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Patricia Gonzlez de Castro Degree in Marketing 2011-2012

FAIR TRADE

INDEX

1. INTRODUCCIN...p.3 2. DEFINITION: WHAT IS FAIR TRADE?........................................................p.3 3. CHARTER AND FAIR TRADE PRINCIPLES .p.4 4. HISTORY OF FAIR TRADEp.9 5. FAIR TRADE PLAYERS..p.10 6. THE SPANISH CASEp.14 7. CONCLUSIONp.17 8. BIBLIOGRAPHY...p.17

1. INTRODUCTION
Not all trade is fair! Farmers and workers at the beginning of the chain dont always get a fair share of the benefits of trade. This situation has prompted the development of alternatives to this unequal trade but, nowadays, although fair trade is present in our society, it remains unknown to many citizens. Thats why I chose this topic. I wanted to study, analyze and explain what Fair Trade is, how it works, what its goals are and how its evolution was. It is important to anticipate that there is a large open discussion about the concept of Fair Trade in Spain, as consequence of the existence of two opposite poles. On the one hand, the traditional and dominant pole led by Intermon Oxfam and on the other hand, a holistic and alternative pole. Issues such as the certification of fair trade mark, the production criteria, the relationship with the producers, the ways of distribution and sale are points of discussion between the two poles. First I define the concept because, what is Fair Trade? I based my approach in the more consolidated definition, established by the World Fair Trade Organization. Then, I move to explain Fair Trade International (FLO) charter and principles, which are approved by WFTO too. This charter and those principles are the basis of the Fair Trade system, where we can understand how has to be a product to be considered a Fair Trade product. Its a good way to understand how works this type of trade. The next point is the history of Fair Trade. Where started the movement? When? How was it evolution? Im going to answer these 3 questions, taking in account the creation of the different organizations and the Fair Trade labels. After the history, is necessary to explain the different players that have a role in Fair Trade. They are introduced in the history but the explanation of its functions is explained in this point. Thats why I consider this chapter as a principal one. At the end, I focus in the case of Spain, where, as I said before, there is a large open discussion about the concept of Fair Trade. Its something original in this country that faces two types of organizations.

2. DEFINITION: WHAT IS FAIR TRADE?


Fair Trade describes an alternative trade system between the producers of the south and the north countries consumers. According to World Fair Trade Organization (WFTO), Fair Trade is a trade system based on dialogue, transparency and respect that seeks greater equity in international trade with particular attention to social and environmental criteria. It contributes to
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sustainable development by offering better trading conditions and securing the rights of disadvantaged producers and workers, especially in the South. Is based on: - Adequate working conditions and wages for Southern producers, that enables them to live with dignity. - No child labor exploitation - Equality between men and women: they are treated equitably and they receive the same financial reward. - Respect the environment: items are manufactured through environmentally friendly practices. Therefore, Fair Trade is seen as a tool for cooperation and also as an international movement to improve market access for disadvantaged producers and change the unfair international trade rules that reinforce poverty and global inequality. Fair Trade offers consumers a powerful way to reduce poverty through their every day shopping.

3. CHARTER AND FAIR TRADE PRINCIPLES


Fair Trade International (FLO) along with the World Fair Trade Organization adopted the Charter of Fair Trade Principles, which provides a single international reference point for Fair Trade. These include: Market access for marginalized producers: many producers are excluded from mainstream and added-value markets, or only access them via lengthy and inefficient trading chains. Fair Trade helps producers realize the social benefits to their communities of traditional forms of production. By promoting these values (that are not generally recognized in conventional markets) it enables buyers to trade with producers who would otherwise be excluded from these markets. It also helps shorten trade chains so that producers receive more from the final selling price of their goods than is the norm in conventional trade via multiple intermediaries. Sustainable and equitable trading relationships: the economic basis of transactions within Fair Trade relationships takes account of all costs of production, both direct and indirect, including the safeguarding of natural resources and meeting future investment needs. Trading terms offered by Fair Trade buyers enable producers and workers to maintain a sustainable livelihood. Capacity building & empowerment: Fair Trade relationships assist producer organizations to understand more about market conditions and trends and to develop knowledge, skills and resources to exert more control and influence over their lives.

