why is trade important

8/2/2019 Why is Trade Important

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WHY IS TRADE IMPORTANT

In every developing country that has embraced the free market economy and entered the WorldTrade Organization (WTO), the first hit and hardest hit by the changes that follow are the ruralcommunities. Changes result from economic restructuring policies required to join the WTO whichemphasize the removal of state protections and safeguards of local industry and agriculturalsectors parallel to the privatization of government sponsored social services. The result has been

detrimental to rural communities around the world. One of the most notable ways in which ruralcommunities are harmed in entering the free market economy is the removal of state protections ofthe agricultural sector and state sponsored industries. When the state protections of a sector areremoved a community suddenly finds itself facing challenges it never faced before. Instead of acommunity working together for a common goal of sustainable local livelihoods with an ability tomaintain natural resources for the collective good, individuals are pitched against each other in anattempt to get ahead for private gains. Privatization of publicly owned or operated sectorsencourages competition against one another rather than working together for the common good.Frequently this leads to an unfair advantage and favoritism for those who are politically connectedor have access to finances in order to own and cash-in on what were once community resources.This quickly depletes natural resources of a community with complete disregard for theenvironmental, communal and social consequences, just to name a few. A prime example of areaadversely affected by the removal of state protections is in handicraft villages throughout Asia.Households find themselves competing to produce more crafts and accept lower and lowerpayment for their labors because they are now competing against each other rather than workingtogether. This trend leads to the impoverishment of entire handicraft-centered communities thecultural gems of countries like Vietnam and Thailand.

Here is how it works: the low prices crafts-persons receive for handicraft products aredictated by outside agents and there is no room for negotiation in the take-it-or-leave-itoffer presented to a household. Like the coffee farmers around the world, there aremultiple layers of middlemen between the crafts-person and the exporter, all of whomare squeezing a profit out of their labors while the laborer lives at a subsistence level. Inmy work in Vietnam, I found 7 - 12 layers of middlemen between the producer and theexporter. Simply stated, at the lowest level in the value chain if they dont accept what isoffered they may lose their only income opportunity. Again, these moves only divide

communities and destroy what were once sustainable community livelihoods; andhandicraft villages are amongst the most vulnerable. Furthermore, there is frequently agender-based discrimination that exists in much of the handicraft production. Most of thelabor in processing and preparation of materials to make a handicraft goes unrecognizedand unpaid because these are considered the labors of women in a household. Simplystated, it becomes a gender role. Just as housework and child rearing is all-too-often notregarded as "labor" despite the demands faced, a woman's work in support of craftsmanfrequently goes unpaid. Forming a local co-operative or community association basedon Fair Trade principles addresses these gender disparities and unites a community ofcraftsmen and craftswomen from being disadvantaged in the local and globalmarketplace.


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Whose Trade Organizationby Lori Wallach and Patrick Woodall

Fair Trade presents a social awareness not seen in the neo-liberal theories of tradeemphasized in the World Trade Organization (WTO) or in the economic reformpackages forced on developing nations in the Structural Adjustment Programs of theIMF and World Bank. There is much to be said about the disastrous effects of narrowlyfocused vested interests of international bankers in developing nations with developmentprojects that primarily benefit the established elite. However, Fair Trade Advocates also

need to understand the equally destructive World Trade Organization (WTO). A highlyrecommended and reasonably priced resource is Whose Trade Organization by LoriWallach and Patrick Woodall. This publication by Public Citizen (http://www.citizen.org/)is a well researched, comprehensive analysis of the organization, its function, and thesecretive closed-door court system which enforces international trade policies formed byWestern governments in collaboration with the Multi-National Corporatocracy.The World Fair Trade Organization (WFTO) with a global network of Fair TradeOrganizations with members in over 70 countries has established ten principle standardsa Fair Trade organization must follow. In addition, a Fair Trade Organization is requiredto contribute to their communities in a manner that addresses their specific social needs.

10 Principles of Fair Trade - Updated June, 2011Principle One: Creating Opportunities for Economically DisadvantagedProducers

Poverty reduction through trade forms a key part of the organization's aims. Theorganization supports marginalized small producers, whether these are independentfamily businesses, or grouped in associations or co-operatives. It seeks to enable themto move from income insecurity and poverty to economic self-sufficiency and ownership.The organization has a plan of action to carry this out.


