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Economic globalization is repainting the face of international trade. World trading has mushroomed into an unfair economic trend separating the developed and under-developed worlds. Around the globe, production, trade and retailing of most goods and services are increasingly concentrated under the control of a small number of corporations. To offset the steaming engine of this powerful global economic force fair trade associations made up of fair trade wholesalers, retailers, producers and consumers are needed to foster a more equitable and sustainable system of production and trade that benefits people and their communities.
Fair trade means that trading partnerships are based on reciprocal benefits and mutual respect; that prices paid to producers reflect the work they do; that workers have the right to organize; that national health, safety, and wage laws are enforced; and that products are environmentally sustainable and conserve natural resources.1
Backed by conventional economists, large corporations have convinced most of the world's governments that they should maximize global competitiveness through freer trade. Corporate and government officials often theorize that free trade will be beneficial for workers, whose wages and benefits can rise as foreign markets expand for their goods and for consumers who can buy cheap foreign imports. Following this theory, new regional trade agreements, like the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) are reducing barriers to trade and investment for firms. These free trade agreements offer firms global protection for their intellectual and property rights but there are currently no equivalent enforceable global standards to protect workers and the environment. Furthermore, as barriers to entering local markets are removed, large scale manufacturers edge small businesses and local cooperative enterprises out of the market. Local economies suffer when these firms' profits are channeled out of the country rather than being reinvested locally. (FTF, 2006)
As a result of these trends, the gap between the rich and the poor has increased dramatically in recent decades. The benefits of trade are similarly concentrated among the wealthiest segments of the world's population and only a handful of developing countries. Even in many countries that are currently experiencing high growth rates from expanded trade, the benefits of growth are not trickling down to the poor. (FTF, 2006)
Another problem is that the bulk of exports from developing countries tends to be in primary product commodities, such as sugar, cocoa, coffee, etc., whose prices generally rise much more slowly than the prices of manufactured goods imports. Free trade agreements do little to enhance the trading positions and commodity prices of these poor countries. In many cases, the world market price for commodities such as coffee and cocoa falls below the cost of production, forcing farmers to sustain huge losses. Fair Trade organizations offer a crucial alternative by paying farmers a price that always covers at least production costs.
Deregulation allows corporations to benefit at the expense of the people in a nation or region with the relaxation of environmental rules, health and educational services including control of natural resources and energy. (Wikipedia, 2006) Meanwhile subsidies in developed countries allow producers to sell their products at discounted prices and make it difficult for producers in developing countries to compete in the global market place. Protectionism issues such as unreasonably high tariffs restrict developing countries from exporting their products to developed countries.
Market prices do not reflect the true costs of producing products because external economic factors like environmental and social costs are not figured into production costs. Fluctuations in commodity prices make it difficut for producers in developing countries to maintain a living wage, forcing them into debt. Marginalized workers and producers work from a position of economic vulnerability and insecurity. Unethical labor practices such as gender inequality, child labor, and sweatshop practices contribute to unfair profits.
Equitable trade relations need to be established between governments, non-governmental organizations, multi-national corporations, and international institutions that promote the principles and practices endorsed by alternative free trade organizations. Fairtrade advocates and associations support trading relationships by creating opportunities for economically disadvantaged producers. Fair trade is a strategy for poverty alleviation and sustainable development. Its purpose is to create opportunities for producers who have been economically disadvantaged or marginalized by the conventional trading system. Fair trade involves transparent management and commercial relations to deal fairly and respectfully with trading partners. Fair trade promotes transparency and accountability throughout the business operation. Fair trade helps build capacity as producers develop their own independence. Fair trade relationships provide continuity, during which producers and their marketing organizations can improve their management skills and their access to new markets. (Wikipedia, 2006)
Payment of a fair price in the regional or local context should be agreed through dialogue and participation. It covers not only the costs of production but enables production which is socially just and environmentally sound. Fair trade actively encourages better environmental practices and the application of responsible methods of production. Fairtraders ensure prompt payment to their partners and, whenever possible, help producers with access to pre-harvest or pre-production financing.
Fair trade provides fair pay to the producers and takes into account the principle of equal pay for equal work by women and men. Fair trade means that womens work is properly valued and rewarded. Women are always paid for their contribution to the production process and are empowered in their organizations. Fair trade means a safe and healthy working environment for producers. Worker safety and environmental protection are pursued diligently. The participation of children (if any) does not adversely affect their well-being, security, educational requirements and need for play and conforms to the UN Convention on the Rights of the Child as well as the law and norms in the local context. (Wikipedia, 2006)
The idea of labeling fairly traded products needs to be expanded into a more widely used standard in business. The easiest way to support Fair Trade is to purchase fairly traded products. Your actions as a consumer support or discourage actions by businesses, even large corporations. Even small acts like purchasing a cup of coffee from a business that is fair trade certified help move the world economy in a more positive direction.
Adhering to social criteria and environmental principles can foster a more equitable and sustainable system of production and trade that benefits people at the local level. Small as it may be the rapidly growing fair trade movement is setting standards that could redefine world trade to include more social and environmental considerations. Fair traders believe that their system of trade, based on respect for workers' rights and the environment, if adopted by the big players in the global economy, can play a big part in reversing the growing inequities and environmental degradation that have accompanied the growth in world trade. (FTF, 2006)