The Hindu Business Line : Trading fairly

As global economic conditions remain bleak and markets fail to display the exuberance of past times, producers are finding it tough to woo consumers. Yet in some niche areas, all does not seem to be lost. Take the case of "fair trade," for instance, a certification initiative that strives to give producers in developing countries more than a fair price for their produce.

According to Wikipedia, the online collaborative encyclopaedia, fair trade is "an organized social movement and market-based approach that aims to help producers in developing countries and promote sustainability. The movement advocates the payment of a higher price to producers as well as social and environmental standards in areas related to the production of a wide variety of goods.

It focuses in particular on exports from developing countries to developed countries, most notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, chocolate and flowers."

THE MISSION

Fairtrade Foundation, a development organisation committed to tackling poverty and injustice through trade, and the UK member of Fairtrade Labelling Organisations International, says that "fair trade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives."

And in that effort there does seem to be some economic silver lining to the dark clouds of recession currently enveloping the world. Fairtrade Foundation claims that despite the global recession, worldwide sales of its products grew by an impressive 22% in 2008 as consumers spent an estimated 2.9 billion Euros on Fairtrade products globally.

GROWTH IN SALES

Global sales have doubled for Fairtrade tea (112%) and for Fairtrade cotton products (94%). Fairtrade coffee sales increased 14% to 66,000 tonnes and the market for Fairtrade bananas grew by 28% to 300,000 tonnes. Fairtrade sales grew by at least 50% in seven countries, including Australia and New Zealand (72%), Canada (67%), Finland (57%), Germany (50%), Norway (73%) and Sweden (75%).

According to Wikipedia, in 2008, fair trade certified sales amounted to approximately US $4.08 billion worldwide, a 22% year-to-year increase.

While this represents a tiny fraction of world trade in physical merchandise, fair trade products generally account for 1-20% of all sales in their product categories in Europe and North America.

In June 2008, it was estimated that over 7.5 million producers and their families were benefiting from fair trade funded infrastructure, technical assistance and community development projects, says Wikipedia.

Scope in India

This is a trend that a State like Kerala could latch on to. Recently, Ananya Mukherjee Reed, Professor of Development Studies at York University in Toronto, was in the State capital to discuss the possibility of linking Kudumbasree micro-enterprises with fair trade organisations in Canada. The Kudumbasree Mission has provided livelihood options to hundreds of women in rural areas across the State, and its network of neighbourhood groups and self-help groups could be a springboard for fair trade food processed products like honey and cashew.

To be sure, fair trade is not without its fair share of critics. Some argue that fair trade, like farm subsidies, tends to distort prices by setting a price floor, encouraging existing producers to produce more and new producers to enter the market, leading to excess supply. Despite these limitations, from the experience gained in some developing countries, notably in Africa, it would appear that fair trade practices could benefit small-scale producers in India.

The writer can be contacted at kgkumar@gmail.com

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