Fair trade

Submitted by martin on 9 February, 2008 - 9:11 Author: Paul Hampton

Many of the young people, NGOs and unions who mobilised for the big demonstrations in Seattle in 1999, or in Edinburgh for the G8 summit, argue that the alternative to the neoliberal, free trade agenda of the multinationals, the big powers and the WTO is some sort of “fair trade”. Three million people have signed Oxfam’s petition to “make trade fair”.

Few opponents of free trade argue that trade per se is harmful, although the localisation school emanating from green politics certainly appears to do so. Instead most charities and NGOs want the rules of the game changed.

“Fair trade” and fairtrade

One approach is to get new and existing businesses to agree to abide by fair trade standards, and to label all products that follow the code so that consumers can choose to buy them.

The Fairtrade Foundation, which certifies and promotes fair trade products in the UK, defines fair trade as “a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning”.

The Foundation has certified more than 300 products, with the green and black fairtrade mark, which it says represents standards of fairness for pricing, sustainable development and employment rights.

Fair trade products has developed significantly since the launch of Green & Black’s chocolate, Clipper tea and Cafédirect coffee in 1994. The Fairtrade Foundation says annual sales of products carrying the fairtrade mark now exceed £140 million and are growing at over 40% a year.

Fair trade now accounts for 18% of the UK roast and ground coffee market, and over 3% of overall coffee sales. Four per cent of UK banana sales are now fair trade – or nearly two million bananas a week. And the British public drink around three million cups of fair trade tea, coffee and cocoa each day.

The UK is now the world leader in fair trade purchasing, having recently overtaken Switzerland as the largest market for fair trade goods. According to the fair trade international body, the Fair trade Labelling Organisation international (FLO), last year global sales of fairtrade goods surpassed £500 million.

Supermarkets Tesco, Asda, Sainsburys and Morrisons, who together command over three-quarters of UK grocery sales, are all now selling fair trade products, including some of their own brands. The Co-op is the UK’s biggest fair trade retailer, stocking more than 90 items with sales of £21 million a year.

The Fairtrade Foundation says 70 local councils have agreed to promote fairtrade products, and firms such as computer giant Microsoft, mobile phone company Orange, the Nationwide Building Society and Thames Water also do so. Popular coffee shops such as Starbucks, Costa and Pret A Manger all offer fairtrade coffee. And government departments such as the Department for Trade and Industry offer fair trade tea and coffee in their offices.

Some trade unions have also begun to promote fair trade as part of international solidarity campaigning. Usdaw shopworkers’ union has carried a motion which “encourages all Usdaw members where family finances allow to buy fairtrade products where possible and to campaign for fair prices to be paid to farmers for tea, coffee, bananas, etc”.

UNISON public services union passed a motion at its conference that endorsed the fair trade standards set up by the Fairtrade Foundation and urged members nationally and locally to get fair trade tea and coffee at work. And the PCS public and commercial services union has promoted Fair Trade Fortnight.

The arguments for fairtrade labelled goods

The arguments for promoting fairtrade labelled goods seem simple and persuasive. Market prices paid for commodities such as coffee, tea and chocolate have not risen in real terms for decades, whilst the value of imported fertilisers, pesticides and machinery has increased substantially. The market price of commodities frequently drops below the cost of producing them. Consequently many of the people who grow these crops have to work harder and longer for less money.

The low price of coffee in the early 1990s had a catastrophic effect on the lives of millions of small farmers, forcing many into debt and others to lose their land. According to trade body the International Coffee Organisation (ICO), coffee prices fell to 48 cents (27p) a pound in 2001.

The Fairtrade Foundation says that the global price of tea has dropped by nearly a half in real terms since the 1970s, while the real banana price has fallen by 35% since the mid-1980s – with catastrophic effects on banana workers living standards.

Instead of this free-market madness, fair trade offers a practical alternative. Companies carrying the fairtrade mark have to pay a minimum price for the product that guarantees growers a profit. For example the fair trade minimum price for Arabica coffee is $1.26 (70p), and hasn’t changed since 1988.

