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Fair Trade Organizations

Fair Trade Organizations. Development Strategies:. Philip Jevtovic Thursday, February 18 th , 2010. Fair Trade. What is Fair Trade?.

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Fair Trade Organizations

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  1. Fair Trade Organizations Development Strategies: Philip Jevtovic Thursday, February 18th, 2010

  2. Fair Trade

  3. What is Fair Trade? • “Fair trade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fair trade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future.”

  4. Introduction

  5. Canadian Coffee Habits • Canadians consume more than 40 million cups of coffee per day. • An average of about 2.6 cups daily for each coffee drinker. • 63 % of adult Canadians drink coffee on a daily basis. • The majority of coffee is not bought at coffee chains or donut retail shops. • The vast majority of the coffee we buy comes from producers who are paid about 54 cents for a pound of beans, or about 11 cents for every dollar spent by the coffee-consuming public.

  6. Fair Trade • Under fair trade arrangements, less money goes to "middlemen" and more goes to the coffee grower. • Consumer interest for fair trade coffee has grown to the extent that several major supermarket chains and specialty coffee shops now carry the product. • Globally, fair trade sales have soared during the past decade. In Europe, sales of fair trade products hit about $950 million in 2005.

  7. Difficult Life Conditions For Farmers in LDC’s • In many developing countries, small-scale farmers and workers are unable to make a living income. Low world prices for primary products, high profits for middlemen, tariff escalation, and poor working conditions make life extremely difficult. • The numerous fair trade schemes and organizations that are set up around the world are an attempt to ensure that the producers of food and some non-food producers in developing countries receive a fair deal when they are selling their products. Thus, ideally, even the small-scale farmers in developing countries would earn enough income that they would be able to live and survive.

  8. Fairtrade Labeling Organization • If consumers are aware of the harsh and unfair conditions that face the farmers in developing countries, fair trade organizations hope that they may be willing to buy from producers who pay a fair prices to the farmers. • These producers all have a common, universal label on their packages, and are coordinated by the Fairtrade Labeling Organisation (FLO), which manages labeling in over 20 countries in the world.

  9. Fairtrade Labeling Organisation • In order to be certified in the system, the products must meet the standards of the FLO, which gives them the right to display the International Fairtrade Certification mark. • This recognizable Mark means that consumers will be able to identify Fairtrade products, know that they have been approved, and buy them knowing that the producer of the good was paid a fair price, and that he was treated fairly and with respect.

  10. FLO Certification Criteria • The product must reach the trader as directly as possible with few, if any, intermediates. • The product must be purchased at least at the Fairtrade minimum price. This is a guaranteed price that covers production costs and provides a living income. It covers the cost of “sustainable production.” • The producer receives a premium if the product is certified as organic. • The trader must be committed to a long-term contract, which in turn gives security to the producer.

  11. FLO Certification Criteria • The producer has access to credit from the trader, upon request, of up to 60% of the purchase price. • There must be no use of child labour in the producers farms. • The producer must use sustainable farming methods to produce the good. • The trader also pays a fair trade premium to the producer. The producers use these funds to aid local community development.

  12. Link to MDG’s • The FLO says that fair trade “offers consumers a powerful way to reduce poverty through their every day shopping.” • Links with the UN’sMillenium Development Goals, especially their first goal, “eradicate extreme poverty and hunger.”

  13. Millennium Development Goals • The MDG’s are a set of goals, developed by the United Nations, that aim to end poverty and respond to the world's main development challenges and to the calls of civil society. • The MDG’s promote poverty reduction, education, maternal health, gender equality, and aim at combating child mortality, AIDS and other diseases.

  14. Limitations Of Fair Trade • While the several development advantages of fair trade are evident, there exist various limitations or drawbacks to adopting this strategy as well. • The market share is much too small to have a major impact on the general living standards in developing countries. • Producing more low-priced commodities for over-supplied markets postpones what is really needed for development: diversifying exports and adding value or finding new social solutions for communities whose economic viability remains in doubt.

  15. Limitations of Fair Trade • Fair trade is an expensive market to maintain, because it needs constant promotion and requires educated consumers. High marketing costs are one reason why all those fair trade premiums don’t make it back to the initial producers. • Thus, the consumer will also bear some of these cost when they purchase Fair Trade products.

  16. Challenges For Fair Traders • Fair trade organizations need to identify further sources of growth, gain credibility with consumers through better quality monitoring and find the balance between business and advocacy in their operations. • Importing organizations need to build greater brand loyalty in the face of competition, identify new sources of growth outside the supermarkets and cooperate more with each other. • Labeling organizations need to manage their fast growth, since this is likely to continue. They need to find innovative ways to cooperate with multinationals.

  17. Sources • Blink, Jocelyn and Dorton, Ian. Economics Course Companion. Oxford University Press: New York, 2007. • http://www.tradeforum.org/news/fullstory.php/aid/1031 • http://www.fairtrade.net/ • http://www.wfto.com/ • http://transfair.ca/ • http://www.globalexchange.org/campaigns/fairtrade/coffee/ • http://www.european-fair-trade-association.org/ • http://www.cbc.ca/news/background/fair-trade/

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