FAIR TRADE AND SUSTAINABLE BUSINESS PRACTICES

By Anna L. Guyton

Presented to The Good Mule Conference 2010

B.A. International Studies, Global Economic Systems, International Business; UW 2008

Fair Trade is an emerging movement in the global economy that is helping to reduce poverty and empower rural producers through ethical and sustainable business practices.

Thesis

What is Poverty?Where is Absolute Poverty?Poverty Traps

Poverty

What is Poverty?

3 degrees of poverty: Extreme/Absolute

poverty Cannot meet basic

needs Only in developing

countries Less than $1/day Approx 1 billion

people

Moderate poverty Basic needs met,

just barely $1-$2/day Approx 1.5 billion

people Relative poverty

Income < proportion of average national income

Where is Absolute Poverty?

Percent of national populations living on less

than $1.25 per day. UN Estimates 2000-2007

Where is Absolute Poverty?

Africa 48% absolutely poor (2001) Life expectancy 46 years and falling (AIDS) 1/5 of all children die before age 5

Colonialism Exploitation Corruption Failure of trade liberalization Natural resource curses

Poverty Traps

No margin of income for future investment

Livelihood often unsustainable Deplete natural capital:

Cutting down trees Exhausting soils of nutrients Mining mineral, energy & metal deposits Overfishing

“Fair trade is the essential first step toward an equitable and sustainable form of international trade that benefits industry, consumers, producers, and the Earth” (Nicole Chettero)

Fair Trade

Why not Free Trade?What does “Fair” mean?DefinitionGoals

The Concept

Why not Free Trade?

“Free markets, though more efficient and productive, produce distributional consequences and compromise other values” (Bruce E. Moon)

Income inequality Loss of tariff revenue

= less state capacity for building infrastructure, etc.

Free trade not always free Exploitation

What does “Fair” mean?

Justice Do you agree?

If we can prevent something bad without sacrificing anything of comparable significance, we ought to do it;

absolute poverty is bad; there is some poverty we can prevent

without sacrificing anything of comparable moral significance;

therefore we ought to prevent some absolute poverty. Peter Singer, “Famine, Affluence, and Morality”

Definition

Equitable trading systems Community support Transparent supply chains Sustainable production methods Protection from unstable prices Safe, healthy working conditions

Goals of Fair TradeKeys to Poverty TrapsFair Trade PerksSustainable Business PracticesWin-Win-Win-Win Situation

Goals & Achievements

Goals

Alleviate poverty Protect the environment Encourage sustainable development Create opportunities for capacity

building Promote gender equity

Fair Trade Keys

Higher profits Investment in human

capital Investment in

business capital Investment in natural

capital Fair, constant wage

“Insurance” Access to new

technology Diffusion of

knowledge

Cooperatives Stronger

communities Networking

opportunities Pooling of

resources Stable

environment Environmental

protection “Shade-grown”

coffee Sustainability

Fair Trade Perks

Fair trade standards quality Reinvest in cultivation, harvesting & post-

harvesting Feedback about quality control

Empowered rural producers Better solve local issues without need for

charity Raise standards of living Stronger communities Reduced exploitation

Sustainable Business Practices Not just about climate change Sustainability has 3 factors:

Environmental Natural resource extraction and pollution

Economical Is the business viable? Can it turn a profit? Are

prices fair? Can the industry withstand fluctuating commodity pricing?

Social/Community Community development, fair labor practices,

cooperative networks Fair Trade addresses all 3

Win – Win – Win – Win Situation

Producers are happy They have work, fair wages, and fair working conditions

Consumers are happy They have higher quality products and feel good about

the impact of their purchases Earth is happy

Less environmental degradation due to our consumerism Industry is happy

When all of the above are sustained, there is good business

“Ending poverty is possible but not inevitable… It is one thing to know that people are suffering. But it is another thing to know that this suffering can go on indefinitely, is largely unnecessary, and that we could have done more to help—with potential benefits that could prove very significant for our own future” (Stephen Smith)

Conclusion