Essays Toward A Principled Economics
Mose Durst Ph.D.
6. Alternative Fair Trade
We have examined how credit can enable the poor to establish enterprises, to create wealth, and to move from poverty to decency. As the poor produce handicrafts, generate agricultural commodities, or offer new services, the domestic market seriously limits the degree to which they can prosper. Goods that are produced must be sold to a world market that is large enough to create wealth for the huge number of poor people in developing nations. Developing nations, however, are also caught in a "trade trap" that limits the degree to which they can sell their products on a world market. The poverty of individuals is paralleled by the poverty of nations, and both problems can be addressed simultaneously as we look at obstacles to fair trade.
When Professor Yunus of the Grameen Bank discovered that a woman worked all day on bamboo handicrafts for only a few pennies, he realized that credit, extended at a reasonable cost, would allow the woman to earn the profit that she paid to moneylenders or middlemen. The bamboo crafts she produced could be sold directly and enable her to earn a decent livelihood. Credit, Porfessor Yunus realized, could be extended to people with no collateral; the poor could be good credit risks and work their way out of poverty. Ideally, the microenterprises established by the poor could connect them to the major financial institutions of a country.
As the Grameen Bank extended loans to more individuals, numerous microenterprises and cooperatives produced hundreds of varieties of goods. This process illustrated the principle economic ideals of enhancing the dignity of the individual, the solidarity of the family, and the common good of the community. Yet the resources generated by individuals remained small. We read of few stories where goods entered the world commercial markets. Microenterprises remain small players in the game of world trade.
How do handicrafts or the commodities produced by small cooperatives in developing nations reach the giant emporia of developed nations? If we travel to developing nations as tourists, we may be delighted to purchase a handcrafted souvenir. But, we would never expect to find such "native" objects as part of the regular, mass stock of items in our department stores, supermarkets, or chic boutiques. We hear of giant trans-national corporations exporting a huge percentage of a developing nation's commodities, but we rarely consider how the individual artisan, rural farmer, refugee, or handicapped person can sell something in the developed nations. Credit is but one aspect of creating wealth; providing the means for marketing goods that are produced is the trade component that can insure that wealth is generated continuously and plentifully.
For this kind of marketing, however, how are producers in developing nations to receive sufficient credit to produce large numbers of items for a mass market? How do producers gain access to major commercial markets? How do they establish ongoing relations with buyers in developed nations? How do they learn about style, quality, on-time delivery, and the multitudinous points that producers must understand if they are to be successful in the major commercial markets of developed nations? These questions pose the challenges to producers who seek to go beyond subsistence and to enter the world of trade and prosperity.
When we look at what kind of trade exists between developing nations and developed nations, we often find that a single commodity is the mainstay of a country's trade. As a percentage of total exports, for example, Zambia's trade in copper comprises about 98%; Uganda's trade in coffee about 95%; Somalia's trade in livestock about 76%.1 Further, a study by UNCTAD The United Nations Conference on Trade and Development] officials has shown that for major commodities entering world trade in 1980, the proportion of the total which was marketed by the 15 largest transnational companies ranged between 70 percent and 90 percent, and that in most cases only three to six transnational companies accounted for nearly the whole of the market.2
What are the implications of these trading realities to large producers?
Unfortunately for the South, -- there are major differences in the bargaining position of manufacturers and of primary producers in the world market. In the first place, many food products are perishable and cannot, therefore, be held off the market, as manufactured goods can, to prevent a fall in price. Secondly, and what is more serious for the Third World producers, they do not have the facilities for processing, packaging and storing, so as to get a better price and add value to their basic product. It is either the local middlemen from the towns or, more often, agents of companies from the First World, who benefit from the added value at all the stages of processing, packaging, transporting and marketing the product from producer to consumer.3
Without the sophistication of technology, finance, marketing, and a host of other areas of trade, producers in developing nations are at a significant disadvantage in their trade with transnational companies from developed nations. Michael Brown enumerates the functions of trade operations between crop and shop, and it becomes obvious which trading partner has the advantage: production, technical consultancy, storing and processing, finance for purchase, preserving and packaging, transporting, marketing, exporting, shipping and insurance, importing, inspection and documentation, commodity dealing, finance for trading, legal and accounting services, manufacturing, wholesaling, advertising and promotion, distribution and transport, and retailing.4
If these are the challenges that large producers in developing nations must face, imagine the situation of small, independent farmers or cooperatives when they seek an alternative to the process just described. How are they to avoid dealing with transnational corporations and establish an independent mode of trade, especially if they seek to add value by more operations over which they have control. We have seen in the previous chapter when small producers work with middlemen like moneylenders, they are vulnerable to exploitation. If they manage to add value before trade to developed nations, additional tariffs are placed on finished goods. Non-tariff barriers, quotas, and out-right bribery are some of the additional obstacles faced by small, independent producers. If a few corporations purchase virtually the entire commodity of a nation, such as coffee, cocoa, or bananas, we can well imagine the challenges faced by the producer who seeks alternative trading partners.
