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43 Fair Trade: Overview, Impact, Challenges and values that drive FT business compared with conventional production and trade at each stage of the supply chain. Price Stabilisation The FT price premium is unlikely to provide a very effective mechanism of price stabilisation. Producers and producer organisations as well as private and continuing state marketing systems need to develop a capacity to use market-based instruments such as options and futures to manage price risk on a sustainable basis. Recommendation 8: DFID should explore the feasibility of options and futures as a practical and cost-effective way of providing risk management for poor farmers. This could involve cooperation with the World Bank’s International Task Force on Commodity Risk Management for Developing Countries. This initiative is seeking to explore market based approaches to managing price risk, and is working in consultation with UNCTAD and several FT organisations. Research A number of themes for further research emerge from this study. Recommendation 9: DFID should consider supporting efforts that enable costeffective assessment of capacity strengthening provided by ATOs to producer organisations. Recommendation 10: DFID should consider supporting studies focusing on the potential role of FT in handicrafts, plantation crops and other areas.
Annex 1: Terms of Reference for Fair Trade Study June 1999 1. Background 1-1 Fair Trade: Overview, Impact, Challenges Annex 1: Terms of Reference The UK Government's White Paper on International Development commits DFID to the elimination of poverty. DFID is committed to strengthening support for trade which contributes to sustainable development. DFID recognises that pro-poor trade measures can play an important role within the wider range of instruments required to integrate poor countries into global trading patterns. Support at the macro level for trade policy reforms and at the meso level for trade capacity and promotion support will have wide systemic effects but the development of models which assist poorer producers (and traders) to access new global opportunities can also be significant, particularly where there are opportunities for replication. The White Paper commitment is being taken forward through a number of different areas of work and policy initiatives: ♦ Support at the international policy level to improve the trading environment for the poorer countries, particularly through building the capacity of developing countries to negotiate in key trade rounds and to reflect the interests of the poorest countries in the development of trade policy. ♦ Support at country level -usually national or regional level -to build trade policy capacity and to support the trade infrastructure (e.g. through work with customs organisations, with licensing, letter of credit processes, trade promotion organisations etc.) The beneficiaries of these processes include larger and smaller firms and single traders. ♦ Support for more 'responsible' models of trading through work (mainly with larger importers) on codes of conduct and responsible sourcing. For example, DFID is providing support for the Ethical Trading Initiative and for civil society organisations to monitor codes of conduct. DFID is also involved in a range of projects to develop and extend models of pro-poor trade which concentrate on assisting poor producers either to access new trade opportunities, to participate in higher value added activities, or to receive a better deal from the marketing chain. 2. Objectives The objective of the study is to inform DFID's policy of support for fair trade, by assessing the benefits and costs of fair trade in comparison with more traditional trade patterns. It will look at the range of initiatives covered by the term 'fair trade' , from the more rigid definitions used by the Fair Trade Labelling Organisations to the looser usage in fair trade
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