According to Cafédirect, this means farmers receive 52p from a 100g jar of fair trade coffee, compared with 11p for normal instant coffee. The FLO says that over 800,000 families of farmers and workers (about 5 million people) in over 48 countries in Africa, Asia and Latin America benefit from fair trade purchasing.

In addition, firms using the fairtrade mark pay a social premium to communities where the products they buy are grown, to pay for local projects and services. The Co-op says it returns £1.25 million each year in fair trade premium to growers in developing countries while Cafédirect says it put 70% of its pre-tax profits back into growers’ associations last year.

The arguments against fairtrade

Right-wing think tanks such as the Adam Smith Institute dismiss fair trade as at best a “well-meaning dead end” and at worst “economic illiteracy” that could end up making the situation worse. Other critics argue it is a niche market that is now being exploited by rapacious multinational firms eager to promote a socially responsible image.

A socialist critique starts from the reality of fair trade, especially for capital and for workers. Sales of products carrying the fairtrade mark are tiny in comparison with total consumer spending. Total UK food sales were around £100 billion a year, meaning that fair trade food accounts for just 0.1% of sales. Figures like these barely dent the market, and only a small number of the world’s two billion small farmers stand to benefit.

However big companies are now jumping on the bandwagon, either to exploit ethical consumers’ willingness to pay more for fairtrade goods by increasing profits and by using fair trade to enhance their image as ethically and socially responsible employers. Nestlé has recently jumped on the fairtrade bandwagon. Companies like Asda and Starbucks have poor records on union recognition and the suspicion is that they are using fair trade as a means of improving their image.

Even if we could persuade more of the well-off who have more market power to be more ethical, almost everything we buy has been bought at least once already by the time it reaches us, passing along a vast transmission chain that is difficult to trace, never mind influence, so their ethical purchasing signals will become lost in the general market noise. Ruthless corporations may feel obliged to do more PR, or clean up this or that corner of their business, but they are not going to be turned into benevolent institutions.

Fair trade purchasing might encourage good practice and help a few impoverished farmers, but it does not stop bad practice. Not buying cocoa produced by slaves does not bring the slave trade to an end, nor does it prevent others buying cocoa produced by slave labour.

And the whole approach is fundamentally mis-focused. As journalist George Monbiot argues, some people have more dollars than others, and those with the most money are the least likely to want to change the economic system that has served them so well. It makes no sense for the poor, or relatively poor, to look to our buying power, or our ability to touch the consciences of those with more buying power, to change the world.

A more substantial issue is the relationship between the fair trade movement and trade unions. The FLO standards for “hired labour” states that the right of workers to form trade unions and to bargain collectively without fear of victimisation is one of the key standards that have to be met for producer companies to get the fairtrade mark.

Most people in the fair trade movement say they want to work with labour movement. Some even argue that the fairtrade mark can open doors for trade unions – pointing to examples of Ghanaian banana producers, Kenyan rose farmers and to Sri Lankan tea unions where unions are recognised.

However this is not the case along the global supply chain, from those working on fair trade plantations to workers who process, distribute and sell fairtrade marked goods.

For example the COLSIBA banana workers’ unions in Central America, has complained about union busting on plantations that have been fair trade certified. COLSIBA pointed to the “systematic violation of workers’ and union rights” by producers that benefit from the mechanism of fair trade and that it has proof that unions do not exist in many of these plantations.

Further along the supply chain, when coffee, tea and cocoa are manufactured ready for sale in the shops, a similar issue emerges. None of the major fair trade companies – Cafédirect, Clipper Tea, Green & Blacks and Day Chocolate – have union recognition agreements in the processing and packaging factories they use in the UK. None are unionised themselves.

In contrast, even nasty multinational companies such as Cadburys and Kraft Foods are unionised and have signed national recognition agreements with unions.

The key issue is whether something is made by union labour. In fact there are some examples of union organising unions in Central America in some big multinationals that are not involved in the fair trade movement. In 2001 COLSIBA and other unions signed an agreement with Chiquita (formerly United Fruit), one of the largest banana producers in the world and long regarded as one of the worst.

So fair trade is at best a well meaning dead end, and at worst a diversion from the real task of organising workers.

Workers have the power of numbers, the power of organisation, because, although it certainly can’t buy everything, the working class does produce everything.

