Dealing with and in the Global Economy: Fairer Trade in Latin America

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Dealing with and in the Global Economy Fairer
Trade in Latin America

• Pauline E. Tiffen Simon Zadek

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Free Trade

• Over the past two decades, people have to work
  harder for less immediate reward
• People have waited in vain for the benefits of
  free trade to accrue
• Few have examined new alternative efforts to cope
  with trade liberalization

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Fair Trade

• A fair trade movement began in the 1960s
• Its proponents espouse non-economic values
• A fundamental principle is to see people as the
  end goal
• ATOs (alternative trading organizations) are
  active in all continents, yet is little
  documented still insufficiently theorized
• Fair trade has come to represent a blend of
  market economy and social justice environmental
  issues

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• Fair trade makes up only one hundredth of one
  percent of the annual world trade
• The most rapid growth in recent years has been in
  the food industry, especially coffee
• Built on 20 years of building consumer awareness
  solidarity
• Max Havelaar Foundation, Netherlands, established
  a set of criteria in 1988 so companies could
  receive its seal of approval
• A floor price for the producer, regardless of
  market price
• All coffee is purchased directly (without
  middlemen) from producer organizations exported
  by farmer export associations
• Fairly-traded coffee has received widespread
  distribution, pointing to a paradigm shift in the
  marketplace

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What Distinguishes Fair Trade?

• Motive, scale, orientation, ownership
• Primary producers come first (not even the
  consumers!)
• Local skills, natural resources, context are
  key
• Good price to the primary producer

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• Given power of market importance of
  information, ATOs seek to strengthen bargaining
  power of trading partners
• But do not seek exclusive relationships with
  producers
• Marketing has been reformed to provide awareness
  of social justice and environmental aspects of
  the product
• ATOs voice producers perspectives, concerns,
  experiences to consumers
• Fair trade has offered new opportunities for
  social organizations and mobilization

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A fairly traded product can offer a focal point
for lessons about how alternative economic theory
might look on a larger scale
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Does Fair Trade Work?

• The fair trade movement is not homogenous
• Not-for-profit trading companies
• Self-standing trading units
• Religious organizations
• Cooperatives
• Community owned associations
• Governmental organizations
• The varying motivations for fair trade make it
  difficult to come to conclusions
• All organizations abide by the International
  Federation for Alternative Free Trade Code of
  Practice

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What is a Fair Price?

• More than the local price currently available to
  the producer
• More than the price available from the
  international traders.
• Enough for producers and their families to attain
  a reasonable or nationally recognized
  remunerative living standard
• A price that enables the Northern partner to be
  no more than viable, but not to make a
  significant profit.

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• A trading regime that allows Southern producers
  to earn the same as Northern trading partners
• Fixed remuneration to all parties involved
  directly in the chain, reflecting input, skills,
  and risk and not purchasing power or lending
  power alonefor mutual benefit

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The Latin American Experience

• Campesinos have seen the reduction or withdrawal
  of government price supports, technical
  assistance programs, credit virtually all
  state-sponsored protection for indigenous
  agriculture basic food crops, notably corn
  rice
• Inequitable competition with imports

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The Case of Coffee

• 1989 Failure of the International Coffee
  Agreement
• It did not enable the U.S. to purchase the kinds
  of coffee the consumers wanted
• Less robusta, more arabicas, reflecting changes
  in coffee-drinking preferences
• The U.S. wanted to stop the sale of the cheaper
  non-ICA coffee going to the Soviet and eastern
  European markets
• No agreement on export quotas (based on volume)
• The result was the liberalization of the coffee
  market with uncertainty of price supply
• 1990s price crashes, price hikes, frosts, etc.

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Mexican Coffee

• In the 1990s farmers came together in a process
  of solidarity reorganization
• What followed was a local-to-global spread of
  action
• 65,000 coffee farmers formed new organizations,
  some with support of Oxfam Inter-American
  Foundation
• 5 organizations created a new brand, Aztec Harvest

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Views From the Farm
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• UPROCAFE (small/medium producers), Coffee Growers
  Solidarity Front for Latin America, Via
  Campesina, South-South Network provide mutual
  support
• 1st International Conference on Organic Coffee
  held in Chiapas in 1994
• Increased activity access to fair trade markets
  has made the difference between bankruptcy
  survival for many small-scale coffee organizations

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Environmental Dimensions of Fair Trade

• Technical
• (1) Integrated pest control, may reduce
  yieldswho pays for this?
• (2) There is frequently a local imperative not
  to address even clearly unsustainable practices
  that are detrimental to the soil fertility

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• Colonial attitudes Failure by Northern consumers
  to adjust their consumption practices is forcing
  a new era of bio-colonialism on Southern
  countries.
• Ecological footprints fossil fuels are needed to
  transport goods around the world

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• Human rights organic production does not
  guarantee human rights
• It can be undertaken under exploitative labor
  conditions
• The debate about environmental issues still lacks
  an appropriate framework to assess it in the
  context of fair trade

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Socially Responsible Business

• Companies like Ben Jerrys and the Body Shop
  claim to be doing fair trade, and work both in
  the North the South towards socially
  responsible business practices

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Fair Trade as Catalyst

• The Fair Trade Movement has the capacity to
  influence mainstream business by its presence in
  the market
• It is beginning to cross over into conventional
  business take over market share
• 3 examples

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El Ceibo Cooperative

• Set up in Bolivia to grow organically certified
  cocoa beans chocolate
• A federation of 37 cooperatives with 900 members
  based on traditional practices, equitable
  earnings, targeting of international niche
  markets

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Kuapa Kokoo

• Farmer-owned run company founded in Ghana after
  market liberalization
• 5,000 cocoa farmers earn high profits bonuses

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Cafedirect

• UKs leading fair-traded coffee brand
• They pay a 10 premium on top of the market price
• Its coffee is of impeccable quality

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Conclusion

• The fair trade movement has shown that even minor
  shifts in consumer purchasing power register high
  on the Richter Scale of corporate management
  priorities
• Fair trade is increasingly positioning itself as
  one of the solutions to profound corruption in
  the trading chain where profit is put before
  people

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• Alternative trade can be viewed as a flea on the
  hide of an elephant, a tiny presence capable of
  making its giant host sit up take notice