Playing fair in a global marketplace

Money. It drives global trade and makes farmers plant, workers manufacture and vendors sell. Yet, the profits made on goods produced in developing countries usually go to marketing executives instead of the actual producers, according to John VanSickle, executive director of the International Agricultural Trade and Development Center at the University of Florida. Individual farmers in poor nations sometimes never see the fruit of their labor, as they work their way into a deeper web of poverty.

In order to combat poverty in developing countries, many organizations are trying to enforce fair trade standards. Fair trade occurs when people “receive a fair price—a living wage” for their work and have safe working conditions, according to Global Exchange, an international human rights organization that promotes fair trade.

Fair trade organizations eliminate the middle man

However, people in developing nations don’t have the infrastructure necessary to market their goods efficiently, VanSickle said. So, fair trade organizations step in to eliminate the costly marketing services low-income producers use to export their goods, he added.

“A fair trade product means it’s more of a direct link between the grower and that consumer, eliminating some of the middle people, so that the grower gets to absorb more of the value of the product,” he said.

Fair trade organizations then rely on the “philanthropy of the consumer” because buying fairly traded products is sometimes more expensive, he said. Yet, people choose to pay more for fairly traded coffee at Starbucks, because they think their money is benefiting needy producers.

Cotton subsidies affect international trade

In addition to eliminating marketing middle men, fair trade organizations also try to stop governments from providing their farmers with subsidies that make them over-produce certain goods and dump them into the global market.

For instance, the Brazilian government complained to the World Trade Organization that United States’ cotton subsidies made farmers over-produce, lowering the price of cotton for all manufacturers, even in countries that don’t provide such subsidies, like Brazil.

“They can’t compete by giving their farmers, for example, the amount of money that we give our farmers just for being farmers,” VanSickle said. “That keeps our producers in business—whereas in some countries, when the value of the products that they produce goes down they would have to stop producing all together.”

The Missouri Farm Bureau, which oversaw 3.6 percent of U.S. cotton production in 2002, notes that the Brazilian government believed that payment for the U.S. crop rose from $1.9 billion in 1992 to $4 billion in 2002, violating a “peace clause” which protects domestic support for a commodity as long as it doesn’t rise above 1992 levels.

According to the bureau, Brazil also claimed that, “ U.S. subsidies violate the clause that prohibits WTO member countries from causing serious prejudice to the trade interests of another member through the use of subsidies.”

Fair trade organizations and WTO help disadvantaged producers

The WTO agreed with Brazil’s accusation that U.S. cotton subsidies created an unfair trading environment and the U.S. will reduce its incentives on the crop or face sanctions.       

In this way, fair trade organizations and the WTO can work to ensure that global trade benefits poor farmers and wealthy producers alike.

“[The fair trade movement is] more of a mechanism for helping disadvantaged producers in countries to have access to and participate in the global market,” VanSickle said. “And it’s a good program. It does help some low-resource farmers the same way that we help our low-resource farmers in the U.S.”