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The Fair Trade Movement in Historical Perspective

Explaining the “In and Against the Market” Predicament



The preceding discussion offers a sweeping overview of the changes and developments within the fair trade movement during its five-decade history. However, there are a few potential misunderstandings in this approach which should be addressed. First, there is a strong tendency in the fair trade literature to view the preceding historical stages as categorically sequential, with the onset of one stage essentially replacing the preceding stage.[164] This view is erroneous, and has contributed to overly simplistic analysis of fair trade that frequently conflates ideas relevant to only part of the movement with the entire movement, and which arbitrarily ignores other parts of the movement altogether. For instance, there is a common misconception that all fair trade products have floor prices, when these relate only to FLO-certified commodities, and not at all to handicrafts. Another common misconception resulting from a misreading of the movement’s history is that the network of goodwill and solidarity sellers’ world shops has disappeared in the era of fair trade mainstreaming; in fact, this alternative distribution network—along with catalogs and their 21st Century equivalent, websites—continues to play an important distributive and awareness-raising role in the fair trade movement.

Such misunderstandings are related to and arise from a core tension in the fair trade movement, which I shall address for the remainder of this thesis. The tension arose at a turning point for the fair trade movement—the launch of the labeling initiatives that, as described in section 1.3 above, allowed fair trade to enter the mainstream. The adoption of a mainstreaming focus during the “mutually beneficial trade” phase prompted many within the movement to ask where its focus should be: was fair trade in or against the market? That is, was the alternative/fair trade movement building a parallel, alternative market to that of conventional markets—a real moral economy of its own? Or was the movement instead carving out a fairer niche within the conventional market system, with reformist intentions rather than more revolutionary aspirations? Or was fair trade, in fact, doing both? Exploring this dilemma affords an opportunity to move toward a fuller understanding of the movement’s history. Before undertaking that analysis, however, it is necessary to briefly introduce an alternative framework that offers insights into the origins of the aforementioned tension. In this area, Gavin Fridell has offered a critical approach which I take up here as both a wider context for the preceding historical analysis and a pretext for the exploration of the movement’s disjuncture concerning its place in or against the market. Since Fridell’s terminology varies slightly from that preferred in the wider literature, I use italics to distinguish his terms from the phrasing elsewhere in this thesis.

Fridell draws a distinction between what he calls the fair trade network and the broader fair trade movement.[165] He describes the fair trade movement as a loose and informal group of governments, international associations, and NGOs which—rooted in an economic outlook largely derived from dependency theory—have sought to use state-centered market regulations to protect poor farmers and workers in the South from the vagaries of global markets and the inordinate power of the rich countries and TNCs.[166] Fridell defines the fair trade network as the narrower grouping of NGOs, Southern producers, and Northern partners that trade together within a system of fair trade rules (i.e., IFAT, FLO, ATOs, and associated groups). Fridell situates the fair trade network within the fair trade movement.[167]

Among the fair trade movement’s signal gains was the Bretton Woods Institutions’ passage of the Havana Charter in 1947 enabling the creation of commodity control pacts like the International Coffee Agreement[168] which set price bands and export quotas in an effort to control price fluctuations in commodities that were the backbone of many developing countries’ economies. Another was the 1964 United Nations Conference on Trade and Development (UNCTAD), where resolutions were adopted to foster greater southbound flows of wealth and to increase subsidies for Southern primary producers. Fridell sees the movement’s apex as the enshrinement of Southern demands for fairer trade in the 1974 UN Programme of Action for the Establishment of a New International Economic Order (NIEO) and the 1976 UN Charter of Economic Rights and Duties of States.[169] Although implementation of the UNCTAD resolutions and the NIEO faltered, two takeaways for the movement and the network were their first slogan, “trade not aid”, and the concept of “unequal exchange” outlined by economist Raúl Prebisch.[170]

Pointing to 1970s measures like UNCTAD’s promotion of compensatory finance schemes—which guaranteed recompense for poor producers if market prices for their goods fell below agreed levels—and the European Community’s STABEX accord, which subsidized Southern producers as a compensatory aid measure to former European colonies, Fridell contends that the fair trade movement (and within it, the network) drew much of its economic outlook from the school of dependency theory spearheaded by Prebisch. In Fridell’s words, “the fair trade network was significantly influenced by the broader fair trade movement, which set the context within which it evolved. From the movement, the fair trade network drew an emphasis on combating unfair commodity prices and on attaining ‘trade not aid.’” [italics added].[171] Fridell continues:

