Eric Fichtl

 
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The Fair Trade Movement in Historical Perspective

Explaining the “In and Against the Market” Predicament

 

SECTION 1.3:  MUTUALLY BENEFICIAL TRADE

The solidarity period saw some notable advances in the alternative trade system, but many solidarity ATOs faced grim prospects as the 1980s wore on; the decade-old Dutch ATO Abal closed its doors in 1984, and SII—the ATO that had roasted and re-routed Equal Exchange’s first coffee shipment—went bankrupt in 1991.[65] Goodwill sellers, with their traditional focus on artisanal handicrafts, also faced increasing competition from mainstream for-profit retailers and a slew of new mail-order catalogs peddling “ethnic” craft products and decorative cultural wares.[66] Global politico-economic shifts (detailed in Part 2 below) also transformed the playing field for alternative trade.

As the 1990s loomed, the alternative trade movement was at a crossroads. A new outlook began to spread through the alternative trade circles. It was widely recognized that, although alternative traders had held true to their convictions about social justice and solidarity with disadvantaged producers, the size of the alternative trade network was too small to generate sufficient sales revenue to consistently improve the lives of Southern partners. Moreover, many ATO practitioners—while confident of the benefits their model offered—lacked the business, finance, and marketing experience to continue expanding their reach in ways that would allow them to sustain their direct-purchase relations with increasing numbers of distant producer groups over the long haul.[67] And, as Tallontire notes, many alternative traders came to the conclusion that “the producer focus of earlier periods was associated with the neglect of the consumer.”[68]

These realizations prompted a reassessment within the alternative trade movement that saw a general shift toward practices of what Tallontire calls “mutually beneficial trade.”[69] Essentially, this meant a transition away from being very supplier-driven—from ATOs buying what primary producers had to offer even if quality or supply was erratic—to striking a delicate balance between the needs and capacities of suppliers on the one hand, and the demands and desires of consumers on the other. If the right mix could be found, adherents of mutually beneficial trade reasoned, it would be possible to simultaneously expand the market for alternative trade goods and incorporate more producers into the network, thereby spreading the benefits of the system to more disadvantaged producers than ever before. As an alternative trade veteran put it:

It became clear that although fair trade is different from regular trade as regards its principles and starting points, this need not necessarily always be evident from the presentation of the products. Commercial techniques may, and indeed must be used to sell both the products and the message. Why not beat the enemy with his own weapons?[70]

At the same moment, a wave of “green consumerism” that had built up during the 1980s began to enter mainstream discourse, especially in developed countries where consumption levels were the highest. According to consumer activism historians Lang and Gabriel, the green consumerism wave of the late 1980s and early 1990s—targeting everyday items from CFC-emitting aerosol cans to apples with pesticide residues—was a turning point for the environmental movement and for consumers:

For the first time since the early Co-operative movement [of the 1840s], consumers were offered a message to influence production directly: buy this rather than that product and you can help “good” producers to out-compete “bad” producers. “Good” and “bad” were defined in environmental terms. Suddenly, the environment movement shifted from being oppositional to staking a claim in the market-place.[71]

Green consumerism served as a leading edge for other forms of consumer activism, including the wave of ethical consumerism and anti-sweatshop sentiment that gathered strength in the mid 1990s when affluent countries’ publics were riveted by reports of exploitative conditions in the maquiladoras and export-processing zones of the apparel and manufacturing sectors.[72] By the turn of the millennium, an observer noted that “The main ethical issue of the 1980s—‘green’ environmentalism—has now been broadened from a product focus into a more general concern over the entire production process, particularly highlighting the human/social element.”[73]

The alternative trade movement saw parallels between these wider developments and the internal debates and realizations it was having at the time. This “new” concept—that production processes and consumption choices meant something and had effects—was one with which alternative traders had long been familiar. Still, while the alternative trade movement felt it had its fundamentals right with regard to producers, many practitioners began to feel that not enough had been done to reach consumers with a convincing message about their power to support improvements in the livelihoods of marginalized producers. Thus, as alternative trade sought to reach more mainstream and main street customers, the movement gradually modified its discourse and began to emphasize its “fair” character more than its “alternative” attributes. This engendered a tension in the movement (discussed in Part 3) that has yet to be fully resolved.

If alternative/fair trade was to reach the mainstream, one initial hurdle to overcome was doubt about the quality of fairly traded foods, since a sense of solidarity had often trumped quality concerns. As Young has quipped of the solidarity goods, “They were for many a political statement and were unrelated to the particular qualities of the products. The ubiquitous Nicaraguan instant coffee was very much an acquired taste.”[74] Alleviating these lingering concerns and improving the quality of fair trade products was approached from a variety of angles.

