Fair Trade or Free Trade?

They’re not the same.

Food for Thought (undated)

Ever ponder the difference between “Fair” Trade and “Free” Trade? They both sound appealing in their own way, but actually couldn’t be more different. Free Trade, and it’s parent, “Globalization”, represent the current trend in global trade whereby companies search the world for the cheapest labor and lowest bar with regards to labor and environmental regulation. Fair Trade, on the other hand, is a response to the shortcomings of Free Trade. In short, it’s an effort to bring some transparency to global trade by inserting standards of fairness into a system once dependent solely on the forces of the liberal free market. Both terms have entered the daily discourse of pundits, academics and the conversations of ordinary folks like us. Though they have very different meanings, they are often confused. Even seasoned journalists use them interchangeably to the detriment of an informed citizenry.

In this case “free” means free to do good and bad. As individuals our free choices are often kept in check because we are accountable for their ramifications by friends, family, our community and law enforcement. On the other hand, while a corporation is made up of people, it is not human by nature. When such an entity can make unhindered free choices, that freedom to choose can result in some universally negative consequences, from environmental degradation to outright human exploitation on a large scale.

Enter Fair Trade, which seeks to address the injustice of global trade by playing in the same arena of the free market, only by different rules. It’s an internationally recognized set of standards with the goal of returning more value to the farmer and his community. A good example is coffee. Like many internationally traded commodities, the majority of coffee beans are not grown on vast plantations, but rather on small family owned plots. In the globalization model those farmers are at the mercy of the commodities market represented by the many middlemen that stand between the farmer and the end user. It’s not uncommon for farmers to have little choice but sell their crop below cost. In the Fair Trade model, farmers join a “producer cooperative” of other small farmers that then sell to a Fair Trade “buyers cooperative”. The buying cooperative must adhere to four core principles:

1. Pay a price to producers that covers the cost of sustainable production and living;

2. Pay a ‘premium’ that producers can invest in community development;

3. Make partial advance payments when requested by producers;

4. Sign contracts that allow for long-term planning and sustainable production practices.

When small farmers are organized in a cooperative they benefit from access to capital and business resources and because the middle-men are removed from the equation a larger percentage of cost of the cup of coffee goes to the producer and his or her community.

Does it work?

Yes. Of course it’s not perfect, but it is an excellent start. Working in the developing world in the 1980s convinced me that our global trading structure is inherently unfair to those with less power. There are clear winners and losers as the income gap between rich and poor countries continues to widen. Fair Trade was not an option at that time. Fast forward to 2007. While visiting a Fair Trade coffee producer cooperative it became obvious why Fair Trade offers a viable alternative. Chris and Jody Treter of Higher Grounds Trading Company, and members of a Fair Trade buyers cooperative, met with the leaders of their producer cooperative when Chris asked how they did the previous year. Optimism would best characterize their summary, however, their cooperative truck needed an expensive repair, and as a result, there wasn’t much of a surplus to invest in the community. Without missing a beat, Chris offered to pay them more and proceeded to discuss the idea that this increase in purchase price could be set aside for future truck and facility repairs as well as an emergency fund to keep members paid in the event of crop failure. This example of the mutually beneficial “relationship” characterizes the essence of the Fair Trade system.

Does this matter?

Perhaps not to some. But when more consumers know about the condition under which their food and products are created, the more empowered they will be to spend their dollars where their values are. Now instead of the old fashioned method of boycotting a company that offends your values, you can now use your grocery budget to reward those that share yours. The engine of this trading system is an enlightened consumer. While it increases every year, we now know that a rapidly growing percentage of consumers are willing to look beyond price and quality and actually pay a premium for goods and services that will bring some greater social value to their purchase. This trend, in part, accounts for the growth in organic and local food, Fair Trade products, as well as other green products rushing to meet this growing demand.

While Fair Trade brings a welcome level of transparency to this global trade, it is currently limited to imported commodities. As a result, there is a domestic fair trade movement happening in this country that seeks to bring fair trade standards to the production of food products grown and processed in this country. That will be a welcome relief to the many consumers who are trying to eat and purchase goods and services closer to home. I’m serving on the Steering Committee of the new Domestic Fair Trade Association and will update you on the progress in future postings. In the meantime, continue to shop with your values and your dollars and we’ll all contribute to a more human world.

Please share your thoughts …

For information on Domestic Fair Trade click http://www.foodforthought.net/learn-more/domestic-fair-trade.html

For more information on Food for Thought’s move to Fair Trade ingredients, click http://www.foodforthought.net/learn-more/fair-trade.html

http://www.foodforthought.net/learn-more/blog/fair-trade-or-free-trade.html

3 thoughts on “Fair Trade or Free Trade?

  1. Thank you Bill Totten for the Fair Trade/Free Trade item ( I have it via Richard Menec’s Fresh Ink site) You and your readers may find this Monthly Review article of interest…about the drastically unbalanced terms of trade as between North and South and the flawed GDP measure.
    http://monthlyreview.org/2012/07/01/the-gdp-illusion

  2. The Fair trade is being welcomed enthusiastically in communities around the US as Monsanto genetically engineered seeds have taken over all the seed banks in the whole United States. On top of that the frantically forced writing, in as total secrecy as is humanly possible of ‘Trade’ Agreements ACTA, TPP, CISPA, etc will nullify all Fair Trade efforts to humanise trade once the European Union can be forced to sign it. Suzanne

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