The situation of the artisan, craftsperson, or small manufacturer is similar to that of the farmer or small, rural, independent cooperatives. How does one identify a market for products to be sold in the developed nations? Who will provide the technical information and the host of services necessary to finance, ship and insure products before they reach a market? How can one eliminate the middlemen, known as sharks, coyotes, and piranha, who make the greatest percentage of profit on a product while leaving little for the producer?
Michael Brown lists five arenas of power that must be challenged if producers in the developing world are to be treated fairly, where alternative trade can become fair trade:
(a) producer power, where monopoly positions are established or competition is regulated;
(b) marketing or trader power, where access to markets is monopolized or effectively controlled;
(c) financial power, where access to finance is restricted to those who already have money or is available only at exorbitant rates of interest;
(d) consumer power, where market tastes and fashions are created by advertising and the promise of convenience of delivery;
(e) nation-state power, where subsidies, tariffs, levies, or the activity of marketing boards manipulates the channels of trades
The first awareness of and then challenge to these areas of power, in the battle for fair trade, came originally from religious organizations involved with charity and disaster relief: groups such as the Quakers, Mennonites, and Church of the Brethren. Shortly after World War II, for example, Oxfam was founded by a group of Quakers and became a prominent relief and charity organization to victims of the war. As with many organizations offering charity, Oxfam realized it would have to tackle some of the more fundamental causes of poverty, hunger, and injustice if it were to accomplish its purpose of helping the destitute. It thus began to involve itself in issues of trade.
A second group of organizations, those concerned with the political causes of oppression, exploitation, and alienation, like Global Exchange, came to the work of alternative trade in seeking to express solidarity with the poor, and in order to begin the structural transformations necessary for global justice. Finally, development organizations like the United States Agency for International Development (USAID) and the United Nations Development Programme (UNDP) realized that their strategies of development through huge projects was not benefitting the poorest of the poor or even the masses of people in a given country. They, too, then examined the relationship of trade to poverty.
These three groups, then, began to practice and then to define principles of alternative or fair trade. Directly empowering the poor with the means of establishing a livelihood became the strategy of these groups. Quickly, however, all of the above-mentioned arenas of power were confronted as the greatest obstacles to any relief or development project. An alternative trading organization (ATO) located in a developed nation would reach out to producer groups who were unable to combat the powers arrayed against them. The process has usually followed a regular pattern:
The ATO has first to find the producer groups in the Third World who are looking for a new outlet for their products so as to establish their independent development. Indeed, the most important role of the ATO may be in helping small-scale producers to get organized, to become a stable group and to join up with other local groups so that there is a firm structure capable of collecting produce from many households, providing storage facilities, setting up a processing plant, managing supplies, organizing transport and communicating with markets at home and overseas. Second, the ATO must be relied on to provide information, which will almost certainly not be available locally, about prices, markets, styling, packaging, quality control, health and safety standards, new uses for old products, transport and shipping and tools, machines and plant for processing, all on an open and fair basis. This information will need to be stored -- not just in files and catalogues but in computers -- and to be communicated by modern means of telephone and electronic mail, telex and fax.
Unlike normal commercial traders, the ATOs do not seek to make a profit for their owners or sponsors. They have to cover their costs and service their working capital, and if they make profits, these are fed back into charitable activities. The aim is to pay back as much as possible, not as little as possible, to the producer .... ATOs are concerned to help producers to add more value to their produce by enabling them to do more of the processing that is now mainly done in the First Worlds ATOs, in addition to what is described here, will seek out those who have been most marginalized by current, dominant trading practices: women, the minority groups within a culture, and the handicapped. They will identify producer groups which allow for significant participation by workers in the operation of the business, and they prefer to work with cooperatives where workers are the actual owners. They seek to work with groups which preserve the traditional arts, crafts, and patterns of culture, and with those who seek a constructive, harmonious relationship with the environment. They emphasize the need for "fair wages" relative to what this means practically and prudentially in a given country, and there is much concern for the health facilities and safety of the workplace. By offering much of the purchase price of items with the purchase order, ATOs provide the needed credit for producers to compete in global trade.
