Regional Markets

Regional Markets for Local Development
Through producer networks, Fairtrade is providing a platform for producers to advocate
their case and lobby their respective governments. Even though this is an initiative
in its early phase, the goal is to ensure that by participating in the Fairtradevalue chain,
producers can better influence governance processes at the local, regional and international
levels.
Producer and consumer prices
Fairtrade is based on close relationship between producers and consumers. While producers
participate in the process of setting the Fairtrade minimum price level, consumers
and Fairtrade buyers choose to support the system by paying this premium
price in final retail.An example from the general market for coffee serves to illustrate
this point. As noted by Giovannucci and Koekoek (2003) (in Nelson and Pound
2009), the ‘coffee commodity market is driven exclusively by economic factors and,
like all commodity markets, does not recognise, much less internalise into its prices,
the very real environmental and social costs of production’. Fairtrade is a response to
this set-up of the marketplace.It seeks to ensure that producers in developing countries
are able to ‘trade themselves out of poverty’ by receiving fair and stable producer
prices for their products.
The Fairtrade guaranteed minimum price is particularly important when market prices
fall below production costs. With the safety net of a fixed fair price, farmers do not
have to migrate to seek alternative employment or use up valuable savings and assets
during periods of hardship.For example, in West Africa, the Fairtrade minimum prices
for cotton seed have been significantly higher than state prices for conventional cotton
(27–49% higher for conventional cotton and up to 76% higher for organic cotton).
Fairtrade cotton producers have received significantly higher prices than producers in
the region that are not certified (Nelson and Smith 2011).
Arnould et al. (2006: 21)conclude that ’participation in Fairtrade is like a life jacket,
a shock absorber, or a buffer against the effects of the volatility global market capitalism
exert on the poor in developing countries...but...Fairtrade alone is not the solution
to the problems of the rural poor’. Fairtrade must continue to evolve and adapt
to the new realities on the ground. While the minimum price is an iconic component
of the system and will continue to play a crucial role for many commodities, how it
could best serve different products, different regionsand different farmers should be
explored further.
Some studies have shown that non-Fairtrade farmers are also benefitting from the
increased prices as a result of the competition for the produce induced by Fairtrade
(see Jaffee 2007). This is an example of a ‘multiplier effect’, increased producer prices
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