Fair Trade - EEP 131: Fair Trade November 23, 2007 1 Topics...

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1 EEP 131: Fair Trade November 23, 2007
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2 Topics in this series of lectures Basic issues and definition of “Fair trade” Discussion of market failure and fair trade. Falling prices for agricultural commodities and past attempts to provide price support. Objectives of Fair Trade (FT) movement. Mechanics of obtaining FT certification. Criticisms of FT and response to criticism. FT as a remedy to market power. FT’s effect on consumers. FT “bundles” reforms, e.g. those involving credit and length of contract.
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3 Basic issues The fair trade movement attempts to increase the prices that producers in developing countries receive for the goods they sell (principally handicrafts and some commodities). Other goals include better credit, increased stability of earning, and promotion of institutional “capacity building”. The movement also wants to increase awareness, amongst consumers in richer countries, of development issues. Skeptics of the movement think that it will have little practical result. It might even be counterproductive if it leads to increased supply and lower prices for producers who do not have fair trade certification, or if it encourages producers to remain in “dying sectors” rather than looking for jobs in sectors with more growth potential.
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4 What is Fair Trade? According to FINE, the umbrella organization that comprises the four largest Fair Trade organizations (FLO, International Federation for Alternative Trade, Network of European World Shops, and the European Fair Trade Association): “Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers—especially in the South [FINE 2001]”. Fair Trade is an approach to treat the relationship between international trade and poverty alleviation in the global South based on a strategy of “trade not aid.” Markets for Fair Trade coffee and other items link ethically minded Northern consumers with democratically organized groups of poor Southern producers. The goal of this alliance is to provide disadvantaged producers a chance to “increase their control over their own future, have a fair and just return for their work, continuity of income and decent working and living conditions through sustainable development” (Fair trade Foundation, 2002).
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5 Common justifications for fair trade ( http://en.wikipedia.org/wiki/Fair_trade ) Implicit and often explicit in fair trade is a criticism of the current organization of international trade as being "unfair". Fair trade advocates argue in favor of the need for fair trade by mentioning the purported microeconomic market failures of the current system and an alleged commodity crisis and its impact on developing country producers.
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6 Market Failures (the Fair trade version)
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Fair Trade - EEP 131: Fair Trade November 23, 2007 1 Topics...

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