BRUSSELS RURAL DEVELOPMENT BRIEFINGS A SERIES OF MEETINGS ON ACP-EU DEVELOPMENT ISSUES Does Fair Trade contribute to sustainable development? This Reader was prepared by Lebo Mofolo, Research Assistant at the CTA Brussels Office Isolina Boto, Head of the CTA Brussels Office Does Fair Trade contribute to sustainable development? This Reader was prepared by Lebo Briefing n. 5 Mofolo, Research Assistant at the CTA Brussels Office With the assistance of Isolina Boto, Does Fair Trade Head of the CTA Brussels Office contribute to Parts of this document were compiled as background reading sustainable material for the 5th Brussels development? Development Briefing on Fairtrade and its contribution to sustainable development on 16 April 2008. Brussels, November 2014 The Reader and most of the resources are available at http://brusselsbriefings.net 2 Does Fair Trade contribute to sustainable development? TABLE OF CONTENTS 1. Introduction 2. What is Fair Trade: concepts and key players 2.1. Definition and definitional issues 2.2. Key players in Fair Trade 2.3. Other Fair Trade certification schemes 2.4. The routes of commercialisation of Fair Trade products 2.5. The role of retailers 2.6. The role of the Consumer 2.7. What is Equitable Trade and how does it relate to Fair Trade 2.8. Voluntary vs. Mandatory Approaches 3. Fair Trade Standards and standards setting 3.1. International Standards for Fairtrade labelled products 3.2. International Standards for Fair Trade Organizations 4. Fairtrade in the Global Marketplace: Issues and Implications for the ACP 4.1. Issues with Fair Trade in the Global Marketplace 4.2. Normative Issues with Fairtrade 4.3. Substantive Issues with Fairtrade 5. Fair Trade in ACP-EU Trade context: scale, opportunities, successes and Case Studies 5.1. Fair Trade in the EU 5.2. Fair Trade in the ACP 5.3. ACP Opportunities for Fair Trade 5.4. Case Studies: Fair Trade in the ACP and EU context Annex Glossary Acronyms Resources Websites 3 Does Fair Trade contribute to sustainable development? 1. Introduction Rationale In addition to the question of in developing and developed Fair Trade, this Reader will also countries were often not considered The term “Fair Trade” (FT) has explore the additional dimension of jointly – as Fairtrade represents various meanings. In this Reader, it “Equitable Trade (ET)/ Equitable private standards which are often is used to indicate the “Fair Trade Sourcing (ES)”, and non-trade not the purview of government movement”, represented in particular concerns in international trade. The regulation or intervention, and by Fairtrade Labelling Organisations range and functions of standards equitable trading often also concerns International (FLO) and its associate and certification methods have public policy on trade covering organisations (and hence the use changed, to cover new areas of issues such as public or international of “Fair Trade” in this note is with commerce beyond those traditionally standards as well as trade rules. In capital letters). These groups aim concerned with FT, for example this sense, FT was promoted as a to provide an alternative business public procurement or services. means to fill the gap in the public which attempts to redistribute This necessitates a broader analysis rules on trade that were silent on returns to factors of production of the trading regime between issues such as the health, education, in a manner that is “fairer” for developing and developed countries labour rules and other social issues developing-country producers. In further to the activities of the FLO relevant to producers from trading this sense, conventional trading and its associate organisations. partners, or else only the minimum relations involving developing In this regard, equitable trade rules were stipulated. This has country producers are deemed is not in and of itself a specific changed, and there is a growing “unfair” insofar as the returns to standard framework, but rather recognition and validation in the EU those producers are abnormally low encompasses all the principles of a at least, that considerations that are in an economic, environmental and/ more balanced, fairer and sustainable not purely about trade can be taken or social sense. Hence, Fair Trade trade commercial relationship into account in commercial activities, seeks to secure higher earnings for between producers and consumers, regulation and partnerships4 developing country small-producers the former largely constituting that will allow them to cover farmers or other service providers production costs, earn higher returns from developing countries. More Historical background and address potential market failures importantly, trade rules at the such as environmental degradation national, regional and international The fair trade concept has been and/or low labour standards1. levels, many of which are covered developing in western nations Fair Trade, therefore, seeks to in instruments such as Free Trade throughout the past 40 years