pre-existing poverty and disadvantage of particular groups of producers (entrepreneurs or workers) leads to inequalities in the market distribution of costs and benefits

and/or

    ; ‘imperfect’ because particular groups of disadvantaged producers lack information, skills, networks or resources to fully participate in existing markets or develop new ones.

    The aim is therefore to address these inequalities and imperfections through intervening at different points of the supply and marketing chain and promoting an enabling environment within which all enterprises can operate according to ethical 1principles.

    However merely labelling an intervention ' Fair Trade ' or ' ethical ' does not guarantee that it is fulfilling its stated aims.

    ; The ethical claims of Fair Trade Organisations (FTOs) are now increasingly contested by their market competitors.

    ; The types of intervention which have greatest impact in some market or social contexts may not be the most effective in others.

    ; Interventions will affect different stakeholders in different ways and there may be conflicts of interest.

    ; Despite potential benefits of ethical practice to business growth, there may in some cases be trade-offs between different aims e.g. between poverty reach and financial sustainability or significant increases in profits, between environmental concerns and producer incomes.

    There are therefore many strategic and practical issues to be addressed in improving current support.

    It is inherent in the aims of Fair Trade that interventions should be assessed by social, political and environmental criteria as well as economic criteria. As discussed in more detail below, this implies combining the criteria of both the sustainable livelihoods approach and human rights approach However although the broad aims of Fair Trade are generally agreed, priorities and precisely how some of the aims are to be translated into practice are somewhat contested. In particular some Southern producers see some of the criteria as Northern impositions by the

     1 For an interesting discussion of the wider context of pro-poor market development see DFID 2000.

    Fair Trade movement and exclusionary and unrealistic for many Southern producers. Other Southern organisations, particularly those which originated as

    grassroots organisations of informal sector or rural workers, are suspicious of any attempts to dilute their underlying objectives. These debates about aims and priorities mean that the criteria and indicators for impact assessment and the ways in which different impacts are to be analysed are inevitably highly sensitive and likely to require careful negotiation.

    BOX 2: WHAT IS FAIR TRADE? AIMS, TYPES OF ORGANIZATION AND LEVELS OF INTERVENTION

     2FINE DEFINITION:

    Fair Trade is an alternative approach to conventional international trade. It is a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning.

AIMS: The FINE principles:

1.To improve the livelihoods and well-being of producers by improving market

    access, strengthening producer organisations, paying a better price and providing continuity in the trading relationship.

2. To promote development opportunities for disadvantaged producers, especially

    women and indigenous people and to protect children from exploitation in the production process.

    3. To raise awareness among consumers of the negative effects on producers of international trade so that they exercise their purchasing power positively.

4.To set an example of partnership in trade through dialogue, transparency and

    respect.

5.To campaign for changes in the rules and practice of conventional international

    trade.

    6.To protect human rights by providing social justice, sound environmental practices and economic security.

TYPES OF ORGANIZATION

    ; Grassroots producer organizations

    ; Fair/Alternative Trade Organizations

    ; Fair Trade labelling and regulatory organizations

LEVELS OF FAIR TRADE INTERVENTION

     2 See Note 2.

; Direct support for producer/employee organizations: technical support and

    BDS, price support, finance, organizational support, gender and environmental planning ; Community level activities: awareness-raising and provision of facilities

    ; Work with marketing chains: facilitation of market linkages, setting up of alternative marketing chains, consultancy on ethical issues, advocacy, networking and consumer-awareness

    ; Work at the macro-level: advocacy, networking and development education

STAKEHOLDERS

    ; micro-level: producers and employees of Fair Trade suppliers and members of their

    households

    ; meso-level: other producers and employees in the same local markets, other members of the same communities

    ; macro-level: other producers and employees in the same national and international

    markets, consumers and others affected by regulatory and policy changes brought about by Fair Trade advocacy

    ; secondary stakeholders: other grassroots organisations and movements,

    entrepreneurs in the private sector, government administrators, donor agencies

1.2 TYPES OF ORGANIZATION

    Fair Trade frequently involves linkages, partnerships and/or networks between a number of different types of organization:

; Grassroots producer organizations of entrepreneurs and/or workers. These

    are usually membership based, including associations of small agricultural producers, small and micro-entrepreneurs, entrepreneurs of differing scale of operation but all complying with fair trade principles, producer-managed co-operatives and Unions of informal sector and home-based workers. These are often linked in federations and networks and may or may not themselves be registered NGOs, co-operatives or other types of legally recognized association.

     3; Fair/Alternative Trade Organizations (FTOs) and networks: includes

    Southern FTOs, Northern FTOs and international partnerships and networks between them, many of which may be registered as one or more named NGOs.