For example, instead of focusing our efforts on helping a tiny minority of ethical banana-traders, we might do better to focus on helping the struggles to organise and gain control by the much larger numbers of workers employed by not-at-all-ethical giant corporations like Chiquita.

Trade justice

A wider alternative than fair trade labelling is the campaign for trade justice. Trade justice campaigners include articulate critics of the existing order such as George Monbiot who propose alternatives within the boundaries of capitalism more ambitious than those of the do-it-ourselves fair-traders.

George Monbiot says: “Just policies have been proposed by groups such as Oxfam, Christian Aid and the World Development Movement (WDM), which call, for example, for the democratisation of the WTO; an agreement which permits the poorest countries to defend their infant export industries from direct competition; and binding international rules to force all corporations to trade fairly.” (Guardian, 9 September 2003)

In short, advocates want rules-based trade as the answer to poverty and other problems faced by the South.

Monbiot believes that the World Bank and the IMF did some useful work after they were formed, but says they are now “constitutionally unreformable” and should be scrapped. He wants them replaced by an International Clearing Union — a body like the one designed by John Maynard Keynes in the 1940s — whose purpose is to prevent excessive trade surpluses and deficits from forming, and therefore international debt from accumulating.

Keynes’ idea was that the clearing union would have its own currency, the bancor. Every country would have an overdraft facility in its bancor account no more than half the average value of its trade over the previous five years. The system would charge progressively higher rates of interest for those countries running surpluses or deficits, giving a strong incentive for them to clear their bancor accounts. This would, for Monbiot, maximise world prosperity and level out the power of nations.

Monbiot also proposes a transformation of the global trade rules, to be run by a reformed WTO — a Fair Trade Organisation. This would mean an end to TRIPS, GATS and TRIMS, no new issues in trade talks and for social and environmental clauses in trade agreements.

Monbiot proposes “a clear and non-negotiable sliding scale of trade privileges”. He says: “Poor nations should be permitted to follow the route to development taken by the rich nations: protecting their infant industries from foreign competition until they are strong enough to fend for themselves, and seizing other countries’ intellectual property rights. Companies operating between nations should be subject to mandatory fair trade rules, losing their licence to trade if they break them.” (Guardian, 8 September 2003)

Monbiot points out that before the First World War, countries at the early stage of industrialisation almost always protected their “infant” industries, or borrowed (more likely stole) intellectual property from other more advanced countries.

Britain’s industrial revolution is usually dated from the 1760s, reaching its highpoint a century later. For virtually the whole of that period, the key industry in this process, textiles, was protected by the British state by a system of tariffs and prohibitions.

The United States also imposed tariffs during its early industrialisation. In 1816 the tax on almost all imported manufactures was 35%, rising to 40% in 1820 and, for some goods, 50% in 1832. As Monbiot puts it: “The US remained the most heavily protected nation on earth until 1913.” (New Scientist, 31 May 2003)

A similar pattern of protection of key industries and the promotion of exports by the state occurred in Japan, Taiwan and South Korea over the past 50 years.

The exceptions to this pattern also prove the rule. Neither Switzerland not the Netherlands protected their infant industries, but “simply stole the technologies of other nations” during their key development phases. For example, in Switzerland in 1859 a company that became Ciba “pilfered the aniline dying process that had been developed and patented in Britain two years before.” (New Scientist, 31 May 2003)

In the Netherlands, in the early 1870s, two firms stole a patented French recipe and started producing margarine. They later merged to form Unilever. In the 1890s, Gerard Philips stole Thomas Edison’s design for incandescent lamps, and founded Europe’s most successful electronics company.

Monbiot’s argument for licensing is part of a wider strategy of international regulation of multinational corporations – making them subject to binding fair trade rules, losing their licence to trade if they break them.

He argues: “To acquire a licence to trade internationally, a corporation would have to demonstrate that its contractors were not employing slaves, using banned pesticides or exposing their workers to asbestos. It would also have to pay the full environmental cost of the fossil fuel it used.” (Guardian, 24 June 2003)

Other trade justice policies include raw material export price support schemes, capital controls, a “Tobin tax” on financial speculation and cancel the debt of the most heavily indebted nations.

