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body and building essays on the changing relation

body and building essays on the changing relationBody and building essays on the changing relation -The most important labelling organizations are organized under the umbrella of the Fairtrade Labelling Organization International (FLO).It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers - especially in the South.But what is Fair Trade, conceptually, and what are its effects?The success of Fair Trade is reiterated time over time by a variety of personalities and institutions, ranging from advocates of Fair Trade in the North and producers in the South to such prominent promoters of trade liberalization as the G 8 and the European Commission. After all, Fair Trade started as an alternative to free trade, explicitly focusing on solidarity and the well-being of producers and rejecting classical economic notions of competition, the self-regulation of the market and sometimes even employing anti-capitalist rhetoric.Fair Trade has thereby changed in a variety of ways, the most import shift being that “Fair Trade has moved from being purely an activist-led advocacy and empowerment model towards being a market-led commercial success story” (Nichols & Opal, 2005: 13).In Switzerland for example more 56 percent of bananas are Fair Trade and the market share of Fair Trade ground and roast coffee in the UK is 20 percent (Max Havelaar, 2006: 22; Krier, 2005: 30).The price index of commodities for example declined by 47 percent between 19, and the present the real prices for key agricultural commodities are near a 30-year low (Vorley, 2003).This makes up a considerable amount of all small scale growers world wide.Both the commodity crisis of falling prices for agricultural products and the concentration of power by a few supermarket chains are general patterns in the agricultural industry that are exacerbated in the coffee sector (Lang, 2003).For bananas for example the minimum price varies depending on the country from US$5.50 in Colombia and Ecuador to US$7 in the Dominican Republic for a box (18.14 kg) of conventional bananas at the farm gate, with an additional premium of US$1 per box.The aggressive liberalization of international trade through international institutions such as the World Bank and the International Monetary Fund has led to an enormous increase in the volume of trade – global trade in 2000 was 22 times the level of 1950 (Nicholls & Opal, 2005: 17) and world exports have almost doubled over the last decade (HDR, 2005: 114).Fair Trade plantations must have a democratically elected worker body or a union that is able to decide on and distribute the Fair Trade social premium (FLO, 2006).Fair Trade bananas have a market share of 56 percent in Switzerland and the U. Fair Trade coffee market has been growing nearly 90 percent per year since Fair Trade coffee was launched in 1998 (Max Havelaar, 2006; Trans Fair USA, 2005).The goals of Fair Trade that are implicit in this definition have been laid out by Redfern and Snedker in a 2002 report of the International Labour Organization (ILO) as being: Historically Fair Trade evolved out of a range of faith-based and secular alternative trading organizations (ATOs) that can be traced back to relief efforts after World War II.In addition to this minimum price producers get US$0.15 per pound for certified organic coffee and a social premium of US$0.05 per pound for all coffee.Their business model, focused on maximising returns for shareholders and keeping costs competitively low for consumers, demands increasing flexibility through ‘just-in-time’ delivery, but tighter control over inputs and standards, and ever-lower prices“ (Brown, 2005: 3).In operational terms Fair Trade is characterized by several key practices that are practiced by the labelling organizations as well as by the alternative trading organizations that do not participate in certification (Nichols & Opal, 2005: 6-7): agreed minimum prices, usually above or independent of world market prices, that allow for a living wage for producers; an emphasis on development and technical support through the payment of a social premium; direct purchasing from producers to shorten the global supply chains and reduce the margins of middle men; transparent and long-term partnerships; provision of credit when requested and pre-financing of up to 60 per cent of the total purchase value; producers are democratically organized, often in a cooperative; sustainable and increasingly organic production is practiced; there are no labour abuses and unionization must me allowed.The richest 10%, almost all of whom live in high-income countries, account for 54%.” (HDR, 2005: 4) There has also been much scholarly attention to a series of commodity crises of falling prices and to changes in the structure of the supply chains that further concentrate power and benefits within a few supermarkets based in the Global North.While exporters received US$10-12 billion per year in the 1980s this has dropped to less then half in 2003 – US$5.5 billion.In order to provide a sense of the scope of Fair Trade it is useful to look at some facts and figures that describe the ‘success story’ of Fair Trade: World wide sales of labelled Fair Trade products are estimated at €1.1 billion for 2005 (Max Havelaar, 2006: 28).body and building essays on the changing relationThe general feeling of euphoria is captured by one of the pioneers of the Fair Trade movement, Carol Wills, on a conference in the European Parliament in June 2005: “Fair Trade works! It works as a business model; it works as sustainable development; it works to protect the environment; it works as an idea! How should one asses that at the G8 summit 2005 in Gleneagles leaders of those economically dominant countries that are continually held responsible for global trade injustices (often by actors and organizations in the Fair Trade movement) formally acknowledged the growing success of global Fair Trade and said in their final statement that they “welcome the growing market for Fair Trade goods and their positive effect in supporting livelihoods and increasing public awareness of the positive role of trade in development”? Or, even more disturbing, how should one think about the fact that Nestlé, famously 2005’s “least responsible company” worldwide and as one of the four big roasters responsible