Is Fairtrade Fair?
The FLO is made up of 21 Fairtrade Organisations, including the UK Fairtrade Foundation. The main aims of the work of the FLO are set out in two main sets of standards:
(i) Ensure that small co-operatives function in a democratic setting
(ii) Protect the workers’ rights, e.g. fair payment, trade unions, good working conditions
The Fairtrade initiatives have been both praised and criticised. For example, Fairtrade helps individual producers to stay in the market at times of economic crisis. Theoretically, the producers should follow the Free Trade model: when prices fall, production should fall in order for demand, therefore prices, to rise. In practice, however, the producers produce more to cover for their lost income. Secondly, the demand and consumption in the developed world do not fluctuate proportionally with price changes. Without Fairtrade to buy the produce at a non-fluctuating price, these minor producers would starve.
Fairtrade also helps the producers produce a higher profit, since the intermediaries involved when trading and their profit, are eliminated. Also, when buying a Fairtrade product, the consumer pays for a premium. This is the slightly higher price that the consumer pays on top of the market price of the product. Even though the producers do not receive the whole value of the premium, they will still make 10-40% more profit, which is significant for them in their poverty.
According to the General Agreement on Tariffs and Trade (GATT) 1994, the long-term prosperity of the nations should be the target, by preventing the excessive dependence of a nation on exporting. Collins has contested that Fairtrade does not allow the minor producers to escape their property and try to create a new, improved life. Rather, it helps them to the extent that they barely survive in their poverty. Dhillon-Penner disagrees, suggesting that the global need for a product is not covered completely by the major producers. The minor producers are needed to cover the remaining needs.
Fairtrade critics also suggest that Fairtrade producers receive a higher payment for their goods compared to non-Fairtrade producers, which is unfair. This is true, only if market prices are low: buyers cannot afford to give high prices. When market prices are high, however, other buyers will have to offer higher wages to compete with those offered by Fairtrade.
Fairtrade can also be said to be illegitimate, since the Fairtrade City Program constitutes a breach to GATT 1994. The five policies that UK cities have to adopt in order to be designated Fairtrade Cities violate WTO’s Agreement on Subsidies and Countervailing Measures (ASCM), since they provide free advertisement for Fairtrade goods.
Fairtrade is not flawless, since it breaches certain regulations. Nevertheless, the harm caused to trade is so negligible, that it cannot overshadow the number of people it helps!
This essay could, very easily, have been a very long piece of work. The debate is endless, so please feel free to comment on anything!
I will be posting a more relevant topic to Illegal Trade very very soon, so behold!
Take care x
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