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Principle Two: Transparency and Accountability

The organization is transparent in itsmanagement and commercial relations. It is accountable to all its stakeholders andrespects the sensitivity and confidentiality of commercial information supplied. Theorganization finds appropriate, participatory ways to involve employees, members and

producers in its decision-making processes. It ensures that relevant information isprovided to all its trading partners. The communication channels are good and open atall levels of the supply chain

Principle Three: Fair Trading Practices

The organization trades with concern for thesocial, economic and environmental well-being of marginalized small producers anddoes not maximize profit at their expense. It is responsible and professional in meetingits commitments in a timely manner. Suppliers respect contracts and deliver products ontime and to the desired quality and specifications. Fair Trade buyers, recognizing thefinancial disadvantages producers and suppliers face, ensure orders are paid on receiptof documents and according to the attached guidelines. A pre payment of at least 50% ismade if requested.

Where southern Fair Trade suppliers receive a pre payment from buyers, they ensurethat this payment is passed on to the producers or farmers who make or grow their FairTrade products.Buyers consult with suppliers before canceling or rejecting orders. Where orders arecancelled through no fault of producers or suppliers, adequate compensation isguaranteed for work already done. Suppliers and producers consult with buyers if thereis a problem with delivery, and ensure compensation is provided when deliveredquantities and qualities do not match those invoiced.


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The organization maintains long term relationships based on solidarity, trust and mutualrespect that contribute to the promotion and growth of Fair Trade. It maintains effective

communication with its trading partners. Parties involved in a trading relationship seek toincrease the volume of the trade between them and the value and diversity of theirproduct offer as a means of growing Fair Trade for the producers in order to increasetheir incomes. The organization works cooperatively with the other Fair TradeOrganizations in country and avoids unfair competition. It avoids duplicating the designsof patterns of other organizations without permission.Fair Trade recognizes, promotes and protects the cultural identity and traditional skills ofsmall producers as reflected in their craft designs, food products and other relatedservices.

Principle Four: Payment of a Fair PriceA fair price is one that has been mutually agreed by all through dialogue andparticipation, which provides fair pay to the producers and can also be sustained by themarket. Where Fair Trade pricing structures exist, these are used as a minimum. Fairpay means provision of socially acceptable remuneration (in the local context)considered by producers themselves to be fair and which takes into account the principleof equal pay for equal work by women and men. Fair Trade marketing and importingorganizations support capacity building as required to producers, to enable them to set afair price.

Principle Five: Ensuring no Child Labour and Forced Labour

The organization adheres to the UN Convention on the Rights ofthe Child, and national / local law on the employment of children. The organizationensures that there is no forced labour in its workforce and / or members orhomeworkers. Organizations who buy Fair Trade products from producer groups eitherdirectly or through intermediaries ensure that no forced labour is used in production andthe producer complies with the UN Convention on the Rights of the Child, and national /local law on the employment of children. Any involvement of children in the production ofFair Trade products (including learning a traditional art or craft) is always disclosed andmonitored and does not adversely affect the children's well-being, security, educationalrequirements and need for play.


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Principle Six: Commitment to Non Discrimination, Gender Equity andFreedom of AssociationThe organization does not discriminate in hiring, remuneration, access to training,promotion, termination or retirement based on race, caste, national origin, religion,disability, gender, sexual orientation, union membership, political affiliation, HIV/Aidsstatus or age. The organization provides opportunities for women and men to developtheir skills and actively promotes applications from women for job vacancies and for

leadership positions in the organization. The organization takes into account the specialhealth and safety needs of pregnant women and breast-feeding mothers. Women fullyparticipate in decisions concerning the use of benefits accruing from the productionprocess. The organization respects the right of all employees to form and join tradeunions of their choice and to bargain collectively. Where the right to join trade unionsand bargain collectively are restricted by law and/or political environment, theorganization will enable means of independent and free association and bargaining foremployees. The organization ensures that representatives of employees are not subjectto discrimination in the workplace. Organizations working directly with producers ensurethat women are always paid for their contribution to the production process, and whenwomen do the same work as men they are paid at the same rates as men.Organizations also seek to ensure that in production situations where women's work is

valued less highly than men's work, women's work is revalued to equalize pay rates andwomen are allowed to undertake work according to their capacities.