In the developed nations, the ATOs provide markets through catalog sales, Third World shops (in Europe), and access to trade shows. Further, a trademark is being developed in Europe (such as the label of the Max Havelaar Foundation in Holland), where a product will be identified as being an example of fair trade, with an explanation provided about its production. A significant component of the ATO network in developed nations is to educate consumers about the situation of producers in developing nations, and to alert them to unfair trade practices of corporations as well as countries.
Religious people involved with alternative trade can be as efficient and effective as any business organization or development agency, and agencies such as USAID and the UNDP look to non-governmental organizations (NGOs) and fund projects in support of alternative trade. Oxfam does millions of dollars of business annually by trading almost 400 products from developing nations in almost 800 shops. We describe below some of the religious and other non-governmental organizations that approach the effectiveness of Oxfam: SERRV Handcrafts, Selfhelp Crafts, Christian Cottage Imports, Equal Exchange, Pueblo to People, and numerous others.
SERRV, an organization sponsored by the Church of the Brethren, began very informally after World War II. When members of the Church returned from Europe to the Church's conference center in New Windsor, Maryland, they occasionally brought with them handcrafted objects. As members explained the origin of the objects, and how Europeans were helped by the purchase, a regular process of purchase in Europe and sales through Church facilities in America was initiated. By the early 1990s, SERRV had grown to annual sales of over $5 million, with imports of over 2,200 handcrafts from 37 countries, and more than 3,500 sales outlets in the United States. The mission statement of SERRV is found on almost all their publications: "to promote the social and economic progress of people in developing regions of the world by marketing their products in a just and direct manner.
Many of the items SERRV markets are displayed in a handsome, colorful catalog organized under such categories as accessories, clothing, furnishings, housewares, jewelry, rugs, and toys. Along with beautifully colored photos of the items, there are descriptions of the artisan communities where the items are produced. The 1993-1994 catalog, for example, includes the following letter from the President of a Mayan community organization in Guatemala:
Greetings from the Aj Quen Artisan Association of Guatemala:
We are an organization made up of 2,000 poor artisans -- 80% of us are women and of those, 50% are widows. We have joined together to work cooperatively in our search for a better way of life.
Aj Quen, which was founded in February, 1989, represents the efforts to coordinate the production of artisans (weavers, tailors, basket-makers, potters, etc.) in order to obtain for them a fair price for their products.
In addition, we are working to improve the quality of our products, to strengthen our organization, to train ourselves in technical and social skills, and to reclaim and promote our cultural values. All of this is done through our marketing, production, education, and research projects.
We want you to know that when you buy our products, you are receiving top quality items made of 100 cotton. But beyond this, you are supporting directly the struggle faced by many artisans to overcome their poverty and are also promoting fair trade between your country and the countries of the Third World.
We are hoping to be able to demonstrate to you the quality of our products and want you to know that behind each product, you will find a dedicated artisan, with a history going back thousands of years and carrying a message of love to everyone -- in all parts of the world.
The purpose of such letters, and other narratives about artisans, is to educate consumers in developed nations about the situations of producers in developing nations. When we in the United States purchase merchandise in our local stores, we are usually oblivious about the production of the items or the lives of those workers who produced them. With information provided by groups such as SERRV, we are able to make informed choices that can impact the nature of global trade.
SERRV explains how it promotes fair trade in a flyer that accompanies the catalog:
We pay our producers fair prices, an equitable return for their labors within the context of the local economy.
Because SERRV artisan partners are poor and don't have ready access to credit for raw materials, we offer to pay up to 50% of the order in advance as an expression of our trust and partnership. The remaining payment is made upon delivery of the crafts.
We encourage indigenous crafts, ones that reflect the culture where they are made. By providing a market for these crafts, we help to preserve traditional skills.
We encourage the use of raw materials and production processes which are environmentally sustainable.9
SERRV has also established a Grant Program which funds artisans in developing nations for technical training, production equipment, and marketing education. Although SERRV provides most of the funds for this program, contributions have been received from many churches, including the Lutheran Church, the Church of Christ, the Congregational Church, and the Presbyterian Church.l0 Since there are over 300,000 church congregations in the United States, one can only imagine the impact of these churches working together to promote fair trade.