for the coffee crisis that impoverishes millions of producers, prides itself of launching a Fair Trade brand in Britain (Nestlé, 2005)?Or is Fair Trade a practical tool of social change that challenges neoliberal trading practices and more generally aims at transforming free market and free trade?Most producers are excluded from financial markets or insurances and especially the lack of access to credit and the inability to switch to other sources of income in response to price changes make it extremely hard for small-scale producers to survive under the global free trade regime.The market share of Fair Trade products, on average only amounting to below 3 percent is partly substantial.Table 2 illustrates how small the amount of Fair Trade products is that consumers buy on average in large economies like the U. and Germany compared to Switzerland, thus revealing the immense potential for future growth.Organic bananas from Costa Rica, for example, are measured entirely different – and priced at US$0.15 plus a 3 cent premium per kg (FLO, 2005c).At the one extreme a pragmatic position interprets Fair Trade as a developmental tool to increase the standard of living for disadvantaged producers in developing countries by making neoliberal free trade work the way it is supposed to work.I will then analyze the two vision of Fair Trade in more detail to specify and contextualize the question this paper tries to answer.During its long history there have been many different definitions of Fair Trade, but in an attempt to come up with an understanding that can be widely accepted, an informal network of the most important Fair Trade organizations called FINE produced the following definition in 2001: “Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade.Studies on the impact of falling commodity prices show that especially for small-scale producers the effects are disastrous, directly translating into diminished opportunities for human development and increasing poverty (Gibbons, 2005).FLO was formed in 1997 out of 14 national labelling organizations with the aim of collaborating on defining international Fair Trade standards, certifying and auditing Fair Trade producers organizations and traders and on providing support to producer organizations that need external help (FLO, 2005a: 23). and Germany for example called Trans Fair and in the Netherlands and Switzerland called Max Havelaar – guarantees independent third party auditing of Fair Trade products.Small-scale producers of agricultural products in rural societies in many developing countries are confronted with the absence of several key conditions on which classical and neo-liberal trade theory is based (Nichols & Opal, 2005: 132-54): Many small scale producers face a lack of market access, in terms of transportation, language, education and market information, making it easy for middlemen or big corporations to exploit this uncompetitive situation of ‘monopsony’ (a market situation with only one buyer) and create a race to the bottom.Beyond these extremes, the 2.5 billion people living on less than $2 a day – 40% of the world’s population – account for 5% of global income.Global Fair Trade sales have reached € 1.1 billion (US$1.4 billion), increasing at rates of around 50 percent per year and are projected to continue to grow.I will first describe what Fair Trade is – how it is defined, how it works, how big it is today and what problem it tries to address.Between 20 the sales of labelled Fair Trade products grew by 56 percent, exceeding the annual growth of 42 percent between 20 (FLO, 2006).This immense loss in income in developing countries is contrasted with the opposite development in high income countries – retail sales in consuming countries increased from US$30 billion in the 1990 to around US$80 billion at present (Osorio, 2004: 2).Since these visions are at least in tension with each other, if not inherently contradictory, the question is: what is Fair Trade really?Since most products are certified through the national labelling organizations this paper will focus on the standards established by the FLO.Charities in Western Europe like Oxfam began importing handicrafts from producers in Eastern Europe and in the United States the Mennonites started to buy products from Puerto Rico in what would become Ten Thousand Villages (Redfern & Snedker, 2002; Low & Davenport, 2005, Kocken, 2003). body and building essays on the changing relation Traders have to pay a price to producers that covers the costs of sustainable production and living; they must pay an additional social premium that has to be invest in development; they must pay up to 60 percent in advance, when producers ask for it; and the trading contracts have to allow for long-term planning and sustainable production practices.These standards, which must be met by producer groups, traders, processors, wholesalers and retailers, can be divided into three parts (FLO, 2006; Nicholls & Opal, 2005: 131): First there are two sets of generic organizational producer standards, one for co-operatives of small-scale producers and family farmers and another one for plantations.Classical free trade theory, which originates from Adam Smith’s and David Ricardo’s theory of comparative advantage, claims that countries specialize in and export what they are relatively good at producing and they import what they cannot produce sufficiently.Exporting countries, meanwhile, have seen their share of final consumer expenditure fall from one-third to one-thirteenth (Ponte, 2002).These environmental standards vary by products but in general prohibit the use of pesticides and require protection of drinking water and endangered resources (Nicholls & Opal, 2005: 131).At the end of 2005 there were 510 producer organizations from more than 50 countries that represent over one million producers and – together with their families – over 5 million people are integrated into the Fair Trade system and profit from it (Max Havelaar, 2006: 28).While consumers in Germany for example only spent €0.70 on average on Fair Trade products, in the U. consumers spent €3.46 and in Switzerland an impressive €18.47 per year (Krier, 2005: 29).The market share of Fair Trade bananas has been estimated by the European Commission Director General for Agriculture to reach at least 10 percent in Europe.Independent small-scale farmers must be organized into democratically