Convinced by dependency theorists that the world capitalist system was incapable of providing developmental benefits to the poor majority in the South because of the mechanism of unequal exchange, fair traders aspired to create a parallel trading system that would open alternative markets for Southern products. In these alternative markets, prices would not be determined by the vagaries of supply and demand, but would be formed through a process of negotiation between producers and consumers based on the premise of fairness to all parties.[172]

Fridell calls this the fair trade network’s first phase, dating it from the 1940s to 1988—roughly aligned with Tallontire’s goodwill selling and solidarity trade stages as outlined earlier.

For Fridell, the fair trade network’s second phase (1988 to present) corresponds with the collapse of the broader fair trade movement amid the ascendancy of neoliberalism marked by the expansion of the GATT into the World Trade Organization and the dissemination of Washington Consensus structural adjustment policies that dismantled state-supported development projects and protectionist programs in many parts of the world; among this era’s casualties were the international agreements that had helped stabilize commodity prices for decades. It is during this second phase, Fridell asserts, that the network drifted from its one-time commitments to the movement’s vision of statist regulation and compensatory trade pacts, and instead reoriented itself to playing within the new neoliberal parameters. Based on an analysis of a 1993 book[173] by the British ATO leader Michael Barratt Brown (widely considered the first holistic treatment of the alternative trade movement), Fridell delineates two clear differences between the fair trade network’s first and second phases, the former of which had been Barratt Brown’s focus. First, Fridell says, the network has abandoned its focus on the state as the primary agent in development, replacing the state with NGOs; and second, the old focus on the creation of a parallel trade system has been replaced by an emphasis on entry into the conventional market, albeit with hopes of reforming it from within.[174]

Consistent with other accounts of the alternative trade movement’s history, Fridell notes that the fair trade network’s second phase has been characterized by rapid increases in its volume of trade and the mainstream acceptance of its products, as exemplified by the decisions of more consumers, supermarket chains, TNCs with food product lines, and public institutions to carry or procure fair trade certified products.[175] Fridell argues that “the fair trade network represents a model that is voluntarist, market-dependent, and member-specific” in which “the prices for fair trade goods and the size of the fair trade market niche … are entirely dependent on the whims of Northern consumers.” [italics added][176] Moreover, he contends, the need to expand the network’s niche has led it to curry favor with the very TNCs, rich country governments, and international financial institutions that have been the primary drivers and beneficiaries of the implementation of the globalized neoliberal system. As such, concludes Fridell,

This situation represents a victory for neoliberal reformers, and reveals that the growth of the fair trade network can only be properly understood historically as the flip side of the decline of the fair trade movement and its broader objectives. [italics added][177]

Fridell’s conclusion teeters on the edge of the rather indefensible view that fair traders should have given up at the onset of globalized neoliberalism, and he largely ignores the fact that the fair trade network has shown a clear linkage to the movement by continuing to support alternative price systems for Southern producers as a means to counter the effects of Northern governments’ massive agricultural subsidies to Northern producers in an era of purportedly “free trade.” An alternate viewpoint, argued by Gendron et al, suggests that fair trade is best seen as a leading example of the “new social economic movements” that have “become a means for citizens to construct political action within the market where unsatisfied demands on the political system can be expressed in the era of globalization.”[178] As such, they continue, fair trade “cannot be uniquely seen in economic terms because it is principally in the social and political spheres that it draws its raison d’être.”[179]

These arguments aside, Fridell’s analysis is useful in showing the broader philosophical roots of the fair trade movement (as I have used the term) as well as the particular challenges the movement faced in the late 1980s and early 1990s. Fridell also makes a critical connection by drawing a distinction between the fair trade network’s two phases, for the onset of the network’s second phase corresponds to the creation of the first fair trade mark, the Max Havelaar label launched in 1988, and the subsequent proliferation of national labeling initiatives that led to the creation of FLO. As detailed in Section 1.3, it was the creation of fair trade labels which enabled the fair trade movement to enter the mainstream and carve out a niche for itself that resulted in increased sales and wider recognition among consumers—but which also precipitated the movement’s disjuncture about its place and purpose, the tension to which I now turn.

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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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