The direct links established between Northern ATOs and Southern producer groups were one important conduit for conveying quality concerns and consumer tastes. To bridge these issues, ATOs provided all manner of technical advice, training, resources, and information to their export partners in the South. As Humphrey Pring of the British ATO Twin Trading explained, “It’s not necessarily easy always, but part of the fair trade process is helping producers that are not yet producing excellent quality coffee to produce excellent quality coffee. It is an iterative process of improvement.”[75] This approach differed widely from that of conventional traders, as Tiffen et al note: “Trading directly with farmers can be labour intensive and may require active developmental assistance or, at least, relationship building. This has not traditionally been the preserve of—or even of interest to—the larger multinationals.”[76] At the same time, the cooperative organizational structure of many producer communities created small economies of scale, allowing cooperatives to pool resources in order to purchase new equipment and improve production infrastructure, to hire technical advisors and sales managers, and to fund the training of cooperative members in these skills. Some cooperatives even began to send representatives to trade shows in their largest export markets to meet with potential buyers—fair trade and conventional—and communicate face-to-face about quality concerns and consumer trends.[77]

Equal Exchange again provides an interesting case study, this time of a solidarity trader that adjusted its strategies to accommodate a new emphasis on consumer choice and quality. During its first five years of operations, Equal Exchange had developed a very limited product array, consisting of only a few coffees and one tea.[78] But in 1991, the company dramatically expanded its product line to over 40 coffee offerings, including whole beans, variant roasts, decaffeinated and flavored options, and an espresso. The company also designed new display cases that served as coffee dispensaries in supermarkets, and more teas and honey were added, giving consumers a wide variety of fair trade products to choose from while also incorporating new producers.[79]

In the non-food segment of the fair trade movement, too, there was a notable shift in strategy toward business professionalization, improved quality, and more responsiveness to consumer preferences. For instance, in the late 1980s, the pioneering Dutch ATO SOS centralized its operations in one facility and opened a new showroom so it could concentrate more on its consumer-facing attributes. The trend was repeated by other world shops:

Products were displayed in an attractive way, white being the dominating colour. The World Shops started to concentrate as much on the sale of products as on awareness-raising and political action. Many shops moved to a more central location and/or made their design and presentation more attractive. In considering possible cooperation with partners, the context in which a producer group worked became an important criterion. Product quality was greatly improved: product development became an important activity to ensure continued cooperation with the partners.[80]

ATOs trading in artisanal crafts also became more concerned with ensuring that information about consumer preferences was transmitted to producers, so that designs could be adjusted to better reflect purchasing trends. Martha Lynd, a U.S. anthropologist who helped start an ATO that imports weavings from Mayan women’s cooperatives in Guatemala, explained the challenges of negotiating the cultural gaps between producer traditions and consumer preferences. She relates an experience between her ATO and a small group of artisans whose traditional weavings featured several bright colors:

When we asked them to use less hot pinks, lime greens, and oranges, they replied that the weavings would then be triste or sad. We had to explain that every culture has different ideas of aesthetics and that North Americans prefer only a bit of these colors… We acknowledge that introducing new designs and color combinations is a delicate issue. On the one hand, we want to help the women succeed in the international market. On the other hand, as a fair trade business committed to preserve producer groups’ traditions, we do not want producers to lose the integrity of their weavings. In such a situation, the fair trade advocate must try to wield a double-edged sword. As a cultural facilitator, we try to educate the North American consumers about the cultural meanings and context of particular weavings, while helping the artisans understand the range of North American tastes.[81]

A consumer-cognizant transformation also took place in one of the oldest ATOs during this period. After experimenting unsuccessfully with a mail-order catalog and clothing lines, in 1996 SELFHELP Crafts of the World (the MCC-affiliated ATO begun in 1946) undertook a rebrand that aimed to present a more mission-driven message to consumers. Playing on the symbolic attributes of the word “village” (“In our modern, mass production world, villages are still a setting for the individualized creation of authentic handicrafts…”[82]), the organization changed its name to Ten Thousand Villages. At the same time, it focused on developing its internal structures and diversifying its product array. A new balance was achieved between staff involved in product procurement and those involved in sales and promotions[83], innovative approaches to consumer education and retailing were developed, and the organization endeavored to heed its board of directors’ call to “operate this like a business, but a business of a different kind.”[84] Throughout its revamp, Ten Thousand Villages still grappled with issues around its core values, as director Paul Myers explained:

