“Trade, not aid”

Decades ago, with that scream a group of small farmers claimed to the UNCTAD congress that the international community should open her eyes and perceive the damage caused by its policy of aid to developing countries. Such policy was based on granting loans on favourable terms to support raw materials supply from those countries to the first world companies. Actually, such funding was hardly refundable by the weak economies and stockpiled unpaid until it reached a level where the debt was either forgiven by countries or renegotiated to very long terms, becoming in fact a modern way of colonization.

However, despite the large sums involved, the scheme didn’t provide effective solutions to the problems of the supplying countries, most in need of authentic implementation of market economies than in more injections of funds which, in practice, helped large multinational corporations to keep alive a very profitable commodity market.

It took years to the public opinion to realize that something had to be done to stop the wheel and change the approach to the problem, recalling the biblical command “do not give him fish, teach him to fish”.

It was a Dutch public agency, Solidaridad, who first launched a product labelled “Fair Trade” informing to first world consumers that such product – Max Havelaar Mexican coffee – was acquired from an association of small producers managed under democratic criteria and marketed according to Fair Trade standards, i.e. paying the producers a minimum price that covers their production costs and guarantee a certain return.

It was not by chance that the first “Fair Trade” product was coffee as such a product met a number of requirements which made it the ideal item for the launch of the initiative: consumers are in the first world – actually, the world’s larger coffee consumer continent is Europe – while produced by milliards of small farmers living in Africa, South-America and Asia, mostly in very poor conditions; it’s considered a luxury article, easy to label and aimed at high-end consumers which are to some extent conscious about the need to help the poorest countries in their development.

Nowadays, the number of initiatives has grown significantly, reaching not only the cultivation of certain products but covering aspects such as environmental protection, sustainable development of tropical forests, the proper use of water resources and/or sustainable tourism.

By adhering to those initiatives, multilateral agencies, governments, NGOs and import / export companies undertake to respect in their commercial transactions a set of established standards, which set out from the prohibition of the use or trade of goods produced by labour subject, to working conditions close to slavery, to fixing a fair price that allows the sustainability of productive activity in the developing country supporting their integration into the international market.

On the other hand, to label an item or a service as a Fair Trade product, the company is accessing the market with a competitive advantage, as it implies respect to values that make it more attractive for potential buyers. When the consumer chooses from the supermarket shelves a product labelled as adhered to any of these initiatives, although its price may be substantially higher than that similar products, he is aware that his contribution will help the development of producer countries and their inhabitants, improving their living conditions, promoting social welfare and fighting against injustices of conventional trade.

Adhere to these initiatives has advantages for all market players: producers, purchasing associations, consumers, etc. but also for banks that finance these transactions, because the fact that there are entities which grant the required certificates and conduct regular audits to ensure compliance with the standards, allow banks to better understanding of its customers’ business operations.

Carlos