Title

Fair trade : a better model for north-south economic cooperation

Publication Date

1-1-2003

Degree Name

MA in International and Intercultural Management

First Advisor

Nikoi Kote-Nikoi

Abstract

This research paper addresses the question; does Fair Trade create more positive outcomes for producers and communities in the developing world than the free market model? The proposition that free market capitalism does indeed have significant unsatisfactory negative outcomes, and that alternative economic models may hold the potential for creating more positive outcomes, drove the research and informed my reading of the literature. It also shaped my case study of the U.S. based mid-sized transnational corporation ForesTrade, Inc., a company that imports certified “Fair Trade” coffee as part of its operations. Of particular concern in this paper are the inequalities inherent in trade relations between developed and developing countries as a result of an imbalance in their individual competitive advantage. The case study data came from document reviews and interviews with key players in the business partnership structure, consisting of coffee roasting customers, environmentally conservation-minded NGO investors, and developing world producer cooperatives. All of these players help to create a system of “Fair Trade” whose key criteria is also reflected in ForesTrade’s organizational mission and vision which is dedicated to environmental conservation, socio-economic development, cultural preservation, and the production of high quality products. Both sets of data (interviews and document review) are compiled into one multi-category database via pattern matching logic. The categories assigned to the data are equal to the independent variables of the research, being socio-cultural, socio-economic, and environmental impacts. The dependent variable in this study is (the presence of) “more positive outcomes for producers and communities in the developing world.” Categories for comparison include: domestic policy standards related to trade; incorporation of environmental externalities; labor issues (including income gaps, extreme working conditions, and the right to organize); decimation of cultural traditions; and the negative influence and dominance of powerful TNCs over states, workers, and competing economies. This database is then analyzed for a preponderance of either positive or negative socio-economic, socio-cultural, and environmental effects resulting from Fair Trade as conducted through the company ForesTrade, Inc. The balance between positive and negative outcomes is examined within the data set as well as compared to the outcomes of free market globalization described in the literature review. Data analysis concludes that Fair Trade as practiced by ForesTrade and assisted by the guidelines provided by the Fair Trade Labeling Organization (FLO) does indeed produce more positive outcomes than the free market model in many of the areas highlighted in the literature review. While most of the case study outcomes are positive, the most significant points of critique regarding Fair Trade concern its pricing system and limitations for market access for producers. This research shows along various lines how Fair Trade is performing as an alternative economic model to the standard practice of free market global economics. Material from this report should be useful to FLO in improving the design of the Fair Trade model; to producers in developing countries who are considering pursuing placement on the Fair Trade registry; and to the general debate over the efficacy and appropriateness of globalization as it is currently being pursued through free market economics.

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