     3; Fair Trade Organizations (FTOs) are called Alternative Trade Organizations (ATOs) in US

    and some other countries. FTOs are also known as the ‘brand model’ whereby fair trade

    products are promoted on the basis of broad principles and a recognizable name rather than

    the labeling model where goods have to comply with specific requirements. A key

    difference between brands and labels is that brands are involved in the trading

    of the commodities sold on a fair trade basis but labelling organisations are not

     they just monitor the trading of others.

     (see discussion in Tallontire 2001).

; Fair Trade labelling and regulatory organizations formed of FTO

    representatives to agree and monitor precise standards to be adhered to by FT products.

    Within each of these categories are organisations with different priorities and governance structures as discussed in more detail in the Case Studies and

    Appendix 1. Some are aiming mainly at increasing the export profits from enterprises in disadvantaged areas and communities, others have much broader commitments to poverty targeting and empowerment. Some are service

    organizations with relatively low client participation in decision-making. Others are democratic, member-owned and member-run organizations. Some organizations are composite organizations with different parts performing different functions and with complementary but different priorities as in the case of Traidcraft plc and Traidcraft Exchange, or Oxfam and Oxfam Fair Trade (See Appendix 1).

    Impact assessments will need to analyse carefully the organizational structures and inter-organizational relationships in identifying the reasons for different types of impact and in drawing practical conclusions. This is even more important with Fair Trade because one of the aims is the strengthening of organizations and improvement of relations between enterprises (See Box 1). In addition many organizations have an explicit commitment to member participation and this is likely therefore to also be one of the criteria for impact assessment.

1.3 LEVELS OF FAIR TRADE INTERVENTION

    Although the focus is on trade, Fair Trade interventions may take place at different levels of the supply and marketing chain. It is necessary to examine the different impacts of these various types of activity before any generalisable conclusions about ‘the impact of Fair Trade’ can be drawn.

FTOs generally combine a number of different types of activity:

; Direct support for producer/employee organizations

    ; technical support and skills training

    ; provision of price support against market fluctuations and/or payment of a premium

    ; Business development services (BDS): advice, training and information for product development and marketing, including brand development

    ; managerial/organizational assistance and training including development of innovative forms of organization and partnerships between producers ; provision of finance to producers or workers for productive investment or to decrease vulnerability and increase their bargaining power

; Work at community level

    ; use of part of profits for community level activities e.g. schools, health centres

    ; local-level awareness raising campaigns around issues like child labour, health and safety, environment

; Intervention in marketing chains

    ; facilitation of market linkages between small-scale producers, wholesale and export markets and/or consumers through BDS or direct purchase and incubating

    newcomers to international trade.

    ; setting up of alternative marketing chains and/or creation of shared ownership of Fair Trade marketing companies and brands involving ethical investors and traders in developed countries and southern producer organisations.

    ; consultancy on ethical issues for large and medium scale enterprises ; advocacy or campaigning for better prices, conditions, trade relations, tariffs etc for producers

    ; networking to develop ethical Codes of Conduct and labelling conditions ; promotion of fair trade consumer markets.

; Work at the macro-level

    ; advocacy for legislation in areas like human rights, child labour, gender equality, rights for informal sector workers

    ; networking to promote fair trade and ethical principles and develop alternative models for the mainstream

    ; development education to raise public awareness of poverty and global inequality

    Different Fair Trade organisations have different emphases. Although many organisations started out from a charitable perspective working with small groups of producers in handicrafts, most are now involved in many different sectors including commodities. Many Southern organizations like SEWA in India and Kuapa Kokoo in Ghana are also involved in grassroots organization of producers into co-operatives and Unions involving thousands of members. Some FTOs aim primarily to link producer groups with existing local and export markets and focus on training and organisational development. Others focus more on setting up alternative marketing structures either to reach niche export markets or to challenge power relations within existing markets. Some organisations only deal with groups and cooperatives with social as well as economic objectives. Others aim primarily to increase sales, employment and incomes through setting up marketing and supply networks between socially-conscious but for-profit intermediaries and larger businesses and small producers.

    Many FTOs or their associated NGOs are now engaged in networking and advocacy to influence macro-level policy (See Appendix 1). Some have been involved in national and international networks, policy advocacy and increasingly now also in development education. Issues have included child labour, equal rights for women, bonded labour and environment. Recently many Southern FTOs are looking at how they can increase the Southern market for Fair Trade products through national and/or regional networking. Fair Trade organisations are also

    increasingly engaged with the private sector in the context of Ethical Trade and Socially-Responsible Business initiatives either as consultants to enterprises or as participants in multi-stakeholder negotiations. As discussed below, these macro level activities present new challenges for impact assessment.

