Fair Trade or Free Trade? They’re not the same.

Fair Trade Cooperative president discussing bean quality with farmer member, Chiapas, Mexico.

Fair Trade Cooperative president discussing bean quality with farmer member, Chiapas, Mexico.

Ever ponder the difference between “Fair” Trade and “Free” Trade? They both sound appealing in their own way, but actually couldn’t be more different. Free Trade, and it’s parent, “Globalization,” represent the current trend in global trade whereby companies search the world for the cheapest labor and lowest bar with regards to labor and environmental regulation. Fair Trade, on the other hand, is a response to the shortcomings of Free Trade. In short, it’s an effort to bring some transparency to global trade by inserting standards of fairness into a system once dependent solely on the forces of the liberal free market. Both terms have entered the daily discourse of pundits, academics and the conversations of ordinary folks like us. Though they have very different meanings, they are often confused. Even seasoned journalists use them interchangeably to the detriment of an informed citizenry.

In this case “free” means free to do good and bad. As individuals our free choices are often kept in check because we are accountable for their ramifications by friends, family, our community and law enforcement. On the other hand, while a corporation is made up of people, it is not human by nature. When such an entity can make unhindered free choices, that freedom to choose can result in some universally negative consequences, from environmental degradation to outright human exploitation on a large scale.

Fair Trade Coffee Farmer, Chiapas, Mexico.

Fair Trade Coffee Farmer, Chiapas, Mexico.

Enter Fair Trade, which seeks to address the injustice of global trade by playing in the same arena of the free market, only by different rules. It’s an internationally recognized set of standards with the goal of returning more value to the farmer and his community. A good example is coffee. Like many internationally traded commodities, the majority of coffee beans are not grown on vast plantations, but rather on small family owned plots. In the globalization model those farmers are at the mercy of the commodities market represented by the many middlemen that stand between the farmer and the end user. It’s not uncommon for farmers to have little choice but sell their crop below cost. In the Fair Trade model, farmers join a “producer cooperative” of other small farmers that then sell to a Fair Trade “buyers cooperative.” The buying cooperative must adhere to four core principles:

  1. Pay a price to producers that covers the cost of sustainable production and living;
  2. Pay a ‘premium’ that producers can invest in community development;
  3. Make partial advance payments when requested by producers;
  4. Sign contracts that allow for long-term planning and sustainable production practices.

When small farmers are organized in a cooperative they benefit from access to capital and business resources and because the middle-men are removed form the equation a larger percentage of cost of the cup of coffee goes to the producer and his or her community.

Stella checking out beans drying in the sun, Chiapas, Mexico.

Stella checking out beans drying in the sun, Chiapas, Mexico.

Does it work? Yes. Of course it’s not perfect, but it is an excellent start. Working in the developing world in the 1980s convinced me that our global trading structure is inherently unfair to those with less power. There are clear winners and losers as the income gap between rich and poor countries continues to widen. Fair Trade was not an option at that time. Fast forward to 2007. While visiting a Fair Trade coffee producer cooperative it became obvious why Fair Trade offers a viable alternative. Chris and Jody Treter of Higher Grounds Trading Company, and members of a Fair Trade buyers cooperative, met with the leaders of their producer cooperative when Chris asked how they did the previous year. Optimism would best characterize their summary, however, their cooperative truck needed an expensive repair, and as a result, there wasn’t much of a surplus to invest in the community. Without missing a beat, Chris offered to pay them more and proceeded to discuss the idea that this increase in purchase price could be set aside for future truck and facility repairs as well as an emergency fund to keep members paid in the event of crop failure. This example of the mutually beneficial “relationship” characterizes the essence of the Fair Trade system.Does this matter? Perhaps not to some. But when more consumers know about the condition under which their food and products are created, the more empowered they will be to spend their dollars where their values are. Now instead of the old fashioned method of boycotting a company that offends your values, you can now use your grocery budget to reward those that share yours. The engine of this trading system is an enlightened consumer. While it increases every year, we now know that a rapidly growing percentage of consumers are willing to look beyond price and quality and actually pay a premium for goods and services that will bring some greater social value to their purchase. This trend, in part, accounts for the growth in organic and local food, Fair Trade products, as well as other green products rushing to meet this growing demand.

While Fair Trade brings a welcome level of transparency to this global trade, it is currently limited to imported commodities. As a result, there is a domestic fair trade movement happening in this country that seeks to bring fair trade standards to the production of food products grown and processed in this country. That will be a welcome relief to the many consumers who are trying to eat and purchase goods and services closer to home. I’m serving on the Steering Committee of the new Domestic Fair Trade Association and will update you on the progress in future postings. In the meantime, continue to shop with your values and your dollars and we’ll all contribute to a more human world.

Please share your thoughts…

One Response to “Fair Trade or Free Trade? They’re not the same.”

  1. Ray Tapajna Tapsearch Com October 28, 2010 at 5:02 pm #

    Both major parties in the USA, supported the free trade agreements that betrayed human dignity in the world day. Free trade is primarily about making production portable and moved anywhere in the world for the sake of cheaper labor. The overhead of long haul ocean, air, rail and truck shipping does not interfere with the process. The shipping acts as an assault on the environment but no one in the save the earth programs talk about this much. Al Gore ignored it. An energy saving light bulb uses up about 8000 miles of energy getting to market. It comes from dirty manufacturing processes in places like China. This is ignored too. Workers become the real commodities being traded. They are put on the world trading block to compete with each other for the same jobs. This is what free trade is all about. See squid.me/9 and tapsearch.com/flatworld

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