or so, connect low-income producers and Agreements (FTAs) or are agreed in response to a growing recognition consumers in large markets in more in fora such as the World Trade that benefits accruing from trading equitable and sustainable ways. Organization, are also considered and trade growth are not necessarily It originates in a growing interest to fall within the ambit of ET. This shared by all countries and all among consumers in large markets is evidenced in the emphasis which layers of the population within each in the development of socially many stakeholders and international country in a comparable manner. responsible traders, that would institutions within and outside of allow for a “social value added” in the FT system placed on ET in the Fair or equitable trading has its roots their commercial transactions. This context of WTO negotiations during in the Italian and British cooperative value added is generated when the Doha Development Round and movement of the 19th Century, which the purchase of a product, besides the Bali Round3 was then followed by religious and its intrinsic value, gives the final political movements in the 1950s and consumer the benefit of knowing Recognition of the interrelatedness 60s in Britain and the US, seeking that it contributes to improve the between FT and ET is increasingly alternative trade models. Religious quality of life of a group of low- gaining tract. Traditionally, these organisations and development income producers2. two dimensions in the relationship agencies were also involved between producers and consumers in actively working to support 4 Does Fair Trade contribute to sustainable development? producers in the Global South to and respect. The goal was greater FT organisation, Max Havelaar in reduce inequality and poverty in equity in international trade. 1988, whose first FT labelled product their livelihoods.5 was coffee. Parallel to this citizens’ movement, The commercialisation of fair trade the developing countries were started in the United States, where addressing international political Fair Trade in the ACP- Ten Thousand Villages (formerly fora such as the second UNCTAD EU context Self Help Crafts) began buying conference (United Nations needlework from Puerto Rico in 1946, Conference on Trade and Fair Trade has repeatedly been and SERRV began to trade with poor Development) in Delhi in 1968, to recognized by the European communities in the South in the late communicate the message “Trade not Commission and EU member 1940s. The first formal “Fair Trade” Aid”. This approach put the emphasis governments for its contribution to shop which sold these and other on the establishment of equitable poverty reduction and sustainable items opened in 1958 in the USA. trade relations with the South, instead development. In 1998, the European of seeing the North appropriate all Parliament adopted the “Resolution The retail development of Fair Trade the benefits and only returning a on Fair Trade”7, which was followed in Europe date from the late 1950s small part of these benefits in the in 1999 by the “Communication from when Oxfam UK started to sell form of development aid. the Commission to the Council on crafts made by Chinese refugees “Fair Trade”8. In 2000, the ACP- in Oxfam shops. In 1964 it created The growth of Fair Trade (or EU Cotonou Agreement made the first Fair Trade Organization. alternative trade as it was called in specific reference to the promotion Parallel initiatives were taking place the early days) from the late 60s of Fair Trade9. In 2001 and 2002, in the Netherlands and in 1967 the onwards grew as a response to several other EU documents importing organization, Fair Trade poverty and sometimes disaster in the explicitly mentioned Fair Trade, Original, was established. At the South and focused on the marketing most notably the 2001 Green Paper same time, Dutch third world groups of craft products. Its founders were on Corporate Social Responsibility began to sell cane sugar with the often NGOs, working with their and the 2002 Communication message “by buying cane sugar counterparts in countries in the South, on Trade and Development. you give people in poor countries a assisting them to establish Southern In 2004, the EU adopted the place in the sun of prosperity”. These Fair Trade Organizations that “Agricultural Commodity Chains, groups went on to sell handicrafts organize producers and production, Dependence and Poverty – A from the South, and in 1969 the first provide social services to producers, proposal for an EU Action Plan”, “Third World Shop” opened. World and export to the North. Alongside with a specific reference to the Shops, or Fair Trade shops as they the development trade there was Fair Trade movement which has are called in other parts in the world, also a branch of solidarity trade. “been setting the trend for a more have played (and still play) a crucial Organizations were set up to import socio-economically responsible role in the Fair Trade movement.