Consumer awareness raising & advocacy: Fair Trade relationships provide the basis for connecting producers with consumers and for informing consumers of the need for social justice and the opportunities for change. Consumer support enables Fair Trade Organizations to be advocates and campaigners for wider reform of international trading rules, to achieve the ultimate goal of a just and equitable global trading system. Fair Trade as a social contract: application of these core principles depends on a commitment to a long-term trading partnership with producers based on dialogue, transparency and respect. Fair Trade transactions exist within an implicit social contract in which buyers (including final consumers) agree to do more than is expected by the conventional market, such as paying fair prices, providing pre-finance and offering support for capacity building. In return for this, producers use the benefits of Fair Trade to improve their social and economic conditions, especially among the most disadvantaged members of their organization. In this way, Fair Trade is not charity but a partnership for change and development through trade.

Also, WFTO prescribes 10 Principles that Fair Trade Organizations must follow in their day-to-day work and carries out monitoring to ensure these principles are upheld: Creating Opportunities for Economically Disadvantaged Producers Poverty reduction through trade forms a key part of the organization's aims. The organization supports marginalized small producers, whether these are independent family businesses, or grouped in associations or co-operatives. It seeks to enable them to move from income insecurity and poverty to economic self-sufficiency and ownership. The organization has a plan of action to carry this out.

Transparency and Accountability The organization is transparent in its management and commercial relations. It is accountable to all its stakeholders and respects the sensitivity and confidentiality of commercial information supplied. The organization finds appropriate, participatory ways to involve employees, members and producers in its decision-making processes. It ensures that relevant information is provided to all its trading partners. The communication channels are good and open at all levels of the supply chain.

Fair Trading Practices The organization trades with concern for the social, economic and environmental well-being of marginalized small producers and does not maximize profit at their expense. It is responsible and professional in meeting its commitments in a timely manner. Suppliers respect contracts and deliver products on time and to the desired quality and specifications.
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Fair Trade buyers, recognizing the financial disadvantages producers and suppliers face, ensure orders are paid on receipt of documents and according to the attached guidelines. An interest free pre-payment of at least 50% is made if requested. Where southern Fair Trade suppliers receive a pre payment from buyers, they ensure that this payment is passed on to the producers or farmers who make or grow their Fair Trade products. Buyers consult with suppliers before canceling or rejecting orders. Where orders are cancelled through no fault of producers or suppliers, adequate compensation is guaranteed for work already done. Suppliers and producers consult with buyers if there is a problem with delivery, and ensure compensation is provided when delivered quantities and qualities do not match those invoiced. The organization maintains long term relationships based on solidarity, trust and mutual respect that contribute to the promotion and growth of Fair Trade. It maintains effective communication with its trading partners. Parties involved in a trading relationship seek to increase the volume of the trade between them and the value and diversity of their product offer as a means of growing Fair Trade for the producers in order to increase their incomes. The organization works cooperatively with the other Fair Trade Organizations in country and avoids unfair competition. It avoids duplicating the designs of patterns of other organizations without permission. Fair Trade recognizes, promotes and protects the cultural identity and traditional skills of small producers as reflected in their craft designs, food products and other related services.

Payment of a Fair Price A fair price is one that has been mutually agreed by all through dialogue and participation, which provides fair pay to the producers and can also be sustained by the market. Where Fair Trade pricing structures exist, these are used as a minimum. Fair pay means provision of socially acceptable remuneration (in the local context) considered by producers themselves to be fair and which takes into account the principle of equal pay for equal work by women and men. Fair Trade marketing and importing organizations support capacity building as required to producers, to enable them to set a fair price.

Ensuring no Child Labor and Forced Labor The organization adheres to the UN Convention on the Rights of the Child, and national / local law on the employment of children. The organization ensures

that there is no forced labor in its workforce and / or members or home workers. Organizations who buy Fair Trade products from producer groups either directly or through intermediaries ensure that no forced labor is used in production and the producer complies with the UN Convention on the Rights of the Child, and national / local law on the employment of children. Any involvement of children in the production of Fair Trade products (including learning a traditional art or craft) is always disclosed and monitored and does not adversely affect the children's well-being, security, educational requirements and need for play.

