Mr. Hernando Monje Granados
Centro de Capacitación para el Desarrollo, Costa Rica

Fair Trade: A social innovation for reducing poverty

     Fair trade has become an important option for small producers in developing countries. It creates opportunities that otherwise would not exist, allowing organized small producers to market their products under the same or even better conditions than exist in the normal market. Fair trade offers small producers the chance to distinguish themselves from their competitors in the market and establish strategic alliances with organizations that help companies enter the market.

     Indeed, the fair trade movement has become a tool in the search for a new international economic order in that it expresses the desire to reach a greater balance and social equality in trade relations between industrialized and developing countries, thereby helping reduce the unfair exchange that is detrimental to and increasingly impoverishing developing countries.

     The purpose of fair trade is to reduce poverty among small producers and maintain their sources of employment, enabling them to sell their products, with fewer problems, to industrialized nations. Fair trade also contributes to the protection of ecosystems in areas where producers live, the biodiversity of the various regions and sustainable use of human and natural resources.

     Small producers belong to a global network that markets their products without intermediaries at a basic price that guarantees they will cover their production costs and receive a profit margin. This profit margin will enable them to invest in the future by maintaining their business presence and ensuring the survival of their company. The network helps to ensure that the product is delivered with the maximum amount of added value, and encourages vertical integration and business connections in the country of origin, given that it prompts small producers to strive to adopt the best possible processes and to use local resources and environment-friendly technology.

     Various different types of stakeholders, from both developing and industrialized nations, have joined this movement. Their participation is reflected in the social alliances and coalitions that have been formed to initiate and develop fair trade. There are organizations in industrialized countries that coordinate imports and sales in order to help producers get their goods to the appropriate market. Many of these organizations, which have come together to form EFTA and IFAT, not only sell but also act as information centres, distribute information, raise awareness and denounce, as well as boycott, poor production practices.

     The market for this type of product is not restricted to individuals. Consumers also include institutions such as the Dutch National Parliament and the European Parliament, as well as large companies in industrialized countries. For example, in Switzerland, the largest catering company, Servicio S.V., and the largest retail sales and food chain, Migros, use and sell fair trade coffee. The importance of the initiative has expanded among multinationals that sell food and other large-scale products.

     Fair trade encourages consumers to be responsible, given that behind the consumer products hide global problems of a social, political and environmental nature that need to be resolved. In this way, consumers can promote change in a company’s production standards through their purchase choices, and ultimately influence the company’s profits.

     Also, institutional agreements have contributed in a positive way to the fair trade movement. The momentum created by institutions such as the European Parliament and United Nations Conference on Trade and Development has been of great assistance in that their political resolutions encourage the development of the movement and fair business relations between industrialized and developing countries.

     The fair trade movement is a clear example of a social initiative to reduce poverty that offsets the powerful exclusionary forces that are created by the current globalization process. The movement shows that it is possible to build international alliances between various sectors in society, producer organizations, development cooperation organizations, parliaments, the United Nations, etc., in both industrialized and developing countries. The initiative is based on the creativity of marginal sectors and their relations at different levels, showing how private investment strategies can be changed to better meet the needs of the poor.

     It is also clear that fair trade improves the lives of the poor and their subsequent empowerment as it enables them to participate in other areas of society, as well as influence policies related to business activities and poverty. Through fair trade, the poor have more opportunities to play more meaningful roles in political and economic processes, creating a safer environment, strengthening human rights and stimulating cultural diversity.