Introduction
Fair trade refers to an organized movement whose major goal is to assist producers in developing countries. The aim of this entity is to improve trade and enhance economic sustainability (Feenstra and Taylor 23). The focal point of the movement is the yields exported by stakeholders from developing countries. It seeks to promote equity in international trading ventures. The various policies touching on fair trade are formulated and implemented through dialogue, transparency, and solicitation of opinions from the concerned parties.
In this paper, the author analyzes several elements related to the fair trade movement. They include, among others, the theories applied by the organization and the challenges it faces in the global market. The place of the fair trade movement in the contemporary society will be reviewed.
Fair Trade Movement: A Historical Background
Fair Trade movement has its roots in the European societies. It came before the structured alternative trading organizations. The major ideas associated with the movement reflect pre-capitalist notions and beliefs. The movement can be traced back to the late 1950s. It was started by Oxfam in the United Kingdom. It began with the sale of crafts made by Chinese refugees in the shops owned by this organization. In 1964, the United Kingdom created the first fair trade organization (Ruerd 45).
To this end, agencies were put in place to source products from developed nations in the South. The primary efforts to commercialize fair trade goods in northern nations commenced in the 1950s. The commercialization was carried out by religious groups and non-governmental organizations. The aim of these undertakings was to come up with fair trade supply chains in developing countries (Ruerd 9).
The movement has changed a lot since World War II. Some of them include large scale modifications of fair trade proponents. Other changes affected the products used in the trade and the distribution networks used. The modern fair trade movement took its current shape in the 1960s. It was mostly structured with the help of global free market economic models (Raynolds 34).
There are three types of products associated with fair trade. They include ‘smallholder’ crops, such as coffee and cocoa. Others are the plantations crops, such as tea and bananas. The third category is made up of small scale manufactured goods. Such products include, among others, handicrafts (Hutchens 69).
Fair trade labeling is an important aspect of this economic network. It refers to a system designed to help consumers identify products that meet the criteria laid down in the movement’s code of conduct. Certification of producers is another significant variable.
To this end, the stakeholders who are approved by the movement must operate within specific political standards imposed by European authorities (Feenstra and Taylor 12). It is also important to note that fair trade movement is a commercial brand operating in the global market. It is structured on the basis of ethical business operations. As a brand, the movement is owned by the Fair Trade Foundation.
Theories Used in Fair Trade Movement
A number of theoretical frameworks are associated with this organization. One of them includes the theory of change. The framework describes the transformation that a given entity desires to see or make in the world. It is a trade policy that allows business persons to act and transact without interferences from the government (Raynolds 45).
The fair trade movement has also come up with strategic trade theory. It describes the policies adopted by various countries to determine the outcomes of planned interactions between firms. One of the assumptions made by this theoretical framework is that global economic interaction in some industries gives rise to zero-sum competition (Raynolds 200). Protectionism is yet another trade theory affiliated to the movement. It describes a situation where economic policies are put in place to restrain trade between states.
Such activities include imposing tariffs on imported goods. The major assumptions made in this theoretical framework are aimed at protecting the domestic economy. The domestic market is shielded from competition emanating from the outside world. The ideas promoted by the protectionism theory contradict with those expounded by the free trade model. However, they are similar to those associated with the strategic theory.
To this end, both protectionism and strategic models emphasize on the importance of government intervention to help local firms enter into the global market (Mankiw 76). The major argument is that regulations formulated and implemented by the government are inherently beneficial. They can improve the welfare of consumers in the local market. It is one of the reasons why the fair trade movement stresses on the importance of trade agreements between partner states.
Operations of the Fair Trade Movement in the Modern Global Market
In spite of the fact that the movement started in Europe, its impacts and operations are evident in many parts of the world. The major purpose of this organization is to promote free trade and spur business between countries. To this end, it is important to note that free trade is both a movement and a set of business initiatives. It is based on a critique of conventional trade policy and practice (Ruerd 49).
Fair trade commodities are products sourced from a region where the principles of the movement are applied. Such goods and services must be approved by an authorized organization. It is noted that 60 percent of the fair trade market is made up of food products (Ruerd 91). Coffee is one of the most established commodities in these transactions.
It is a product characterized by the transition between small-scale farms and big companies. A number of transnational companies have started engaging in fair trade policies. For example, Starbucks supplies coffee sourced from these markets in its stores.
However, the ethics associated with transactions in fair trade commodities are not enough to make a difference in the lives of small-scale farmers (Ruerd 69). To address this challenge, the free trade movement has made efforts to challenge profit oriented competitors. The organization acts as an agent to secure changes in the international trading regime. It also plays the role of redistribution of benefits in relation to price premiums.
Free trade movement empowers producers by enhancing their capacity to participate in international business. Such manufacturers enjoy the benefits associated with connections in the global market. As a result, the commercial value of the movement has risen significantly in the past decade (Raynolds 97).
The organization questions the policies adopted by northern and southern governments. It also criticizes the practices promoted by multinationals. In light of this, fair trade organizations argue that the activities of the agents mentioned above have negative impacts on agricultural producers and small-scale processors in the developing world (Ruerd 38).
According to Mankiw, the movement can be described as a meaningful expression of solidarity (91). It brings together consumers in the north and marginalized producers in the south. It criticizes most international relations as unfair engagements. The producer-controlled marketing organizations are generally efficient. The movement raises awareness among consumers with regards to the negative effects that unscrupulous producers have on the market (Mankiw 45).
Challenges Associated with the Movement
The impacts of the movement have become perceptible in the global market since the early 1990s. There is increasing emphasis on quality assurance. There is also the harmonization of definitions and supervision at the European level.
However, a number of criticisms have been leveled against this entity. One of them is the fact that the advantages associated with some fair trade products are not equally distributed. For example, consumers may fail to benefit. On the contrary, they are lost on, among others, unnecessary expenses (Mankiw 33).
There are also challenges associated with the definition of fair trade and its objectives. For example, some manufacturers find it hard to adopt such elements as pricing. In addition, a number of issues associated with labeling deter conventional business operations. For instance, labeling is incompatible with the adoption of a free trade sub-brand (Raynolds 7). Fair trade activists raise a number of questions regarding the perceived and actual benefits of the movement. There are doubts whether or not fair trade improves the welfare of developing countries and small-scale farmers.
Conclusion
Organizations operating in a given market desire to associate their products with fair trade practices. The scenario is especially evident in cases where the movement develops a sustainable alternative form of production arrangements. It helps create enduring partnerships. However, the marketing system associated with the organization may lead to increased cases of corruption. Such evils are evident among elite members of cooperatives in developing countries.
In addition, there may be ‘false’ labeling of products, reducing the revenues of exporters. Free trade movement calls for cooperation and not competition. It identifies and discourages unfair trade structures, approaches, and practices. It also promotes ethical practices and social justice in the market.
Works Cited
Feenstra, R., and Alan T. Essentials of International Economics. 2nd ed. 2012. New York, NY: Worth Publishers. Print.
Hutchens, A. Changing Big Business: The Globalization of the Fair Trade Movement, Cheltenham, UK: Edward Elgar, 2009. Print.
Mankiw, G. Essentials of Economics. 5th ed. 2008. Mason, OH: South-Western Cengage Learning. Print.
Raynolds, L. Fair Trade: The Challenges of Transforming Globalization, London: Routledge, 2007. Print.
Ruerd, R. The Impact of Fair Trade, Wageningen, The Netherlands: Wageningen Academic, 2009. Print.