Commitment to Non Discrimination, Gender Equity and Freedom of Association The organization does not discriminate in hiring, remuneration, access to training, promotion, termination or retirement based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, HIV/Aids status or age. The organization provides opportunities for women and men to develop their skills and actively promotes applications from women for job vacancies and for leadership positions in the organization. The organization takes into account the special health and safety needs of pregnant women and breast-feeding mothers. Women fully participate in decisions concerning the use of benefits accruing from the production process. The organization respects the right of all employees to form and join trade unions of their choice and to bargain collectively. Where the right to join trade unions and bargain collectively is restricted by law and/or always paid for their contribution to the production process, and when women do the same work as men they are paid at the same rates as men. Organizations also seek to ensure that in production situations where women's work is valued less highly than men's work, women's work is re- valued to equalize pay rates and women are allowed to undertake work according to their capacities.

Ensuring Good Working Conditions The organization provides a safe and healthy working environment for employees and / or members. It complies, at a minimum, with national and local laws and ILO conventions on health and safety. Working hours and conditions for employees and / or members (and any home workers) comply with conditions established by national and local laws and ILO conventions. Fair Trade Organizations are aware of the health and safety conditions in the producer groups they buy from. They seek, on an ongoing basis, to raise

awareness of health and safety issues and improve health and safety practices in producer groups.

Providing Capacity Building The organization seeks to increase positive developmental impacts for small, marginalized producers through Fair Trade. The organization develops the skills and capabilities of its own employees or members. Organizations working directly with small producers develop specific activities to help these producers improve their management skills, production capabilities and access to markets - local / regional / international / Fair Trade and mainstream as appropriate. Organizations which buy Fair Trade products through Fair Trade intermediaries in the South assist these organizations to develop their capacity to support the marginalized producer political environment; the organization will enable means of independent and free association and bargaining for employees. The organization ensures that representatives of employees are not subject to discrimination in the workplace. Organizations working directly with producers to ensure that women are groups that they work with.

Promoting Fair Trade The organization raises awareness of the aim of Fair Trade and of the need for greater justice in world trade through Fair Trade. It advocates for the objectives and activities of Fair Trade according to the scope of the organization. The organization provides its customers with information about itself, the products it markets, and the producer organizations or members that make or harvest the products. Honest advertising and marketing techniques are always used.

Respect for the Environment Organizations which produce Fair Trade products maximize the use of raw materials from sustainably managed sources in their ranges, buying locally when possible. They use production technologies that seek to reduce energy consumption and where possible use renewable energy technologies that minimize greenhouse gas emissions. They seek to minimize the impact of their waste stream on the environment. Fair Trade agricultural commodity producers minimize their environmental impacts, by using organic or low pesticide use production methods wherever possible. Buyers and importers of Fair Trade products give priority to buying products made from raw materials that originate from sustainably managed sources, and have the least overall impact on the environment. All organizations use recycled or easily biodegradable materials for packing to the extent possible, and goods are dispatched by sea wherever possible.

