27 September 2011

Was That "Free" Or "Fair" Trade?

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Fair Trade coffee, Mexico Fair Trade coffee, Mexico http://www.cloudforest-mexico.org/tag/fair-trade-coffee-2

Recently I attended the first ever “Fair Trade Towns and Universities National Conference” in Philadelphia. There were lots of useful workshops and inspirational talks about how to take this growing movement to the next level. Grassroots mobilization, all agreed, was the key to making this happen.

Incidentally, my family and I moved to a little community in the southwest suburbs of Philadelphia in 2006. Hence, my connection to the University of Pennsylvania and my teaching at St. mwo4meph’s University. But also . . . my joining the Fair Trade Committee of neighboring Media, PA – North America’s first Fair Trade town! Hence, also, the location of the first national gathering of a movement that includes dozens of towns and now cities like Chicago, Milwaukee and Boston!

Having written about Muslims and Christians joining hands to make this planet more peaceful and just, you can imagine how I was eager to look into a strategy for tapping the purchasing power of rich nations to alleviate some root causes of poverty in the developing world. My conclusion: it really works – though admittedly, unfair trade is not the only cause of poverty nor is fair trade the only solution. Yet, leveling the playing field so that farmers, artisans, and producers of all kinds in poorer countries can export their products at a fair price – with an added “social premium” to boot – is already lifting thousands of communities in Africa, Latin America and Asia from poverty.

Poverty: as grinding and grim as ever

Why is this important? It turns out that the gap between haves and have-nots has been dangerously widening in the last three decades. Poverty is endemic to many parts of the world and, speaking personally, it’s absolutely heartbreaking. Consider the following statistics:


  • At least 80% of humanity lives on less than $10 a day.
  • The poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income.
  • According to UNICEF, 22,000 children die each day simply because their families are poor.
  • Around 28% of all children in developing countries are considered underweight or stunted. The two regions that account for the bulk of the deficit are South Asia and sub-Saharan Africa.
  • Some 1.1 billion people in developing countries have inadequate access to water, and 2.6 billion lack basic sanitation.
  • Less than one per cent of what the world spent every year on weapons could have sent all the world’s children to school by the year 2000 – sadly, we are still far from this goal.


Though some progress has been made since the UN’s launching of the Millennium Development Goals in 2000, much remains to be done, even beyond the appalling famine in and around Somalia this year.


What is poverty?

As the above list indicated, poverty is a lot more than lack of money. Here’s how the World Bank defines poverty – a definition most development specialists would agree with:


“Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.”


Stepping out of poverty, then, is about gaining the power to join the democratic process – having a voice in one’s family, community, and perhaps even beyond. For people of faith, it’s the right to fulfill one’s calling as a trustee of God’s good creation; to provide for one’s family and influence for good the direction of one’s community. In the end, and especially in the world of satellite TV and the social media, it means joining with people all over the globe to foster relationships of respect, friendship and love.


“Free” trade: anything but!

Admittedly, poverty reduction is a multi-faceted and complex subject. But considering that most developing countries have an abundance of agricultural and cottage-industry products to export, one would think that encouraging “free” trade is one sure-fire solution. Not so. And the reason is that most talk on the part of rich countries about “free trade” is very misleading.

Ben Cohen (of Ben & Jerry ice cream fame) at the Fair Trade conference emphasized just that point. Global trading could be “free” if all the partners had the same power. But that is not the case, so we need to use trade as an instrument of justice. Just two examples: first, rich countries have a large stake in the multinational corporations (from oil to construction, and from coffee to cleaning products) that flood poor countries with their products as they seek to expand their markets, usually undercutting the prices of local vendors and putting them out of business.

Second, you have these large firms come and hire locally, but end up creating “sweatshops,” hiring children, or banning organized labor – basically getting away with abuses they are banned from at home. Anything but “empowering”! Some of the speakers talked about “modern day slavery” in this context, and in some cases, this is completely accurate.