As with Oxfam and SERRV, SELFHELP -- a program of the Mennonite Church -- began shortly after World War II in a very humble way. Almost every brochure published by SELFHELP explains its origins:
In 1946 MCC worker Edna Ruth Byler of Akron, PA., visited MCC volunteers who taught sewing classes in Puerto Rico. They were looking for ways to improve the lives of their students, many of whom lived in poverty. Byler brought several pieces of embroidery home to sell to friends and neighbors.
The crafts were popular, and soon she added crossstitch needlework from Palestinian refugees and handcarved Haitian woodenware to her inventory. In the early 1970s, the flourishing project moved out of Byler's basement and became an official MCC program.11
The mission statement of SELFHELP speaks directly to the religious motivation of the organization, and epitomizes the purpose of many groups in the alternative trade movement: "... to glorify God by serving people; to help the poor in obedience to the teaching of Jesus; to be signs of God's continuing love and care."12 What international development agencies have begun to realize is the sacrificial action of nongovernmental religious and volunteer organizations. With such groups there is extraordinary concern for the poor, of genuinely and effectively helping them, with little concern for the prestige or status of the helping organization. A next step, as we shall discuss, is for these organization to work more closely with each other.
By 1992 SELFHELP had become a major alternative trade organization, as it worked in 30 countries and represented as many as 50,000 artisans. The crafts are sold in SELFHELP shops throughout the United States and Canada and, as with other ATOs, SELFHELP seeks to sell the crafts as well as to tell the stories of the artisans who produced them. From the jute crafts made by women in Bangladesh (who may have been helped by the Grameen Bank), to decorated gourds made in Cameroon, SELFHELP provides income to poor communities and education to the wealthy. Its operating principles are stated on its introductory brochure:
* We work with disadvantaged artisans.
We purchase from craft groups that are concerned for their members and that promoted member participation. We pay fair prices for handicrafts. We pay promptly.
* We pay up to half the value of a handicraft order when it is placed; the balance when the items are shipped to North America. This provides operating capital for artisans to purchase raw materials and for crafts groups to pay workers.
* We offer handicrafts that reflect and reinforce rich cultural traditions
* We promote fair trade.12
As with other religious organizations, SELFHELP seeks to encourage volunteers to participate in its marketing by hosting crafts sales in churches, homes, and through various community activities. The SELFHELP shops as well as the warehouse in Akron, Pennsylvania, are staffed by volunteers and thus the organization is able to fund itself and maximize the amount of money returned to producers.
Christian Cottage Imports, established in 1975, works in partnership with the Christian Reformed World Relief Committee. It sells over 800 handmade products made by artisans in developing countries through its catalogue published in Muskegan, Michigan. The items pictured in this catalog are so fashionable in design, one could imagine finding them in any department store or jewelry shop. The artisans are obviously getting excellent advice from their ATO about the taste and fashion of consumers in developed nations.
When we look at the non-religious organizations engaged in alternative trade, we find fair trade principles at work in service to similar groups of people. Alternative trade seems to engage people from all bands of the religious and political spectrum. As the problem of poverty is so serious, and the alternative trade movement a practical means to bring immediate help to huge numbers of people, all sorts of people find themselves working together for a common good. Also, the ATO movement by its concern for fair trade seeks to transform the global trading system by making it more equitable and just for all people.
Equal Exchange, located in Stroughton, Massachusetts, is an alternative trading organization that imports coffee from small cooperatives in the developing nations and markets it in the United States. An illustration from their brochure quickly reveals the distinction between conventional trade and alternative trade in relation to coffee:14
From the illustration, we see that Equal Exchange is able to provide greater income to workers by supporting cooperatives, by performing functions usually done by mid-level traders, and by providing direct marketing outlets to stores in the United States. The brochure goes on to explain how gourmet coffee may retail in supermarkets for as much as $7 per pound, while the farmers receive between 35 and 50 cents. Without the alternative trade organization, small farmers find themselves trapped:
Few farmers have any cash surplus to tide them through until harvest. Banks won't lend them money. Governments sometimes make loans available, but at 30% or 40% interest. Most farmers must rely on the coyotes for credit, further increasing their indebtedness to them, further decreasing their chances of breaking the cycle of poverty and dependence.15
Figure -- The Economic Chain
Equal Exchange helps such farmers generate greater income for themselves by following the guidelines of fair trade:
(1) As an ATO they buy directly from the cooperatives;
(2) They offer a fair price to the farmer based on a mutual agreement;
(3) They extend credit in the form of paying a good percentage of the price with the purchase order, and they return a significant amount of sales profit to the farmer;
(4) They promote the democratic management of farm cooperatives;
(5) and they educate consumers in developed nations about producers.
