Thursday, March 27, 2008

History of Fair Trade

For my second project with Equilibrium, I am to research on Fair Trade to put together information as a reference for our clients.

The term Fair Trade was first used by Michael Barratt Brown in 1985, during a Trade and Technology Conference in London, although during the early days some other names existed: "Alternative trade", "Alternative commerce"... and some of them are still in use.

Principles and ideas related to fair trade and incorporating morals/ethics into commerce have been around for a long time, even before capitalist institutions began, dating back to at least the 18th century. Specifically, farmers and the poor were given consideration in different ways. One example of the system in this era would be the concept of the "old moral economy." However, the structured organizations supporting and promoting fair trade similar to what we see today began emerging much later, after World War II.

Political and religious Non-Governmental Organizations (NGOs) were the first groups to formally attempt to market goods from marginalized producers. The Mennonite Central Committee (MCC) and SERRV International were the first, in 1946 and 1949 respectively, to create supply chains based on fair trade in developing countries. The products they commercialized were sold mostly by volunteers in "charity shops" as a way to raise charitable funds.
For example, in 1946, a volunteer from the Mennonite Community in the United States, founded what is now "Ten Thousand Villages" organization that began by buying quality linen needlework from Puerto Rico producers and selling them in the states, cutting out the middle man.

The fair trade movement we see today was first developed in Europe in the 1960s and served as a political statement by radical students against imperialism. During this time, the ideals where all producers are given fair and equal access to the markets, gained in popularity as the mainstream knew little about the realities of so-called "sweat shops"and the conditions under which products were made, they were very disconnected from the realities of where their products came from.

Soon, the first alternative trading organization was formed under the slogan "Helping by Selling," called British NGO Oxfam. Soon it m
oved from "helping" to empowering, by realizing the merits of workers' cooperatives and artisans' societies and fostering this. Throughout the 1960s and 1970s, the fair trade movement worked to find markets for products from countries that were excluded from the mainstream trading channels for political reasons. The message through these movements to the public and politicians was: "give disadvantaged producers in developing countries a fair chance on the world’s market, and you support their self-determined sustainable development." The movement gained in popular support and soon thereafter dozens of Alternative Trade Organizations were established. However, in the 1980's, the handcraft products that were being sold began to lose their marketability and this forced the fair trade supporters to rethink their approach and their goals.

Another factor that became an increasingly significant issue to fair trade supporters during this period was the impact of the fall of agricultural commodity prices on poor producers. Many believed it was the movement's responsibility to address the issue and to find innovative solutions to address the ongoing crisis in the industry. So they shifted from a focus on crafted goods to agricultural products such as coffee and tea, and then later fruits, cocoa, spices, and nuts, all of which which became a renewable source of income for the the producers. Coffee sales quickly became the main source of growth of fair trade. In 2005, coffee made up 25-50% of total revenues from ATOs.

Handcrafts are still considered the theme product of fair trade although they only appeal to a small segment of the market and the niche market who buys products typically gets these products for the story behind them. Agricultural products reach a much larger amount of buyers.

Another problem facing fair trade was that the products were not mass-produced and were only offered in small "worldshops" around Europe and in some parts of North America. As more people learned about the fair trade movement, the challenge was to find a way to expand distribution without compromising consumer trust in fair trade products and in their origins. Labeling products as fair trade goods allowed the products to spread to mainstream stores and locations around the world for increased exposure to the market. This would allow customers to be more inclined to purchase these products that before was not worth the opportunity cost of going to a market off the beaten path just for one good.

In 1989, a sharp crisis on coffee prices pushed growers to poverty in spite of being producing a nice coffee, well above average quality. Max Havelaar was working in Chiapas (southern Mexico) at the time with his father Franz Vandelhoff when they had the idea of differentiating their coffee, charging the final customer a little more, cutting off the middlemen and providing farmers a fair wage. They created the first Fair Trade certification label, or mark. It was launched under the initiative of Nico Roozen, Frans van der Hoff and Dutch ecumenical development agency Solidaridad. The labeling and consequent broader reach of the fair trade goods increased the sales significantly. The labeling also allowed consumers to trace where their products came from and whether or not the producers at the end of the supply chain were making a profit from them.