4. HISTORY OF FAIR TRADE


The creation on Fair Trade was 1946 in United States, where Help Crafts (now, The Thousand Villages) and SERRV International started to established trade relations with poor communities of the south. The first fair trade store opened in 1958 but, until 1964 didnt be constituted as an international movement. In 1964, in the United Nations Conference, a lot of countries reclaimed more fair trade and less development aids. His slogan was: Trade, not aid! From that moment, the first Fair Trade organizations began to appear around the world. Oxfam UK was created in 1964 and S.O.S. Wereldhandel (now Fair Trade Original) in 1967. In 1969 started to open the first stores in Belgium and Netherlands. At the end of the 70s it was launched the first Fair Trade label, Max Havelaar, under the initiative of the Dutch development agency Solidaridad. The first Fair Trade coffee from Mexico was sold into Dutch supermarkets. It was branded Max Havelaar, after a fictional Dutch character who opposed the exploitation of coffee pickers in Dutch colonies. The Max Havelaar initiative was replicated in several other markets across Europe and North America: Max Havelaar (in Belgium, Switzerland, Denmark, Norway and France), Transfair (in Germany, Austria, Luxemburg, Italy, the United States, Canada and Japan), Fair Trade Mark in the UK and Ireland, Rttvisemrkt in Sweden, and Reilu Kauppa in Finland. In 1987 EFTA (European Trade Fair Association) was born though the union of many organizations and two year before IFAT (Now, WFTO World Fair Trade Organization) was built. Now, it brings together more than 400 organizations. In 1994 NEWS (Network of European World shops) was created as representation of 2.500 fair trade stores. The Fair Trade Labeling Organizations International (FLO) was established in Bonn (Germany), in 1997 to unite the labeling initiatives under one umbrella and harmonize worldwide standards and certification (It was the union of Max Havelaar, Transfair and Fair Trade Mark. In 2002 Fair Trade International launches the international FAIR TRADE Certification Mark. The goals of the launch were to improve the visibility of the Mark on supermarket shelves, facilitate cross border trade and simplify export procedures for both producers and exporters. Parallel to the development of labeling for products, the World Fair Trade Organization (WFTO) developed a monitoring system for Fair Trade Organizations. In order to strengthen the credibility of these organizations towards political decision-makers, mainstream business and consumers, the WFTO Fair Trade Organization Mark was launched in January 2004. The Mark is available to member organizations that meet the requirements of the WFTO monitoring system and identifies them as registered Fair Trade Organizations. WFTO is working with FLO on a Quality Management System for Fair Trade. WFTO is also developing a third-party certified product label for Fair Trade Organizations.
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5. FAIR TRADE PLAYERS


Fair Trade players can be divided into five types of organization: Producers: a producer is classified as any person or company supplying produce that adheres to the standards of Fair Trade. This includes both certified and uncertified producers. Producers range from individual artisans to factories with several dozen employees, and they are distributed in all the world and work in many sectors. For example, in the image we can see the countries where certified Fair Trade producer organizations are located. And, if we look in the Fair Trade Spanish Coordinator site, we discover, that in Spain the Fair Trade Food products come from over 35 countries, 42% of food from Latin America, Asia 25.7%, 22.9% from Africa and 8.6 others. By product, coffee is the one with a more varied provenance: applicable from 13 countries, of which 11 are African and 2 are American.

Associations: associations are often founded and funded by organizations within the Fair Trade movement. They are the connecting bridge between Fair Trade organizations that wish to cooperate or to be associated with each other. Their main goal is to promote Trade and the each do this is their own way. Some advocate Fair Trade, some connect the retail outlets of Fair Trade, and others create standards. The largest Fair Trade associations are the Fair Trade Labeling Organization (FLO, recently also known under the abbreviated name Fair Trade International), the European Fair Trade Association (EFTA) and the collective of national associations of World shops in Europe.

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The Fair Trade Labeling Organization (FLO) is an association of 24 organizations that have joined forces to secure the development of Fair Trade. FLO describes its main responsibilities as setting international Fair Trade standards, organizing support for producers around the world, developing a global Fair Trade strategy and promoting trade justice internationally. Their members consist of 19 Labeling Initiatives, three Producer Networks and two Associate Members. The organization assists in the socio-economic development of producers in the Global South and help to foster long-term relationships and good practice with traders of Certified Fair Trade products. Their Certification provides a guarantee to consumers of Certified Fair Trade products that they are contributing to the SocialEconomic Development of people through their purchases The European Fair Trade Association: was established in 1987 by a few of the oldest and largest Fair Trade importers and obtained formal status in 1990. It is an association of 11 Fair Trade importers in 9 European countries. Its members are located in Austria, Belgium, France, Germany, Italy, The Netherlands, Spain, Switzerland and the United Kingdom. The associations aim is to support its member organizations in their operations and to encourage cooperation and joint coordination between them. National associations of World shops: are an initiative that came into being to respond to the need for countries from the South to gain easier access to the North. They can be described as specialized retail outlets that sell a large variety of Fair Trade products from developing countries under fair trade conditions for the producers. World shops combine commercial interests with an idealistic attitude. They form the interface between end-consumers and the Fair Trade products. Because the first World shop was opened in Europe, most World shops today are still based in that region. However, the movement is spreading across the world and has seen new World shops open their doors in North America, Australia and New Zealand as well. The individual World shops are usually united under the umbrella of a national association of World shops. These associations do not only support their members, but also actively campaign, educate and lobby at the (inter)national level to promote trade being conducted in a Fair manner.

