Fair Trade II: History

The concept of ethical trade as a counter-movement originated in the Netherlands in the 1980s (Scott, 2003). It was not until the 1970s, however, that the concept started to gain recognition as an international alternative to free trade policies. The increasing speed of globalization, seen after World War II, and the flaws of neo-liberalism, spurred the transformation, as it was becoming increasingly evident that global economics were falling dangerously out of balance (Barrientos, 2000).

Neo-liberalism is the modern market tendency towards liberalization and deregulation, particularly of trade barriers (Roddick, 2001). It’s supporters claim that the economic gains of the First World would “trickle down” to the poor nations and would provide them employment opportunities by integrating them into the dominant world political economy, the capital-driven market. The actual result of the free market theory, it is increasingly evident, is the “race to the bottom”, the Third World commodity devaluation resulting from the economic influence of the ever-more powerful Multi National Enterprises (MNE) which are able, due to loose trade regulations, to secure, from Third World producers, low costs (Roddick, 2001). For example, in 1989, coffee producers received 20% of profits from coffee sales. In 1995, their profit sharing fell to 13% (Taylor, 2004). Clearly, neo-liberalism is not adding value to coffee growers’ lives. This trade framework’s result is actually a wider gap between First and Third World economies, a need which propelled ethical trade towards what it is today.

Since the late 1990’s the ethical trade movement has undergone a series of transformations to work out how to best address the needs of a variety of stakeholders with cultural sensitivity. Nongovernmental initiatives such as the Ethical Trading Initiative (ETI) and the Fair Trade Labeling Organization (FLO) as well as non profit organizations such as Oxfam, the International Federation of Alternative Trade (IFAT) and Fair Trade Federation (FTF) have played integral parts in bringing structure, traceability, and credibility to ethical trade, in an effort to enable it to take a foothold in major First World markets (Obourn, 2004). Nongovernmental organizations (NGO) are able, due to increased speed and accessibility of information technology, to learn of corporate misconduct, to pressure MNE’s towards ethical practices and to inform consumers of business’ ethical track records (Levy and Prakash, 2003). These forces help the ethical trade movement to gain the necessary traction to attain its goals of economic, social and environmental sustainability worldwide, or the “triple bottom line”(Raynolds, 2000).

The ETI, started in 1998, was a ground-breaking initiative in that it pulled together, for the first time, all the various stakeholders in international trade in an effort to create an ethical trading framework (Barrientos, 2000). With its inception, Third World development became a part of people’s daily lives--something they could engage in by purchasing ethically traded products to directly to make a change (Goodman, 2004). This altered the dynamics of development by placing it squarely inside the market. Suddenly, marketing and advertisement, which endorsed ethically traded products, theoretically had the power to change lives of Third World producers and to bring them into the daily consciousness of First World consumers.

Photo:Chiapas, Mexico, here the Fair Trade price for organic coffee is $1.41 a pound when the market price has hovered around .90 cents and has fallen to as low as .45 cents over the last 10 years. Here we pay up to 10 a pound. In Mexico, Fair Trade monies go towards sustainable agriculture and education and opportunity. Sarah Scarborough.