Equal Exchange is an employee-owned company, and thus workers can more easily identify with employee-owned producer cooperatives. In addition, the workers at Equal Exchange can democratically decide what kinds of support they wish to give to their counterparts in producer cooperatives. A "socially responsible" company may decide to give a small percentage of its net profits to various charities. Equal Exchange employees, however, are committed to maximizing the profits for poor producers, and thus they enhance the opportunities for wealth creation and a better quality of life for those who are most in need. The principled economic ideal, creation of wealth while promoting the well being of the individual, families, and communities, is thus realized.
When Equal Exchange was founded in 1986, investors loaned money to the new company at a maximum annual dividend of 5%. Investors obviously supported the fair trade principles of Equal Exchange, and it is no surprise to find a religious organization such as the Adrian Dominican group as one of the investors. In fact, the brochure is dedicated to this religious group, and one can imagine once again the greater cooperation of religious organizations in support of alternative trade.
Finally, in an attempt to educate consumers, lengthy profiles of producer organizations are printed in the brochure. COOCAFE, for example, an Equal Exchange trading partner in Costa Rica, has received a fair trade seal from the Max Havelaar Foundation in Holland, and it is now available in 90% of Dutch supermarkets. With the boom of cafes and coffee drinking in the West Coast of the United States, there is great potential for educated consumers to choose their brew based on knowledge of producers.
Just reading the information from ATO brochures and catalogs is an education for most consumers in developed countries. Pueblo to People, founded in 1979, is a non-profit ATO. Its catalog presents information about artisans in the developing world and displays their crafts in a smart, sophisticated format. The first information page of the catalog explains the mission of Pueblo to People:
Our mission is to relieve the suffering of the poor in Latin America. Our means is to market the products of artisans and small farmers in Latin America -- paying them a good price.
The artisans and farmers producing the products in this catalog commonly earn two to four times as much selling to you through Pueblo to People as they are able to earn otherwise.
We buy from small, democratically organized production cooperatives and associations -- self-help efforts of the poor themselves.
We also use our catalog, store and event marketing as educational media, diffusing information on craftspeople and traditional crafts, as well as the economic and social circumstances in which the poverty exists.16
The statements in the catalog appeal not only to the conscience of the consumer, but also to the good sense of the buyer. Products are described as "well made" and "long lasting." Organically grown foods are showcased. There is an emphasis on the reasonable purchase price, the benefit of buying directly from a catalog, and "satisfaction guaranteed." One can do well and do good by making a purchase from Pueblo to People.
While most of the ATOs we have described provide marketing opportunities for crafts and commodities produced in the developing world, a number of organizations provide extensive consulting to producers, and marketing through the more lucrative arenas of world commerce.
Aid to Artisans, for example, founded in 1976, provides for a fee a whole range of services to artisan groups directly or to non-governmental organizations working with these groups. Information on design, business training, marketing research, and marketing of products at such prestigious events as the New York Gift Show are some of the functions ATA performs. ATA places items in such fashionable catalogs as the Boston Museum of Fine Arts, and has sold the work of artisans to corporations like Esprit, which looks for items that can be incorporated into its environmentally sensitive product line.
Since its inception, ATA has given more than 2,000 grants of $2,000 or less to microenterprises focusing on the production of crafts. It works in conjunction with USAID in Ghana to revitalize the craft production of traditional textiles, beads, and baskets, and then provides global marketing access for these items. ATA is a non-profit organization that seeks to promote the self-sufficiency of artisan communities throughout the world.17
Since providing information and promoting trade directly are two complex functions, sister organizations within the same institution are sometimes spun off in the developed nation to help producers in the developing world. Twin and Twin Trading in London work together to provide trade information and trade development. Twin produces publications such as The Network, which provides very specific, practical information on how to develop new products. The July-September 1994 issue explains the lucrative market for jams and preserves, with "value-added" in the developing nations. Articles on technology, market news, finance, regional information, training, women, cooperatives, coming events, and review of books related to trade are found in its pages.18
Twin also provides consultants to producer groups in the areas of international markets, barter, and agriculture. Conferences sponsored by Twin bring producer and consumer groups together, and Twin will be as helpful to consumer groups seeking partners as to producer groups. The formal linking of these two groups appears to be a main function of Twin Trading:
... Twin Trading carries out trial importation and tests markets for products from new sources.
... [Its trades commodities, arranges barter trade and helps negotiate sales and agency agreements to develop reliable markets in the North for Southern producers.
... [It] develops brand and marketing strategies and wholesale distribution systems for selected products.