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International networks: a network is a collection of Fair Trade organizations and represents the interests of its members. The networks provide support, opportunities, information, a common meeting ground and access to the market. The largest Fair Trade network is the World Fair Trade Organization (WFTO). The WFTO is a global network of Fair Trade organizations spread over more than 70 countries. The common goal is to enable producers to improve their livelihoods as well as their communities by means of Fair Trade. WFTO carries out this mission by facilitating market access for its member base through policy, advocacy, campaigning, marketing and monitoring. The members of this global network represent every step in the value chain, from production to sale. They provide the Fair Trade movement with a voice that has been heard for more than 20 years and there are more than 400 Fair Trade organizations in membership of the WFTO.

Importers and consumers: in the Fair Trade market, importers are also regarded as consumers. Importers can have different types of shops, as we can see in the chart.

Also, if we take, for example, the data of the Annual Review 2010-11, Financials and Global Sales Figures of FLO, we can see the growth for Fair Trade. Shoppers spent 4.36 billion on Fair Trade products, up by 27 percent on 2009. Sales more than tripled in the Czech Republic and South Africa. Consumers bought a 40 percent more in Fair Trades largest market, the United Kingdom.

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Lobbying organizations: they serve as advocates for everyone in the Fair Trade movement, helping the Fair Trade movement lobby and campaign nationally, regionally and internationally. They attempt to persuade the state to change their point of view in favor of a certain cause. In principle, all Fair Trade organizations have something of a role in lobbying, either through traditional lobbying activities or by showcasing success stories of positive impact. However, an example of a lobbying organization within the Fair Trade movement is the Fair Trade Advocacy Office (FTAO). The FTAO in Brussels (representing FLO, WFTO and EFTA) continues to lobby successfully for a comprehensive European Commission policy that supports Fair Trade. The FTAO supports Fair Trade and trade justice with the aim to improve trading conditions for the benefit of small and marginalized producers and poor workers in developing countries. The office: coordinates the advocacy activities of FLO, WFTO and EFTA; monitors European and international trade and development policies; ensures a constant dialogue between the Fair Trade movement and political decision makers;
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develops political positions in the area of Fair Trade and trade justice publishes information materials such as newsletters and brochures.

6. THE SPANISH CASE


Until 1986 Spain didnt have Fair Trade. In this year, the organization Traperos de Emas and Cooperativa Sandino (now, Ideas) were born and open the first stores in Basque Country and Andalusia. Since then, other NGO appeared in Spain to defend Fair Trade. (Equimercado, Alternativa 3, Setem) Ten years later, some NGO allied to create Coordinadora Estatal de Comercio Justo that today encompasses 34 organizations a more than 100 stores. In 2004, Coordinadora Estatal de Comercio Justo approved the application of FLO Certification and the distribution of the products in supermarkets. This regulations motivated the creation of Espacio por un Comercio Justo by 30 Fair Trade stores and some NGO that were not agree with the Coordinadora Estatal de Comercio Justo opinion. That was the origin of the dispute, but the existence of two opposite poles was clear years before. On the one hand, the traditional and dominant pole led by Intermon Oxfam and on the other hand, a holistic and alternative pole led by Xarxa de Consum Solidari. What are the differences between them? Production: the traditional pole thinks in the establishment of some criteria that allow the distinction between Fair Trade products of the rest of the products. An example of these criteria are: prepayment of a part of the total price, the destination of the benefits obtained in cover basic needs of community, the warranty of non children labor exploitation The alternative pole says that trade relations are so complicated that we cant simplify them with these criteria. Relation with producers: the traditional pole has a quantitative vision, justifying Fair Trade as a transference North-South that seeks for obtain maximum benefits to improve living conditions of producers. The other sector follows a qualitative perspective. They want to manage a political and economic system transformation, instead of increase the benefits. Imports: traditional organizations consider that all products made following the Fair Trade criteria must be imported, although we produce these same products in Spain. However, the alternative pole says that these products cant be imported (for example, wine o oil) because there isnt any logical reason to justify this action.