Most would agree that we have to provide good quality product, good price, good customer service just like anyone else. The question is what do we add to that. What is the added value? I think that question is far more important in terms of our success 10 years from now than whether we choose this particular store model or that particular marketing channel. Strategic planning will force us to find different ways, hopefully deeper ways of involving producers in what we do. That brings back the old problem of do you listen to the consumers or the producers. Well, the answer is clear—you listen to both, but how we bring that together will be a very important issue.[85]

In the developing world, regional interactions between artisanal producers and in-country capacity-building NGOs also contributed to improved quality by connecting small cooperatives with training, resources, and international buyers who helped them evade local middlemen. The Asia Fair Trade Centre of Excellence, for instance, drew on the expertise of successful fair trade groups to disseminate best practices and improve product development techniques, while also acting as an umbrella group to represent fair trade products at major trade shows in the region.[86] Likewise, the Community Crafts Association of the Philippines, a fair trade organization based in Manila, helps small-scale craft producers raise their profile through websites and showroom space, and by encouraging “artisan groups to develop high-quality products instead of engaging in mass production in which large quantities are made to offset low markups.”[87]

As product quality improved, the alternative trade movement also began to concentrate on creating consumer-facing expressions of the qualities that made its products different from conventional products. This required a multifaceted effort that included not only moves toward increased professionalization within and better coordination amongst ATOs, but also a shift in some segments of alternative trade toward new systems of quality control, certification, auditing, and marketing. This led to the creation of several important umbrella organizations that have become critical players in the alternative/fair trade movement.

At a conference in 1989, 40 ATOs that had been informally collaborating for some time established the International Federation for Alternative Trade (IFAT).[88] Among the founding members were leading ATOs such as SERRV, SELFHELP, Traidcraft, and Equal Exchange.[89] Headquartered in Amsterdam, IFAT is an association of ATOs involved in the production, trading, and retailing of fair trade products. To join IFAT, ATOs must conduct a self-assessment on several fair trade criteria, pass a peer review by existing IFAT members, and open their operations to external audits.[90] IFAT works in three main areas: market development for fair trade products, standards-setting and compliance monitoring of ATOs, and advocacy on behalf of fair trade. By 2004, IFAT had 235 members in all regions of the world, the bulk of which are producer organizations located in the global South.[91]

The European Fair Trade Association (EFTA) was founded in 1990, establishing a network among 11 of the oldest and largest ATOs from nine European countries. With a single-digit staff based mostly in the Netherlands, EFTA’s main purpose is to help coordinate the exchange of information between its member organizations in order to improve the efficiency of their importation operations. EFTA also encouraged individual member ATOs to take the lead in dealing with specific producer groups and product types, allowing for streamlined communications and advisory relations with producers, and increased leveraging of knowledge among EFTA members.[92] EFTA’s advocacy office in Brussels has, since 1995, run the “Fair Procura” program that lobbies European-, national-, regional-, and local-level public administrations to demonstrate their commitment to sustainable development by procuring fair trade products when possible.[93]

The Network of European World Shops (NEWS) was established in 1994 to improve communication and strategic collaboration among the 15 national world shop associations in 13 European countries, representing some 2,500 world shops and more than 100,000 volunteers. NEWS works to exchange best practices and information among its members, publish research on fair trade trends, and collaborate with other umbrella organizations like EFTA and IFAT to promote and advocate fair trade.[94]
In 1988, a landmark event for alternative trade occurred when Mexico’s UCIRI approached the Dutch ATO Solidaridad about developing a product label that would signify that coffee bearing the mark had been traded fairly.[95] This soon led to the launch of the Max Havelaar Foundation[96] and its innovative fair trade labeling initiative in the Netherlands. The labeling strategy spread rapidly, with similar national initiatives launched in several European countries, Canada, the United States, Japan, Australia and New Zealand, and eventually Mexico, the first Southern country with its own labeling initiative. The premise was simple, as Nicholls and Opal explain:

ATOs and Fair Trade retailers realized that by sharing a mark that identified their Fair Trade business practices, they could benefit from joint marketing and education around the Fair Trade label and grow more quickly…. They could also protect their own promise of fair trading practices by subscribing to the same broadly recognized standards and submitting to independent audits of their transactions with producers.[97]

Moreover, the consumer-facing labels were a tactical maneuver that would allow fair trade goods to be “mainstreamed” into conventional distribution networks like supermarkets and convenience stores where the vast majority of the public shops.

