Development & Aid, Economy & Trade, Europe, Headlines, Poverty & SDGs

DEVELOPMENT: Fair Trade Is Helpful, but Not Enough

Tito Drago

MADRID, Dec 30 2004 (IPS) - The Fair Trade movement is growing in Spain, where it now enjoys government support. But the momentum is not strong enough to compensate for the unfair practices that keep the markets of the wealthy industrialised North largely closed to the developing South.

Fair trade is a cooperation-based, non-profit approach to international trade, offering direct access to the markets of the North for excluded and disadvantaged producers of the developing South, and ensuring them decent wages and working conditions.

For Fair Trade outlets, like any other retail operation, the Christmas and New Year’s season is always a peak business period.

According to Intermon Oxfam – part of the international relief agency Oxfam’s global network – which coordinates a network of 70 Fair Trade entities, sales figures in early December already represented over 40 percent of the total for the entire holiday season last year.

This year, the movement enjoyed the support of the government of socialist Prime Minister José Luis Rodríguez, who symbolically expressed his endorsement by purchasing holiday season gifts at Fair Trade shops.

Zapatero has said that 2005 will be a vital year for international cooperation. At a meeting with civil society leaders shortly before Christmas, he pledged to develop a foreign policy aimed at the fulfilment of the millennium development goals (MDGs).

The eight MDGs were adopted by the United Nations in 2000 as a framework for promoting sustainable development and eradicating poverty, hunger and inequality, with specific targets set for the year 2015.

Among other announcements, Zapatero reaffirmed his intent to promote a debt swap system in which developing countries can have a portion of their foreign debt cancelled by investing in education.

He also reported that his government will be organising a cooperation conference during the first half of 2005, to be attended by representatives of governments, non-governmental organisations (NGOs), trade unions and the business community.

In 2004, the Fair Trade network in Spain registered sales of four and a half million euros (roughly six million dollars), marketing products from Africa, Asia and Latin America.

According to Catholic priest Angel García, president of the humanitarian organisation Messengers of Peace, the Fair Trade system is a useful tool, but Fair Trade alone cannot bring about more equitable development.

García spoke with IPS shortly before leaving for Sri Lanka, where he will help coordinate relief efforts for the victims of the tsunamis that devastated large parts of Asia last Sunday.

“While Fair Trade is important, we must also fight to eliminate the unjust practices in international trade that keep the markets of the North closed to the countries of the Third World,” he said.

For her part, the head of the Spanish NGO Action Against Hunger, Marta López, said she supports Fair Trade as “a means of fostering production by craftspeople and small business owners in developing countries.”

Nevertheless, she warned, “there are some products that bear the Fair Trade label but are actually marketed by purely profit-driven companies.”

Furthermore, López told IPS, Fair Trade products represent a very small niche market, one that is unable to offer competitive prices. “The main problem lies in the markets of the industrialised countries, which refuse to open their doors,” she said, echoing García’s views.

One example is Central America, “a region that produces high-quality, low-cost fruit, but cannot freely export its products to the European Union (EU) and the United States because of tariff barriers,” she said.

The central theme of the current round of multilateral negotiations in the World Trade Organisation (WTO) is the dismantling of the millions of dollars in subsidies provided to farmers in the powerful industrialised nations, which lead to distortions in international agricultural trade and primarily hurt producers in the South. Those talks, however, are currently at a standstill.

Lourdes Berges of Intermon Oxfam told IPS that Fair Trade is another form of international cooperation, that does not exclude others. “Supporting the production of small farmers and crafts cooperatives is a way of contributing to their development,” she said.

An important component of the Fair Trade system is the “pre-financing” of production. The NGOs involved provide the producers with advance payment of up to 50 percent of the sales value of their products. The NGOs also handle the marketing of the products in Spain and other countries of the North.

Thanks to this financing, participating communities, associations and cooperatives can produce their goods without falling into debt.

In addition to the non-governmental Fair Trade network, the Spanish International Cooperation Agency (AECI), a government institution, provides small and medium-sized producers in countries of the South with assistance in the form of financing, training and technical support for projects. The goods they produce are subsequently marketed in Spain.

The Fair Trade products sold in this country include an organic chocolate containing kiwicha, a protein-rich Andean grain native to Peru, produced by a Peruvian company.

During this year’s holiday season, AECI also distributed cashews from Mozambique, produced by a network of 227 cooperatives that bring together more than 6,000 women farmers in poor areas surrounding Maputo, the capital of that southeastern African nation.

Other goods sold in Spain and produced with assistance from AECI are black pepper from an irrigation project in Sao Tome and Principe (an island nation in the Gulf of Guinea), coffee from the northern Sierra Nevada mountains in Colombia, and palm hearts grown in Cochabamba, in central Bolivia.

In any event, from the viewpoint of Action Against Hunger, the problem of international trade imbalances must be addressed globally, “because there are three actors that rule the global economy: producers, distributors or intermediaries, and consumers.”

Those who produce the most for the world market are those who earn the least, namely the two million workers in the developing nations of the South who earn between one and three dollars a day.

At the other end of the equation, the industrialised world accounts for 80 percent of global consumption, the NGO reports.

It will take more than Fair Trade to rectify an imbalance of this magnitude.