... [Its supplies equipment for projects supported by NGOs or sought by organizations in the South. This includes help with equipment specification, purchasing, inspection, packaging, shipping, installation, commissioning, training, and maintenance.19
Although most ATOs in the developed nations, such as Twin and Twin Trading, provide a wide range of functions for producers, some will focus on a niche market that will provide the greatest benefit in a specific area. Earth Trade, for example, located in New York City and Oakland, California, offers many of the services provided by Twin and Twin Trading; however, Earth Trade seeks to assist farmers who produce organically grown foods. As the market in developed countries for such products grows each year, with individuals concerned about the chemicals used to grow food, producers in developing nations have a natural advantage in growing organic food and can earn significant income if they can enter markets in the wealthier countries. Since chemicals for agriculture are expensive and labor for farming is relatively cheap, producers in the South would have a comparative advantage in growing organic food.
Earth Trade educates producers about conversion to organic farming, then provides a range of services such as packaging, marketing, and information feedback about quality and changes in customer taste. Soybeans, sesame seed, nuts and coffee are just some of the products for which significant markets have already been established in developed nations. The entire system created by Earth Trade seeks not only to return greater profit to the producers, but to protect the health of individual consumers and the quality of the environment. As with all principled economic activities, the creation of wealth must simultaneously promote the well-being of the person, the community, and the environment.20
Although we have seen the range of services that ATOs can provide to support producers in developing nations, significant obstacles remain if there is truly to be "fair trade" between developed nations and developing nations. Corporate monopolies are not easily dissolved; access to markets for producers is still difficult; credit does not come readily or sufficiently; and tariffs, trade barriers, and discrimination against "value-added" products are formidable.
David Dalton reports how "In 1967 the twelve countries which now make up the European Union imported nearly four million tonnes of sugar between them. By the mid-1980s they were net exporters of nearly four and a half million tonnes of beet sugar."21 Changes in trade such as this have a major impact on the small producers in developing nations, yet there is often little effort made to provide alternative markets. There is no powerful lobby which small producers can use to influence the decisions of government or of international organizations. Even with the new GATT agreements for world trade, "The DECD has estimated that the poorest countries stand to lose around £4.7 billion annually..."22
In conclusions reached by the 1988 conference sponsored by Oxfam and Tradecraft, producer ATOs cry out for greater access to credit, for this is "the greatest restriction on Third World countries."23 As much as ATOs in the developed nations seek to provide credit by offering up to 50 % of the purchase price when they order from producers, this is an ideal that is not always possible, nor can producers plan production based on this idea. Buyers for Global Exchange in Berkeley, California, an ATO that purchases hundreds of products from throughout the world, explain how the realities of business will often constrain the flight of idealism. Cash flow and capital are as difficult to come by for ATOs as for any business. Producer organizations need sources of credit that are as available to them as credit is available to large corporations. A Grameen Bank-type of solution is necessary for these small enterprises.
A further conclusion of the conference, which is reiterated in all the literature about ATOs, is "the deep concern over the lack of access Third World countries have to training and know-how. This very much restricted the ability of countries to maximize any benefits from its trading activity. This was especially true in the field of design, marketing, and technology."24 ATOs in developed nations, as we have seen from our brief survey, do provide training and information to producers, yet this is still not adequate when we look at the speed and sophistication by which large corporations build these processes into their production. From Tom Peters' Thriving on Chaos to Akio Morita's narrative about the success at SONY, we learn that the speed at which a producer gets market feedback and transforms production will determine success. ATOs in developing countries need organizations to serve them in this sophisticated way.
However foolish the billion dollar borrowing in the 1970s and 1980s by developing countries, usually by governments, the reality of the debt burden is like a noose around the neck of each person within such countries. Governments may not "go broke," but individuals can be economically in a kind of debtor's prison with little hope of release. Unless creditor nations and banks can find more dramatic means to alleviate the debt burden, millions of producers will find it extremely difficult to expand their enterprises sufficient to create economies of scale. For such economies demand the infrastructure support that only governments can provide. And this support will never be adequate until the poor have a powerful enough international lobby to ease the burden of debt repayment: fair trade demands this kind of debt restructuring.