The initiative was a great success and was replicated in several other markets: in the ensuing years, similar non-profit Fairtrade labelling organizations were set up in other European countries and North America, called “Max Havelaar” (in Belgium, Switzerland, Denmark, Norway and France), “Transfair” (in Germany, Austria, Luxemburg, Italy, the United States, Canada and Japan), or carrying a national name: “Fairtrade Mark” in the UK and Ireland, “Rättvisemärkt” in Sweden, and "Reilu Kauppa" in Finland.

Initially, the Max Havelaars and the Transfairs each had their own Fairtrade standards, product committees and monitoring systems. In 1994, many of these labeling organizations merged into TransMax working group, culminating in 1997 in the creation of Fairtrade Labelling Organizations International. FLO is an umbrella organization whose mission is to set the Fairtrade standards, support, inspect and certify disadvantaged producers and harmonize the Fairtrade message across the movement.

In 2000 Garstang (Lancashire, UK) became the first Fairtrade town in the world. Now, some other 250 have followed.

In January 2004, Fairtrade Labelling Organizations International was divided into two independent organizations: FLO International, which sets Fairtrade standards and provides producer business support, and FLO-CERT, which inspects and certifies producer organizations. The aim of the split was to ensure the impartiality, the independence of the certification process and compliance with ISO 65 standards for product certification bodies.

Today, even big corporations set on profit-making now specify minimum standards of working conditions when they buy clothes and other products in low-income countries and labeling initiatives now exist in 20 countries. Global fair trade sales have soared over the past decade. The increase has been particularly spectacular among Fairtrade labelled goods: in 2006, these sales amounted to approximately €1.6 billion worldwide, a 41 % year-to-year increase.[16] As per December 2006, 569 producer organizations in 58 developing countries were FLO-CERT Fairtrade certified and over 150 were IFAT registered..[17][18]


History of Fair Trade by Transfair

History of Fair Trade by A Fair Trade Hub

History of Fair Trade - Wikipedia

How Fair Trade Hit the Mainstrean - BBC

A Great Source on Fair Trade Information

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How Can Sustainability and Social Responsibility Contribute to the Future of the Middle East?

With their potential for economic growth and their financial wealth, Kuwait and the rest of the Gulf countries have the potential to become front runners in the Middle East in considering the environment and social responsibility, and I hope to help them to start that foundation.
The Middle East is a fascinating place with so much cultural richness and financial prosperity. People of the region are increasingly growing aware of the changing climate of business and of the world as a result of globalization and as such there is growing potential for development here. We can see already a substantial amount of growth and innovation in a very short period of time through the example of Dubai. Unfortunately, one area that still lacks a greater awareness is the environment and how it is being impacted by the current practices of companies and individuals. This problem affects all aspects of life from physical health to the natural beauty of the region. This problem however can also be viewed as a treasure box of opportunity for those who have vision and initiative and wish to consider sustainable concepts and how they can adopt them in their businesses.

I chose this cause because I love the Middle East. I am originally from Latin America and study in the University of Washington and I am studying abroad in Kuwait. I had so much success here and fell in love with the region so much that I was looking for a way I could give back to a place that had given me so much. I realized quickly that the region overall had great issues with regards to the environment. The beautiful beaches of the gulf were littered with garbage, there were little if any recycling programs, no awareness campaigns and lesson plans for the schools with regards to the environment, all of the landfills were unplanned and unlined and the waste seeping into the soil and polluting the storm water drains. Yet I could not understand how such a wealthy country with the financial means to take care of this issue and with a government committee assigned to the environment was allowing this to be this way. I decided I would try to see how I can help make a change for the better just as many countries have also done with regards to such issues as waste management such as the UK.