Analysis of Fair Trade as a Concept of Sustainability

Essay, 2009

15 Pages, Grade: 1,7



1. Introduction

2.1 Definition of Fair Trade
2.2 Fairtrade organisations and standards
International Fairtrade Organisation (IFAT)
2.3 Labelling
Criteria of Certification
Differences and similarities between Bio and Fair Trade
The Fairtrade Mark TransFair
International Fairtrade Certification Mark
2.4 Producers
2.5 Products and Sales Channels
Foodand Non-food Products
Importersand Retailers
2.6 Sales and image campaigns

3. Discussion and critics:
No diversification of Products
Unfair allocation of the profit margin
Onlya image campaign
3.2 Excursion: Global free trade
Themercantilist idea
Theliberal conception
Should we extend free trade?

4. Conclusion

1. Introduction

Almost every day we h ear news about the so called third world th at sill shock us. Extreme poverty, starvation and childhood m ortality seem to be normality for some of the developing counties. But who is to blame for that and how can we better their situation?

It is obvious that the western countries have a huge influence on the situation of third world countries because both have close trade relationships. Western countries buy mostly food and resources from the developing countries and sell certain end products. Every transaction of goods and services goes along with a m onetary transaction called the price. The price is determined by certain econom ic laws like e .g. supply & dem and. Classical economics made several attempts to define how the right or even "fair" price of a good can be defined. Current Neoclassical economics have abandoned this at tempt by saying that th e right price of any good is just what the p urchaser is willing to buy. So they do not even think abo ut a "fair" price.

In this essay I want to discuss the issue of Fair Trade a nd how Fair Trade can contribute to social justice. First I will give a sh ort definition what Fair Trade actu ally is and then I will give an overview about the different Fair Trade organisations and define the standards which they follow. Then I will have a look at the producers and also the products which are available. I will analyse their sales statistic and also their market share.

Fairtrade is a "trading partnership" which tries to m aintain "respect, dialogue, transparency, and increased more fairness in international trade"1. Fair Trade tries to better the situation of developing countries by paying a "fair" price for certain products that is higher than the market price. In the last few years, Fairtrade has becoming more and m ore popular in the industrialized world. The supporter's base is often also engage d in debates with political decision-makers in the European in stitutions for the purpose of making international trade fairer. Fair Trade is definitely a form of ethical consumption, because as consumption is one aspect of human behaviour that could harm other human beings.

Then I will make a short excursion to the possible advantages of global free trade because the essay also deals with the contrary relationship of Fair Trade and Free Trade and tries to analyze which of them is worth being expa nded. As fair trade can be considered as protectionism, it is also doubtful if real global free trade is being practised in our times At certain points I will focus on Germ any bec ause first it is a big market for Fair Trade products and it also has its own Label organisation called Tran sfair and second it is easier for me to get information since I am from Germany.

Finally, I will sum up my results an d will conclude with discussing the question whether fair trade is worth a greater expansion in the future or not.

2.1 Definition of Fair Trade

Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair Trade Organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade. Fair Trade products are produced and traded in accordance with these principles — wherever possible verified by credible, independent assurance system.2

This is the official and currently accepted definition of Fair Trade which has been agreed by the informal association of four international fair trade networks called FINE3.

Nevertheless Fairtrade is m ore than an alte rnative approach to c onventional international trade. Fairtrade is a tradi ng partnership which aim s at development for excluded and disadvantaged producers. Fairtrade stands for providing better conditions, by awareness raising and by campaigning4. Furthermore the trading partnership tries to fill the gap of unfair trading conditions. For both sides the farm ers in the developing countries and for the consumers in the industrialized world. First the long-term and trustworthy cooperation's helps the farm ers in the developing countries. Fairtrad e provides perspectives for fair prices that cover the production costs and le ave a m argin to the producer. Furthermore it offers a pre­payment on request and thus m ore planning certainty for producers. Second, it helps us consumers in the industrialized wo rld, with a fair price because a cup of fairly traded coffe e only costs two cents more than regular traded coffee.5

Every long-term goal should also im ply valu es. The central values of Fairtrade are partnership, dialogue, tran sparency, accou ntability, respect, (gender-) equ ity, and sustainability6. The central values are guilty in every m ember c ountry worldwide. For the Fairtrade co mpanies this m eans: a prem ium bio quality, ecological farm ing by protecting natural resources. They provide non-geneticall y engineered food products with continuous quality through all distributing channels and fi nally better living and working conditions for the producers in the south.

Today, the Fairtrade movem ent is a global m ovement. More than one million small sc ale producers are organised in approx imately 3,000 grassroots organisa tions with subsidiaries in more than 50 countries in the South. The produc ts are sold in world shops or Fairtrade shops and supermarkets7.

2.2 Fairtrade organisations and standards

International Fairtrade Organisation (IFAT)

The Interna tional Fair trade Organ isation (IF AT) is an um brella organisation of all Fairtrade enterprises and organisations 8. IFAT monitors the standards of these enterp rises. Furtherm ore it has a network function for all enterprise s and organisati ons. Nevertheless the standards of IFAT are not equal with the FLO standards9. Member organisations o f IFAT are Fairtrade en terprises like Gepa, dwp, TransFair e.V., world shops like W eltladen, whole food shops like Alnatura and also Fairtrade coffee shops like Contigo.

FLO International

"FLO International" develops Fairtrade standa rds and assists producers in gaining Fairtrade certification and capitalizing on m arket opportun ities. These standards are in addition the result of an extensive consultation process, involving a variety of stakeholders: producers, traders, external experts, inspectors, certification staff etc. 10 FLO standards contain minimum requirements that all producer organisations must meet to become certified. They also contain progress requirements in which producers must demonstrate improvements over time.

There are two types of Fairtrade standard s: First th ere are stand ards for sm all far mers' organizations, which include requirem ents for democratic decision m aking to ensure that producers have influence on how the Fairtrade Premiums are invested . They also include requirements for capacity building and econom ic strengthening of the organization. Second there are standards for hired labour situations to ensure that employees receive decent wages and are able to join u nions. Fair trade cer tified plantations m ust ensure health an d safety requirements and that there is no forced or child labour.11



2 European Fair Trade Association (2006)

3 FINE consist of the Fairtrade Labelling Organizations International, World Fair Trade Organization, Network of European Worldshops and European Fair Trade Association

4 OXFARM (2006)

5 GEPA (2004b)


7 IFAT (2006)

8 IFAT (2006)

9 EDLER (2006B)



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Analysis of Fair Trade as a Concept of Sustainability
Åbo Akademi University
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Analysis, Fair, Trade, Concept, Sustainability
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Carsten Glöckner (Author), 2009, Analysis of Fair Trade as a Concept of Sustainability, Munich, GRIN Verlag,


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