    The nature of donor support has also varied. It is likely that DFID will be concerned not only with the impacts of interventions which it supports, but the relative effectiveness of the different types of support it can give. As can be seen from Box 1 above and the Case Studies, this has included general core funding for UK-based FTOs and their partners, support for resource centres, networks and information exchange (ECOTA Forum), loan guarantees for marketing organizations (Kuapa Kokoo), microfinance programmes for FTO partners (Kuapa Kokoo), research and awareness raising. The DFID Fair Trade Strategy Draft Paper outlines a range of other possible types of support which would merit investigation.

    An important recent donor concern has been the development of markets for Business Development Services and how these can increase outreach and 4financial sustainability. There are many ways in which FTOs could contribute to

    improving the quality and promote the integration of ethical principles in mainstream BDS markets. There is a key role here for donors to support development of innovative types of training and support which integrate ethical concerns and which could then provide a source of consultancy income for FTOs.

    Impact assessment will need to examine carefully the activities involved in the particular intervention being assessed in order to understand why particular impacts are occurring and draw practical conclusions. This is particularly the case where the aim is to compare the relative effectiveness of different types of Fair Trade strategy and/or propose innovations.

1.4 STAKEHOLDERS

    Stakeholder analysis is particularly important in impact assessment of Fair Trade. The potential range of stakeholders is very wide given the broad aims of Fair Trade to benefit not only poor producers but also their communities and consumers. In addition the attempt to address power inequalities in marketing chains and macro-level policy involves a second set of stakeholders in the same markets and national and international economies who are likely to be affected or influenced but not necessarily benefited. At all levels there is likely to be differentiation by, for example, gender, ethnic group, types of asset ownership, age, education etc.

Stakeholders who may be expected to benefit include:

     4 See in particular the paper Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention produced by the Committee of Donor Agencies for Small Enterprise Development 2001.

; Grassroots producers (entrepreneurs and workers) : Grassroots producers

    are the most evident direct beneficiaries and primary stakeholders. But distinctions must be made between different types of entrepreneur and different types of labour contract. Impacts may differ significantly between entrepreneurs and employees, small and micro-entrepreneurs, permanent and casual employees, between women and men and so on. Some producers in the production and marketing chain may be completely marginalized by FT interventions, particularly those who are already very disadvantaged (See Section 2).

; Other members of the same households: differentiated by gender, age,

    access to assets and ownership, role in decision-making. Inclusion of other household members in assessments is important in the context of concerns with interlinkages between poverty, gender inequality and child labour. Impact on intra-household inequalities cannot be inferred from impacts on direct participants in Fair Trade interventions.

; Other members of the same local community: including direct beneficiaries

    of investment from fair trade profits in the form of investment of Fair Trade premiums or awareness campaigns and/or those indirectly affected by economic, social and environmental changes brought about by Fair Trade operations.

; Other entrepreneurs and workers in same markets: affected by e.g. changes

    in wage levels, improved terms of trade with intermediaries, increased accountability of local businesses. Some may be disbenefited through increased competition from Fair Trade organisations in the same markets.

; Consumers: benefited by greater information about product quality, health

    benefits and Fair Trade issues

; Others affected by macro-level policy changes: including those affected by,

    for example, greater awareness of the problems of informal sector workers, gender inequality

    Other secondary stakeholders who may affect the outcomes of and/or be affected by Fair Trade interventions and who may need to be consulted in impact assessments include:

; Grassroots organisations and movements like trade unions, business

    associations, women's organisations and environmental organisations

; Entrepreneurs in the private sector, particularly large and medium scale

    enterprises

; Government administrators in enterprise development

; Donor agencies funding other linked interventions

    Each of these stakeholders may have very different interests in both Fair Trade interventions themselves and in the outcomes of impact assessment. Serving the interests of existing employees and small-scale producers may take resources from reaching out to new more disadvantaged groups who need more support. Women and men may have very different priorities. Investment in environmental improvements may be expensive in terms of resources and/or decrease profits and be opposed by primary stakeholders. Fairness to consumers may detract from incomes for employees and so on.

    These problems are not unique to Fair Trade, but it is particularly important to address them in FT Impact Assessment because of the commitment of FT to social justice and human rights. Given the firm and inherent commitment of Fair Trade to increasing the benefits for the most disadvantaged of the bottom of the chain, their views and interests must be given at least equal weight in terms of selection criteria for assessment, representation in the impact assessment process and analysis of the types of impact and the practical implications. Any assessment of Fair Trade will therefore inevitably involve a participatory process which will need to be carefully managed and negotiated. Given the potential conflicts of interest and need for accountability, this participatory process will need to be paralleled by external and independent assessment. At the same time, the stated commitment of all stakeholders to fairness and participation provides a good framework for linking impact assessment with sustainable and participatory monitoring and evaluation systems.

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