organized cooperatives that transparently account for and distribute the Fair Trade income, especially the social premium.According to Leatherhead Food International the most important Fair Trade products globally are in bananas (in terms of volume) and coffee (value) (Nicholls & Opal, 2005: 191, see also FLO, 2005a).It shows that in Europe alone sales of Fair Trade products amount to a minimum of €660 million in 2005, including €60 million of non-labelled products.For other products the standards are very specific and complex.But social reality proves the opposite: international trade (among other things) has contributed immensely to the present situation of devastating poverty for the majority of humanity (Mc Michael, 2004).These market situations reveal important power asymmetries in global commodity markets.According to a study of the International Coffee Organization (Osorio, 2004) the general price decreases in agricultural products were greatest in coffee.The central part of the paper tries then to assess the impact Fair Trade has, first on the level of producers and producer communities and secondly the socio-cultural, political and economic impact on the free trade market in general.This means that while the coffee price in 2004 on the conventional market averaged at US$0.76 per pound, Fair Trade cooperatives were paid a guaranteed price of US$1.26 for conventional and US$ 1.41 for coffee that is also certified organic (Trans Fair USA, 2005).In theory, free trade is a win-win situation in which everyone benefits.How can such a company deserve the Fair Trade mark? In this paper I will try to asses if Fair Trade really works for all and – even more importantly – how it works for the different participants of Fair Trade, mainly consumers and producers and what the wider effects of Fair Trade are.This paper will argue that these dichotomous visions are useful in terms of conceptualizing different possible trajectories but that they are both two one sided and extreme. body and building essays on the changing relation Fair Trade organisations (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” (FINE, 2001).Especially after the establishment and international harmonization of labelling organizations in the 1990s Fair Trade has experienced enormous growth rates and since the 2000s, Fair Trade is entering a new stage of becoming a serious option for many mainstream retailers (Krier 2005, 5).“Before you’ve finished your breakfast this morning, you’ll have relied on half the world.”Martin Luther King Fair Trade is the most important and fastest growing market-based mechanism to improve the lives of producers in developing countries.As such it is a site of contestation, conflict and negotiation between different actors that brings about multiple and partly contradictory effects on different levels.But global inequality has grown simultaneously – so drastically, that many question the basic assumption that trade benefits all.„These companies have tremendous power in their negotiations with producers and they use that power to push the costs and risks of business down the supply chain.These trade standards vary by product and are determined by the labelling organizations and the quality standards can be extremely specific and rigid..Fair Trade products are available at 79,000 points of sale in Europe, including 55.000 supermarkets. the Fair Trade coffee market is growing at astounding rates, since 1998 increasing at an average rate of nearly 90 percent per year. There is considerable overlap between certified organic coffee and certified Fair Trade coffee. There are 5000 to 7000 different Fair Trade products available, 250 of which are currently certifiable.And instead of increasing the wealth of both trading parties, the relations between producers and consumers in commodity markets like coffee or bananas can be described as a “perverse transfer of wealth, by some of the supermarkets, from farmers and farm workers of developing countries to the consumers of developed countries” (Tallontire & Vorley, 2005: 5).It does so by offering small-scale producers in the global south fairer trade relations, including a guaranteed minimum price above world price and developmental support.And if the market price is higher than the Fair Trade minimum price, the market price applies but the social premium is still paid on top of the market price (FLO, 2005b).And producers have to meet the above requirements, have to accord with the labour standards of the International Labour Organization and have to meet certain quality requirements (FLO, 2006).It is important to understand the reasons why we need Fair Trade in the first place.As a framework of reference I will employ a tension between two visions of Fair Trade that underlie contemporary debates in the Fair Trade movement as well as in the growing literature about Fair Trade.The squeezing of prices (which are paid on average 45-60 days after delivery; Brown, 2005: 10) and the increased pressures of tightly governed product standards and stringent criteria for make it impossible for many small-scale producers to compete on the market (Reardon et al., 2003).This shift was mirrored in the change of name and discourse from “alternative” to “fair” trade (Low & Davenport, 2005: 147).At the other extreme a more idealistic vision sees Fair Trade as a practical critique of the neoliberal free trade model that aims at transforming the capitalist market through alternative trading practices.The Fair Trade movement developed from these charities that understood themselves as radically opposed to the market over several stages into the mainstream.Rather, I will argue with Polanyi, Fair Trade can be analyzed as a complex and multilayered process of social defence against destructive effects of unrestricted market forces that tries to re-embed the economy.Table 2: Average consumption of Fair Trade products per capita in different countries in Euro (Source: Max Havelaar, 2006 / FLO) The most comprehensive study of the exact facts and figures about Fair Trade organizations is a 2005 study “Fair Trade in Europe” published by the four largest Fair Trade organizations(Krier, 2005). body and building essays on the changing relation But what is Fair Trade, conceptually, and what are its effects? body and building essays on the changing relation




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