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Transformation: as the traditional pole wants to obtain the more benefits as possible, they justify the recruitment of multinational companies to transform the products. So, they can reduce the costs of the products and obtain a large margin. The other pole only accepts the recruitment of artisans, cooperatives and small family businesses in the transformation step. Distribution and sales: the presence of Fair Trade products in supermarkets and large surfaces its a success for the traditional pole, because thats means more sales. The alternative sector is against it, because they think that its only a marketing strategy for these supermarkets. They prefer small stores, fairs, local markets Certification: FLO certification is an instrument to distinguish Fair Trade product from the others and the traditional pole supports it use. In the other hand, the opposite pole criticizes that this certification regards only in the origin of products, but it doesnt take in account how are the exporters, importers, distributors something so important to decide if a products is or nor fair. RCS: the traditional pole agrees with the implications of companies through RCS actions. The thought in companies can strengthen Fair Trade. The alternative pole thinks that companies are only interested in marketing campaigns, so they cant be allies.

But these differences have not impeded the growth of Fair Trade in Spain. As last Setem inform about this phenomenon, the perspectives are good. In this graph we can see the sales of Fair Trade products in the last 10 years.

Studying the distribution channel, we can see that small stores are the principal distributors of Fair Trade products, followed by supermarkets.

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And, regarding to the type of products, we can see that food products are the most sold, and between them the coffee its the key product.

Last point, the origin of the products shows that Latin America is where more Fair Trade products are produced.

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7. CONCLUSION
In these pages we have learned a lot of things about Fair Trade: how were its origins, it evolution, it working, the countries implied, the players involved The case of Spain is an exception compared with the International Fair Trade, because we have two opposite poles, with different opinions about the basic concept of Fair Trade. But, what its clear is that today, fair Trade is a truly global movement. Over a million small-scale producers and workers are organized in as many as 3,000 grassroots organizations and their umbrella structures in over 50 countries in the South. Their products are sold in thousands of World-shops or Fair Trade shops, supermarkets and many other sales points in the North and, increasingly, in sales outlets in the Southern hemisphere. On top of that, Fair Trade has made mainstream business more aware of its social and environmental responsibility. In short: Fair Trade is becoming more and more successful.

8. BIBLIOGRAPHY
Books:

Coscione, Marco (2008) El comercio justo, una alianza estratgica para el desarrollo de Amrica Latina, Ed. Catarata, Madrid Sol, Eullia (2003); Qu es el comercio justo. Ed. Integral, Barcelona Montagut, Xavier; Vivas, Esther (2006); Adnde va el comercio justo?, Ed. Icaria Mas Madera, Barcelona.

Studies and reports: El comercio justo en Espaa 2010. Crisis, impactos y alternativas. Coordinadora Estatal de Comercio Justo. Fair Trade facts & figures. A Success story for Producers and Consumers. The Dutch Association of Worldshops Challenge and Opportunity. Supplement to Annual Review 2010-11. 2010 Financials and Global Sales Figures. Fair Trade International

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Websites:

Espacio del Comercio Justo: www.espaciocomerciojusto.org Coordinadora Estatal de Comercio Justo: www.comerciojusto.org Sello de Comercio Justo: www.sellocomerciojusto.org European Fair Trade Association: www.eftafairtrade.org International Federation of Alternative Trade: www.ifat.org Network of European World Shops: www.worldshops.org SETEM: www.setem.org

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