From Hooked - Students for Trade Justice

Contents 1 The Economic History of Fair Trade 1.1 Commodity Curse 1.2 More Prehistory 1.3 Where did Fair Trade begin? 1.4 Question 1.5 The FLO Agenda: “Mainstreaming Fair Trade” 1.6 The Future

[edit] The Economic History of Fair Trade

Brett Inder, 6\5\6

…I missed first 10 min of this :(

[edit] Commodity Curse

• A country produces a very valuable commodity
• they over-rely on a single commodity; e.g. a cash crop
• price falls and it becomes a curse on them
• “Dutch Disease”
  • Egyptians made lots of money, their exchange rate went up, and made all their other products unviable. Increased over-reliance on that product even more.
  • Max Havelaar
    • a fictional character!
    • symbol of exploitation of poor workers (Indonesia, by Holland)

[edit] More Prehistory

• Prebisch & Singer
  • Continual deterioration of the “terms of trade” between agricultural / primary commodities and manufacturers
  • In PNG
    • 1972: 1 tractor = 1 tonne of coffee
    • 2000: 1 tractor = 8 tonne of coffee (same quality tractor)

[edit] Where did Fair Trade begin?

• Post-WWII: mostly crafts, missionary links, Alternative Trading Organisations
  • missionaries were out there as part of the colonisation things
  • thing was, they needed economic rescue, not just Jesus
  • Giving producers access to credit, to markets, skills, fair prices
• A friend of Brett’s in India had friends making “friendship bands” and selling them for almost nothing. Had an idea, and sold them in Australia and made LOTS of money with them!
• it’s about giving them access to market
• “Alternative Trading Organisations” bc it was about being Alternative in every sense of the word (not just “fair trade”) and also because
• Need access to credit. To set up anything, you need to borrow money first, and then become profitable. Local shopkeepers do most of the lending. Charge exorbitant interest
  • e.g. need money before payday. Get the bread, say $1.40. And then it’s 3000% interest p.a. when they pay 4 days later..
• Brett’s constantly getting emails from ppl saying “we’ve got these wonderful products but nobody to buy them” FT Organisations unfortunately only focus on a few products, largely not on Crafts. So now the focus is on diversifying.
• Market: very little transaction cost. Good access to information—walk around and see the prices. But international? Access to information a huge problem
• “Trade not Aid”—also a key emphasis in the beginning.
  • Trade: problematic. Disempowers people. “We will help you; tell you what to do; can’t entrust the money to you…have to teach.”
  • Idea that trade can be helpful is very exciting—become equal partners, mutual benefit, not just ‘helping you out’.
  • e.g. Sri Lanka 2004:
    • Official Aid: $US519 m
    • An extra $1 / kg for tea would provide: $300 m
    • More aid, and fairer trade both help! Aid goes to the poor people and trade perhaps to the rich, but still helps
• Commodities & Food?
  • began 1973: Coffee from Guatemalan co-op into Netherlands
• Moving into mainstream commodities now! Big step. Moving from marginal products, into the mainstream.

[edit] Question

Isn’t Trade also an extension of Colonialism? e.g. Vietnam 2nd-biggest producer of coffee; but they don’t drink it (at least traditionally! Colonial idea introduced by the World Bank.

• In Australia: began with Trade Winds/World Development Tea Cooperative 1978
  • Tea from Sri Lanka
    • they bought a big container of tea, and asked everybody through their Catholic church network, to come and buy tea!
• Community Aid Abroad
  • handcrafts

[edit] The FLO Agenda: “Mainstreaming Fair Trade”

• The Label
• FTAANZ, FLANZ
• [picture: “Live to Work…and Work and Work. No choice for Nestlé Coffee Farmers. (25 million coffee farmers need a break)]
  • very interesting because this very Nestlé no provides a FT line of coffee.

Where are we now?

• Mainstream organisations, but not mainstream trade?
  • many people questioning FT’s legitimacy, some are legitimate questions
  • Market Prices affect supply, reflect demand
    • if FT causes coffee to sell for $5 a cup; really good business! So more people will produce it. Oversupply will cause prices to fall; fall, and problem will be worse than you start with.
    • Basic Idea of response:
      • the price is in fact already as low as it can go. That’s the minimal price the farmers will accept. A choice between subsistence farming and coffee.
      • The supply curve is flat (long-term), not gradually up (the essence of that argument against FT). These coffee farmers will actually supply as much as you ask for because that’s all they can do; they’re under capacity.
      • Price of coffee lower than 1986, asme as 1960s. That’s not supply and demand. That’s market power.
      • FT is about more than price! Access to markets, credit, skills, etc. A voice, a democratic process.
• FT is based on rules.
  • As soon as you make rules, people find ways around them. :(

[edit] The Future

• Mainstreaming via Government regulation of the regular market
  • anyone who talks about the market governing trade doesn’t really understand economics; really it’s full of rules and regulations
• Ongoing aid / development assistance to facilitate alternative products & industries
• New breakaways from the fair trade movement who are always pushing for higher standards of “fairness”.
  • I expect that some of you are going to jump ship
  • This conference has corporate sponsorship! Not everyone will be happy with that.

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