Some of Monbiot’s proposals could become useful transitional measures in the future when the global economy is run by an association of workers’ governments restructuring world trade. But who he thinks will bring about change in today’s conditions is unclear — yet agency is a crucial element in any political strategy.

He calls for a “democratic revolution” in which institutions such as the IMF would be scrapped and some governments would be replaced by better ones. Other institutions such as the WTO and the UN would be reformed, presumably, by those better governments.

Monbiot describes his proposals as creating a “modified species of capitalism” — yet he hopes they will also “create the conditions in which capitalism is destroyed” (Age of Consent, p.241). The same ambivalence extends to the multinational corporations that control world trade and the bourgeois governments that administer the system on their behalf.

Monbiot’s proposals assume that capitalist governments have both the power and the interest to transform the multinationals into “vegetarian great white sharks”, and that these corporations will accept such a status. This is to misconstrue what capitalism is. It is in the nature of capitalist corporations to be rapacious vehicles for profit making, and for capitalist governments throughout the world to create the conditions in which firms can best exploit wage labour.

The idea that we can change the world, not by workers taking over those corporations, but by a sort of diffuse public pressure making them behave differently, is plainly utopian. The idea that the world’s only superpower will volunteer to surrender its hegemonic status is indeed “hopelessly unrealistic” (Age of Consent, p.64).

In fact the reasoning behind the regulation of multinationals is circular. Trade justice advocates want laws or rules to control multinationals – but these regulations would be made by the governments of powerful states — that are controlled by multinationals. The same kind of objection applies to capital controls and the Tobin tax.

Price support schemes also illustrate the point. They have been tried four times in the past and largely failed. In the 1920s (for wheat, rubber, sugar, copper, petroleum lead and zinc). In the 1930s for tin, sugar, tea wheat, rubber, tin and copper. After WWII for sugar, tin, coffee and cocoa. And in the 1970s for bauxite, bananas, copper, tin, coffee and petroleum.

The only arrangement to enjoy long-term success has been for oil, organised by the OPEC oil cartel – hardly a model for social justice.

Similarly, side agreements in trade treaties don’t work – probably the best example is NAFTA, where countless cases of trade union violations have been reported, but none resolved in favour of workers.

Monbiot suggests that the poorest governments in the world could group together and threaten to default on their debts. But this is highly unlikely given the present political character of many of these regimes, never mind the kind of alliance that would have to be formed to make it happen. Nor is the strategy a particularly enticing prospect for their inhabitants, who would most likely be the first to suffer from its consequences, without necessarily having given their consent.

Monbiot also looks to the global justice movement. The World Social Forum in Mumbai in 2004, where 100,000 activists from 130 different countries met, was another impressive gathering, but this movement does not represent the kind of cohesive social power that can take on the multinationals and the governments and replace capitalism with something better. As Indonesian socialist and trade unionist Dita Sari recently commented, large parts of the movement are dominated by NGOs, funded by various governments or corporate foundations. They do good work on many issues but cannot be a force to change the world fundamentally.

Monbiot’s “reformed WTO” proposals are in fact a programme for lobbying, writing columns in the Guardian, and so on, rather than mobilising the working class by starting from workers’ immediate issues of struggle and organisation.

Yet workers are the only social force in every country across the globe with both the power and the interest to end capitalism and replace it with a new social order free from exploitation. This was the key argument made by Karl Marx and one that George Monbiot ignores in his rant against the Communist Manifesto in The Age of Consent.

Workers — because they produce the wealth that the multinationals expropriate, are simultaneously the immediate victims of exploitation but also the producers of profit — giving them both a reason to revolt and a unique social power. Workers are the immense majority in most countries of the world, and connected by an intricate web of production and trade. The working class is also capable of building democratic organs of power (such as unions, factory committees and councils) embracing millions that can make the key collective decisions about what to produce, how to do it and who gets the proceeds.

Only by freeing the world from the domination of capital can we end the inequalities of world trade. And the transitional stages towards that are those of the mobilisation of the working class — solidarity in struggle, international organisation and links, measures of workers’ control — not those of an agenda for reform from the top by a better WTO.

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