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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.