Let me insert the big picture (macro-economics) for a minute. Two main reasons that tip the balance of “free” trade in favor of the rich are:


1. Structural imbalances in international trade: the rich countries have, by and large, written the rules by which the World Trade Organization (WTO) and World Bank (WB) operate. Worse than that, because of their power, these same countries easily get away with flaunting those rules when it suits them. So adding insult to injury, the USA and Europe shower their farmers with generous subsidies, which means that African or Latin American growers of wheat, rice, or soy, cannot possibly compete with such low prices.

2. Structural adjustments imposed by the International Monetary Fund (IMF), whose mission is to lift developing nations out of debt and poverty, carry with them “neoliberal” (or “pro-business”) policies. In practice this means means a mandate to . . .

      • reduce government spending on health, education and development
      • privatize gas, water and other utilities
      • spend more money on paying off their debt to the World Bank


Structural adjustment only widens the gap between rich and poor, while fanning the flames of social unrest. Especially as we continue to cope with the fallout of the Great Recession, it’s good to read the opinion of people like Nobel Prize laureate economist mwo4meph Stiglitz, who along with others is urgently calling for a new, revamped capitalism on a global scale (Freefall: Free Markets, and the Sinking Global Economy, 2010).

Notice how in the Preface of his book he sees the solution in reducing the imbalance of producers and consumers:


“The global trade imbalances that marked the world before the crisis will not go away by themselves. In a globalized economy, one cannot fully address America’s problems without viewing those problems broadly. It is global demand that will determine global growth, and it will be difficult for the United States to have a robust recovery – rather than slipping into a Japanese-style malaise – unless the world economy is strong. And it may be difficult to have a strong global economy so long as part of the world continues to produce far more than it consumes, and another part – a part that should be saving to meet the needs of its aging population – continues to consume far more than it produces.”


What can I do?

Now back to the micro level of economics – where you and I as consumers can truly make a difference. One of the sponsors of the conference Ten Thousand Villages, who seek to create opportunities for artisans in 35 countries, by helping to organize them and, if necessary, providing them with the needed training and tools We heard the story of a group of 30 to 40 leper women in India who are now sewing a line of products that are selling well in the US. That means, of course, that they work on both sides of the equation: empowering the producers and expanding the potential market of consumers.

Another sponsor was Green Mountain Coffee, a company that has been doing “fair trade” for a couple of decades. One of their managers spends his time visiting coffee farmers in Central America and seeing how his company can improve their lives. One of the realities that depressed him again and again was that typically these rural farmers and their families struggle to even feed themselves from three to eight months a year. Yet the good news is that by joining a cooperative sanctioned by the Fairtrade Labelling Organizations International (FLO), they obtain the following benefits, which has literally turned their lives around, as families and whole communities alike:


  1. a fair price for their products (with a guaranteed minimum in advance)
  2. a 10% “social premium” to be spent on education, female empowerment, healthcare, or any other way that will benefit the community (decisions are made on the cooperative level)
  3. a chance to learn first hand how democracy works and to make a difference


“Fair Trade” is about empowering communities in the developing world through our own insisting – we, the consumers – that they receive proper value for their labor and production. Along with this very simple principle (insuring a “fair” price), these are some other values the Fair Trade movement promotes:


  • Fair labor conditions: freedom of association, safe working conditions, and living wages – strictly no child labor!
  • Direct trade: eliminating unnecessary middlemen and enabling farmers to compete in the global marketplace.
  • Democratic and transparent organizations: farmers and farm workers decide democratically how to invest their Fair Trade revenues.
  • Community development: the Fair Trade premiums can also be used toward scholarship programs, quality improvement trainings, and organic certification. Usually farmers get a 10% advance up front, with an additional 10% going to the cooperative benefiting the whole community.
  • Environmental sustainability: banning harmful agrochemicals and GMOs in favor of farming methods that protect farmers’ health and safeguard precious ecosystems for future generations.

All said and done, “Fair Trade” (forget “Free Trade”!) is an effective means of alleviating poverty worldwide. Then, lifting people out of poverty is to empower them to join civil society locally and globally. And finally we the consumers, by deciding to buy “fair trade” whenever possible, can ensure that we, along with the producers and artisans, are better trustees of the earth. To this agenda people of all faiths – and no faith – can subscribe.