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Fair Trade - In or Against the Market? Matthias Schmelzer Is Fair Trade a neoliberal solution to market failures or a practical challenge to neoliberal trade and the free market regime in general?
Introduction Fair Trade is the most important and fastest growing market-based mechanism to improve the lives of producers in developing countries. It does so by offering small-scale producers in the global south fairer trade relations, including a guaranteed minimum price above world price and developmental support.
Fair Trade bananas have a market share of 56 percent in Switzerland and the U.
The success of Fair Trade is reiterated time over time by a variety of personalities and institutions, ranging from advocates of Fair Trade in the North and producers in the South to such prominent promoters of trade liberalization as the G 8 and the European Commission. It works for poor people; it works for consumers.
It works as a business model; it works as sustainable development; it works to protect the environment; it works as an idea! However, one could wonder what this is all about. After all, Fair Trade started as an alternative to free trade, explicitly focusing on solidarity and the well-being of producers and rejecting classical economic notions of competition, the self-regulation of the market and sometimes even employing anti-capitalist rhetoric.
Fair Trade Advocacy Newsletter, The sentiments and reactions of many people working in the field are nicely summarized by John Hilary, policy director at War on Want: How can such a company deserve the Fair Trade mark?
In this paper I will try to asses if Fair Trade really works for all and — even more importantly — how it works for the different participants of Fair Trade, mainly consumers and producers and what the wider effects of Fair Trade are.
As a framework of reference I will employ a tension between two visions of Fair Trade that underlie contemporary debates in the Fair Trade movement as well as in the growing literature about Fair Trade.
At the one extreme a pragmatic position interprets Fair Trade as a developmental tool to increase the standard of living for disadvantaged producers in developing countries by making neoliberal free trade work the way it is supposed to work.
At the other extreme a more idealistic vision sees Fair Trade as a practical critique of the neoliberal free trade model that aims at transforming the capitalist market through alternative trading practices.
Since these visions are at least in tension with each other, if not inherently contradictory, the question is: Is Fair Trade a neoliberal solution to current market failures for small scale producers in the global south that works within and thus perpetuates the free trade and free market regime?
Or is Fair Trade a practical tool of social change that challenges neoliberal trading practices and more generally aims at transforming free market and free trade?
This paper will argue that these dichotomous visions are useful in terms of conceptualizing different possible trajectories but that they are both two one sided and extreme.
Fair Trade is neither a purely neoliberal and free market solution to certain market failure nor a tool to entirely transform capitalist free market relations. Rather, I will argue with Polanyi, Fair Trade can be analyzed as a complex and multilayered process of social defence against destructive effects of unrestricted market forces that tries to re-embed the economy.
As such it is a site of contestation, conflict and negotiation between different actors that brings about multiple and partly contradictory effects on different levels. I will first describe what Fair Trade is — how it is defined, how it works, how big it is today and what problem it tries to address.
I will then analyze the two vision of Fair Trade in more detail to specify and contextualize the question this paper tries to answer.
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The central part of the paper tries then to assess the impact Fair Trade has, first on the level of producers and producer communities and secondly the socio-cultural, political and economic impact on the free trade market in general.
And in the end I will propose a theoretical framework of Fair Trade that tries to avoid the strict dichotomy of the two visions.Are you day dreaming about a winter holiday to the amazing Morocco?
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