Anja Osterhaus of the Fair Trade Advocacy Office acknowledged that Fair Trade as an alternative business model is not perfect, nor can it solve all the problems in this area. But it shows that more just trading systems are possible. It should therefore be supported by public policy to ensure that fair trade standards and principles are followed.
Ms. Osterhaus gave some background, explaining that Fair Trade aims to ensure “market access under fair terms, particularly for small and marginalized producers from developing countries.” There are two approaches to commercialize Fair Trade: The first is direct trading relationships between trade producer and retailer such as world shops. The second is the use of Fair Trade labelling systems where conventional companies acquire Fair Trade labels for their products. For both approaches, it is essential that Fair Trade standards are met, and comply with Fair Trade principles.
The main benefit of Fair Trade, originally a “development approach to trade“, is that it provides a fair price to producers that covers the costs of sustainable production and living. This often equals a stable minimum price that rises alongside rising global market prices plus a premium . Payment is given in advance to producers to purchase inputs. This method of market access helps to overcome supply side constraints, and empowers local producers. A frequent criticism of Fair Trade is that the products are not changed and innovation is avoided, because a stable price is paid. Ms. Osterhaus strongly disagreed, arguing that Fair Trade is instead a tool to diversify and test new options.
There has been considerable growth in Fair Trade with annual growth rates around 40% and 2 billion Euros spent on fair trade in 2007. For some commodities, a major proportion of the industry is now Fair Trade. As examples: 25% of bananas sold in the UK, 50% in Switzerland, and 90% of bananas produced in the Eastern Caribbean. Awareness has grown to such an extent that in Belgium, for example, 80% of consumers recognize Fair Trade labels. Thus, the Fair Trade market has a huge potential which depends on the demand from us, the consumers, and companies and public purchasers.
Concluding, Ms. Osterhaus argued that “public policy support to Tair Trade is needed to support growth, both in the EU and ACP countries.“
See more from the 16 April Briefing