2010 - European Fair Trade Association

1.2. North versus South
The common division of North versus South is often used in
the Fair Trade industry . North represents the developed markets,
whereas South represents the developing markets. In Fair
Trade the South is furthermore the producing side of the Fair
Trade supply chain; this is where most Fair Trade products
originate. In this report, the South is seen as consisting of
three continents, Africa, Asia and South-America. Each of
these continents will be discussed separately in each chapter.
The North on the other hand, represents the consumer side
of the supply chain and forms the main market for Fair Trade
products. However, as will be discussed in chapter 4.2, a new
trend is slowly arising: it is no longer only the Northern countries
who buy Fair Trade products, local Fair Trade sales in the
South are increasing as well.
1.3. Fair Trade: where it all started
Where free trade has been the most common form of trade for
centuries, along with protectionism and planned economies,
Fair Trade is a relatively new concept. Free trade characterizes
most of the developed markets and is seen by many people
as being beneficial for all. Unfortunately free trade is subject
to market failures as well, such as price discrimination.
Free trade is not necessarily beneficial for all and might even
lead to unfair trade at times. Examples of this are people
who cannot afford to pay market prices and people for whom
the entry barriers are too high and remain too high. Protectionist
methods such as trade tariffs, trade quota and subsidies
enhance this effect. Free trade supporters argue against Fair
Trade by claiming that Fair Trade will in fact hinder fair competition
by offering the incentive of overpriced products to
enter the Fair Trade market. The high price will attract a larger
number of producers to the market, leading to an oversupply
of goods, which will eventually lead to lower prices in the
non-Fair Trade market. But where free trade places its faith in
the self-correcting abilities of the market for the good of all,
Fair Trade points to the marginalized producers who are left
behind, and advocates an active policy to improve their lives.
Tracing Fair Trade back to its origins, one of the first welldocumented
expressions of dissatisfaction with the free trade
system came from an assistant resident employed by the
Dutch East Indies, Eduard Douwes Dekker. Under the pen name
of Multatuli he wrote a book in which he criticized colonial
politics, titled ‘Max Havelaar: Or The Coffee Houses Of The
Dutch Trading Society’ (Zook, 2006; Douwes Dekker, 1860).
With this book, Multatuli managed to create awareness among
Dutch citizens who started to realize that their luxury came at
the cost of human suffering elsewhere (Aram, 1985). In the
1950s, an alternative approach to the opposing ideas of a free
or regulated market arose. The concept was called Alternative
Trade and was sustained by the argument that international
trade can be beneficial to developing countries as long as it is
performed in an honest way. If successful, improved trading
conditions for farmers and workers in the developing world
would accelerate economic growth and subsequently be a solution
to poverty. Many Fair Trade initiatives originate from
this period, such as Ten Thousand Villages (formerly Self Help
Crafts) in the United States, which started buying needlework
from Puerto Rico in 1946, and SERRV International who began
to trade with poor communities in the South in the late
1940s. In Europe Oxfam UK started to sell crafts made by Chinese
refugees in Oxfam shops, in the late 1950s. Oxfam also
set up the first alternative trading company, Oxfam Trading,
in 1964.
The Netherlands played a significant role in the development
of Alternative Trade. In 1959 the importing organisation SOS
Wereldhandel (now known as Fair Trade Original) was founded.
Other Dutch third world groups began to sell cane sugar with
the message: “if you buy cane sugar you give people in poor
countries a place in the sun of prosperity”. The same group
opened the first Worldshop in 1969 (EFTA, 2006). According
to the European Fair Trade Association (2006), these shops
have played a crucial role in the development of Alternative
and then Fair Trade . In 1988 the Max Havelaar Foundation
for fair coffee was founded, named after the key character in
Multatuli’s ‘Max Havelaar’ (Max Havelaar, 2011).
During the same period, many Non-Governmental Organisations
and motivated individuals in the South started Fair marketing
organisations which would provide advice, assistance
and support to disadvantaged producers. These organisations
established partnerships with the new organisations in the
North, in order to fight for greater equity in international
trade (EFTA, 2006).
Fair Trade also managed to attract attention at international
political fora. Debates between the North and the South on
the “New International Economic Order” were already taking
place (UNCTAD, 2002). In 1968 UNCTAD (United Nations Conference
on Trade and Development) adopted the ‘Trade Not
Aid’ approach, which was considered to be more efficient
and fair than providing development aid to the South (EFTA,
2006). Other agreements of UNCTAD in the same period encompassed
the stabilization of international prices of export
products crucial for developing countries (UNCTAD, 2002).
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