A lobby within the United States on behalf of producers is especially important because of the size of the American market. The United States will establish trade policy that dramatically affects small producers in developing nations, yet there is very little awareness among Americans about such changes. The Multi-Fiber Agreement, for example, affects artisans in the following way:
Textile crafts are usually not covered by the beneficial access programs. Most textiles, including handwoven products, are heavily restricted by a system of quotas negotiated by the U.S. and other nations under the international Multi-Fiber Agreement (MFA). There are few quota exemptions for handicraft textiles but these usually only cover carpet or wall hangings. Textile tariffs are very high and new quotas can be imposed at any time.25
When other groups have faced the type of difficulties confronting ATOs, they have organized themselves for greater power and effectiveness. Certainly, the great variety of ATOs, with various levels of formal and informal structure, spread through most developing nations, presents a unique and complex challenge. National and regional organizations, however, have begun to form with the purpose of addressing many of the needs of the ATOs.
The International Federation for Alternative Trade (IFAT) was founded in 1989 and is comprised of 60 ATOs and producer groups.z6 IFAT is dedicated to serving the poor producers in developing nations and of correcting the problem of unfair trade:
IFAT sets out to improve relationships and cooperation between member organizations through an information exchange. Members exchange information about market research, product development, and marketing products.
IFAT strives to provide members with assistance and services to improve their knowledge of world markets. It lobbies for the rights of producers and seeks to improve communications. It is active in supporting the development of an internationally recognized fair trade standard. It brings its members together through conferences and networking to provide opportunities for consultation on product development, marketing, and access to finance and professional training.
IFAT strives to establish links and to lobby international trade institutions in order to develop in them a sensitivity to the impact of unfair trading practices and to speak out on behalf of exploited producers worldwide.27
IFAT is no doubt helping ATOs and producer groups in responding to fundamental needs. Yet, it is still an inchoate organization that cannot itself provide the financial clout or marketing expertise that can enable the alternative trade movement to leap into the major commercial markets. When I attended the North American Alternative Trade Organization (NAATO) conference in June, 1994, (see editorial in the last chapter), several representatives of ATOs and producer groups were not clear about how IFAT was different from NAATO.
Although NAATO was founded in July of 1993 at its tenth annual conference, it was still organizing its structure at the eleventh annual conference that I attended. Its stated purposes are very similar to those of IFAT, as it is committed to establish fair trade practices as they have been outlined in this essay. NAATO has goals of providing members with technical assistance, access to finance, marketing services, information exchange, consumer education, and coalition building.28 These are goals, however, yet to be realized, and my sense of IFAT and NAATO is that excellent, dedicated people are at the formation stage of organization-building.
Just as Global Exchange in San Francisco publishes a directory of alternative trade organizations (including practical profiles, names of contact persons, and telephone numbers), a number of organizations have strengths that can complement the work of IFAT and NAATO. The Crafts Center in Washington, D.C., for example, publishes an International Directory of Resources of Artisans:
This lists over 5,000 organizations and individuals, including crafts, enterprises, individual artisans and experts, art and folk art associations, financial institutions (foundations, banks, sources of micro-credit), community organizations, public and private international development organizations, publications, sources of materials and equipment, training institutions, and a range of markets, including alternative trading organizations, museums, galleries, architects, fairs, gift shows, mail order catalogs, importers/ exporters, boutiques and craft shops and interior designers.29
Crafts News, a publication of The Crafts Center, is an excellent source of information on ATOs, producers, and organizations listed in the International Directory.
The European Fair Trade Association (EFTA) coordinates the activities of ATOs in nine European countries. With purposes and activities very much like IFAT, EFTA's greatest success has been the establishment of a European fair trade mark called TransFair. Consumers are alerted to the new trademark and educated about the fair trade practices that allow a product to bear such a mark. As consumers are educated, they can then be organized into a strong lobby in support of fair trade organizations.30
IFAT, NAATO, Global Exchange, The Crafts Center, EFTA, and other organizations are giving support, guidance, and momentum to the fair trade movement. Much has been done to help producers as well as to educate consumers. Still, the amount of alternative trade is extremely small if we compare it to mainstream commercial trade. Even in terms of what poor artisans and small cooperatives in developing countries need to overcome poverty, dramatic increases in the volume of alternative trade are necessary.
For this dramatic increase to take place, our survey of alternative trade leads us to several conclusions: producers in each region of the world need to work more closely with each other, and they need to be served by modern, sophisticated commercial organizations that provide the same marketing information as found in a giant, transnational corporation. Second, producer organizations need regional access to credit in the form of reliable and responsible financial institutions. Finally, producers need organizations in developed nations that can provide regular entry of goods into the quality-volume commercial markets.
Professor Miller C. Lovett accurately summarizes the present state of the ATO network:
The ATO network is ...very primitive in accomplishing its intent. It has few established importers, offers little sophistication in solving production problems, nor has the ability to get products to market in an efficient manner.