In 1997, the 17 then-existent national initiatives formed an umbrella organization, Fairtrade Labeling Organizations International (FLO). Headquartered in Bonn and structured as a nonprofit association, FLO took on the role of standard-setting that the national initiatives had formerly executed, including the development of certification standards for existing and new fair trade products.[98] FLO sets standards for small-scale producer cooperatives, systems that use hired labor (like plantations), and buyers and traders. The producer standards include provisions about transparent democratic governance (for cooperatives) and free association of workers and the right to collective bargaining (for plantations), occupational safety, sustainable production processes (including various environmental clauses), and access to technical training in agriculture and business skills. Producer standards also proscribe the use of forced and child labor, discriminatory employment practices, and a range of harmful pesticides. Trader standards include the stipulation that buyers must provide prefinance of up to 50 percent of the expected value of a purchase to producers if requested (an advance credit facility), and the payment of both FLO-specified minimum prices and fair trade premiums, the latter of which are used to fund community development projects chosen by producers’ representative bodies. FLO defines both minimum standards (which must be met for inclusion in FLO’s fair trade registry) and progress standards, which set benchmarks for continual improvements in producer communities’ production, governance, and business practices.[99] (See Appendix 2 for FLO’s Standard Principles and links to product standards.)

FLO also licenses ATOs and mainstream businesses to use its certification label (launched in 2002) on their packaging and promotional materials; this label signifies that the product bearing it has met the FLO standards for fair trade. At present, FLO standards exist for the following commodities: avocados, bananas, cocoa, coffee, cotton, flowers, fresh fruit, honey, juices, nuts and oilseeds, rice, spices and herbs, sports balls, sugar, tea, and wine.[100] FLO has also developed standards for “composite” products where at least 50 percent of the total ingredients are sourced from fair trade producers, and standards for several other products are in development.[101] Initially, FLO was responsible for overseeing audits of producers’ and traders’ compliance with fair trade standards, but in 2004 it created a subsidiary company specifically tasked with conducting certification audits, FLO-Cert[102]; this company regularly inspects over 500 producer groups in more than 50 countries.[103] FLO also helps to coordinate connections between producers and traders to streamline supply chains, and offers market information and technical capacity building services to producers through its Producer Business Unit and a network of liaison officers in developing countries.[104] Because compliance with production standards and certification requirements is vouched for by the FLO certification label, the advent of product labeling allowed fair trade products to enter the mainstream retail sector in ever-increasing abundance. FLO’s cost accounting techniques, including minimum prices and social premiums, have become one of the better known features of the fair trade system (discussed in Part 3).

It is important to note that FLO sets standards and FLO-Cert audits compliance for fairly traded commodities, but thus far not for cultural goods, which, due to their handcrafted heterogeneity, require a different approach to valuation and certification[105]; fair trade handicrafts do not presently have a certification and labeling system, but most ATOs involved in the trade are members of IFAT and meet its criteria.[106] In 2004, IFAT launched its own “Fair Trade Organisation” (FTO) mark at the World Social Forum in Mumbai. The FTO mark can be applied to the promotional materials of IFAT member organizations to demonstrate their status as FTOs that have met the requirements of IFAT’s Standards and Monitoring System.[107] The FTO mark is not a product label, but instead signifies the attributes of “mission driven organizations whose core activity is fair trade.”[108] In conjunction with the FTO mark, IFAT has drawn up “Ten Standards of Fair Trade” (included in Appendix 3) that provide a useful overview of its vision of fair trade.[109]

The ascendancy of mutually beneficial trade altered the alternative/fair trade movement considerably. Changes in business strategy, the development of standards and certification regimes, and a new emphasis on consumer-facing expressions of quality all meant that the movement was now better positioned to enter the mainstream and compete with conventional traders in an ever-growing range of products. This development succeeded in expanding the volume of fair trade—particularly in food products which became increasingly available on supermarket shelves and through other retail outlets. But it was also a radical departure from previous precedents, and one that created a tension within the alternative/fair trade movement about its direction and integrity. While I focus on this tension in Part 3, it is helpful to note that concerns over mainstreaming had much to do with the ethical dilemma of entering the conventional markets that alternative traders had previously sought to distance themselves from, as well as the fear that fair trade would be diluted or co-opted by the conventional market.

 



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Masters Thesis for:
New School, Graduate Program in International Affairs
May 2007
Advisor: Professor Stephen Collier
Reader: Professor David Gold

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