Furthermore, the ATO network has virtually no access to a high volume commercial market, partly because products are of insufficient quality or quantity, but also because the ATO network is not familiar with marketing structures in general. Another barrier is that ATO producers cannot assume timely delivery. A further problem is that there are hundreds of artisan producers or potential producers who have no link to the ATO network and could not be accommodated in the ATO structure anyway.31
Lovett proposes the establishment of regional organizations in developing and developed nations based on the Spanish cooperative Mondragon. The artisans would own the regional organizations, just as workers own the organizations connected to Mondragon. With capital contributions from all artisans in a region, a development bank, a consulting group, and a technical institute could be established and owned by the worker cooperatives, again similar to the Mondragon model (which we will discuss at greater length in the next chapter). Further, producer cooperatives would own the regional structures in the developed nations which would provide marketing information, establish a permanent presence in major trade shows, and coordinate presentation of products in a single ATO catalog.
The essence of Lovett's proposals is to provide greater effectiveness for ATOs, and greater benefits for the workerproducers. With ownership of production, distribution, finance, and trading organizations workers will be able to maximize their profit and compete with major businesses. Fair trade must allow for fair participation in global commerce, and worker ownership of the institutions described above would allow for greater wealth creation for producers along with the attendant well-being of families, communities, and the environment. Fair trade, based on the principles laid down by the ATO network, and guided by the values of Principled Economics, can make a significant contribution to ending poverty and hunger, while moving millions of people to greater economic and social justice.
1. Belinda Coote, The Trade Trap (Oxford: Oxfam, 1992), p. 5.
2. Michael Barratt Brown, Fair Trade (London and New Jersey: Zed Books, 1993), p. 50.
3. Brown, p. 42.
4. Ibid. pp. 65-66.
5. Ibid. pp. 66-67.
6. Ibid. p. 163.
7. Carol Wills, from Oxfam Trading, reports in Who Cares About Fair Trade, a conference on development, trade, and cooperation, September 4, 1988. Sponsored by Oxfam and Traidcraft (Third World Information Network Ltd, 345 Goswell Road, London ECIV7JT), p. 8.
8. SERRV Handcrafts, 93-94 Catalog (New Windsor, Maryland, 500 Main St. Box 365, zip. 21776), p. 2.
9. Flyer entitled "Thank You for Buying SERRV Handcrafts" is obtain able from address in footnote 8.
10. SERRV 1992 Annual Report, 1992 (same address as footnotes 8 and 9), p. 3.
11. Brochure entitled "SELFHELP Crafts of the World" (Obtainable from SELFHELP, 704 Main Street, P.O. Box 500, Akron, PA 17501-0500).
14. "Making Coffee Strong," published by Equal Exchange (101 Tosca Drive, Stoughton, Mass. 02072), p. 9.
15. Ibid. p. 8.
16. Pueblo to People Catalog (2105 Silber Road, Houston, Texas 77055), p. 2.
17. Aid to Artisans, 80 Mountain Spring Road, Farmington, Connecticut, 06032.
18. The Network, Twin and Twin Trading are all located at 5-11 Worship Street, London, EC2A2BH.
19. From a brochure published by Twin and Twin Trading entitled "Trading for Development."
20. Earth Trade, Inc. 1814 Franklin Street, Suite 710E, Oakland, California, 94612.
21. David Dalton, A Buyer's Market (Oxford: Oxfam, 1992), p. 3.
22. Ibid. p. 5.
23. See footnote 7; p. 13.
25. Charley Kellerman, "The Effects of U.S. Trade Policy on Craft Imports," Craft News (V. 5, Issue 20, Autumn 1993), p. 5.
26. "Appendix II," Alternative Trade Directory (Global Exchange: 2017 Mission Street, San Francisco, California, 94110), n.p.
27. Brochure on the International Federation for Alternative Trade (Obtainable from IFAT, P.O. Box 500, Akron, PA. 17501-0500), p. 1.118
28. "Appendix III," Alternative Trade Directory, n.p.
29. Brochure on The Crafts Center (Obtainable from the Crafts Center, 1001 Connecticut Avenue, N.W., Washington, D.C., 20036), n.p.
30. EFTA, Witmakersstr. 10, 6211 JB Maastricht, Netherlands.
31. Miller C. Lovett, "Needed: A Distribution System," draft of a position paper for the ATO network (Boston: University of Massachusetts, Nov. 1993), p. 2.
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