Principle Seven: Ensuring Good Working Conditions

The organization provides a safe and healthy workingenvironment for employees and / or members. It complies, at a minimum, with nationaland local laws and ILO conventions on health and safety. Working hours and conditionsfor employees and / or members (and any homeworkers) comply with conditions


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established by national and local laws and ILO conventions. Fair Trade Organizationsare aware of the health and safety conditions in the producer groups they buy from.They seek, on an ongoing basis, to raise awareness of health and safety issues andimprove health and safety practices in producer groups.

Principle Eight: Providing Capacity Building

he organization seeks to increase positive developmental impacts for small,marginalized producers through Fair Trade.

The organization develops the skills andcapabilities of its own employees or members. Organizations working directly with smallproducers develop specific activities to help these producers improve their managementskills, production capabilities and access to markets - local / regional / international / FairTrade and mainstream as appropriate. Organizations which buy Fair Trade productsthrough Fair Trade intermediaries in the South assist these organizations to developtheir capacity to support the marginalized producer groups that they work with.

Principle Nine: Promoting Fair Trade

The organization raises awareness of the aim ofFair Trade and of the need for greater justice in world trade through Fair Trade. Itadvocates for the objectives and activities of Fair Trade according to the scope of theorganization. The organization provides its customers with information about itself, theproducts it markets, and the producer organizations or members that make or harvestthe products. Honest advertising and marketing techniques are always used.

Principle Ten: Respect for the Environment


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Organizations which produce Fair Trade products maximize the use of raw materialsfrom sustainably managed sources in their ranges, buying locally when possible. Theyuse production technologies that seek to reduce energy consumption and wherepossible use renewable energy technologies that minimize greenhouse gas emissions.They seek to minimize the impact of their waste stream on the environment. Fair Tradeagricultural commodity producers minimize their environmental impacts, by usingorganic or low pesticide use production methods wherever possible.

What does the Fair Trade look like at the local level?Local Fair Trade Organizations in "developing nations" each have a unique shape andserve in a variety of functions. No two are identical. Organizations, co-operatives, andproducers work together and benefit in ways that differ from others according to theirparticular community needs. Each Fair Trade Organization is unique!

Some Fair Trade Organizations focus on community development programs, theempowerment of the people through skills training and programs designed toenhance local integration and participation

Other Fair Trade Organizations simply act as marketers for handicrafts theycollect from villages to free producers of the hassle of finding buyers andmarkets, and allow them to focus on their primary sources of income, such asagriculture.

Some Fair Trade organizations have producers who depend 100% on the

revenues they generate from the sale of their products Most organizations use the income generated from handicraft and textile

production to supplement other forms of income generation

Local Fair Trade Organizations are formed according to the needs of the community itserves. In order to ensure social sustainability, the community must work together toform the unique aspects of the organization. Success of a local co-operative orcommunity association depends on the direct involvement of community members in theforming stages. With appropriate facilitation and orchestration with various stakeholders,it is possible to create a community-based farmers co-operative or association ofcraftsmen and craftswomen to address many of the economic and social challenges thecommunity currently face and the prepare for the unforeseen challenges in the years to

come.

How does Fair Trade Address the Real Needs of a Community?A few examples of where Fair Trade Organizations step in to address thesocial and livelihood needs of a community are:

Utilizing the proceeds from the co-operative to provide adequate education fortheir children by sponsoring schools or school programs

Developing community centers, womens health care clinics, training centers orlibraries

Addressing social issues such as


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supporting a community-based childcare center

providing for healthy school lunches and after school child developmentprograms

support a home for victims of domestic abuse

or as one cooperative in India addresses the cultural issue surrounding thepayment of an expensive dowry for a young bride, the organization provides thedowry for the daughters born to cooperative members who may otherwise abortthe female fetus out of future economic concerns

Providing an economic opportunity in a refugee camp where opportunities arefew and outright physical or sexual exploitation is the only other opportunityafforded them outside the camp where they face great risk of deportation ifcaptured by the immigration authorities

As a community, intervening in market fluctuations of raw material availabilityand prices by purchasing in bulk at fair prices

In communities too poor to borrow from banks, they establish communitysavings plans and provide low interest micro-finance programs for theirmembers. In cases of emergency, they provide 0% interest funds for families inneed essentially local Fair Trade Organizations are made of community

members who define their community needs and identify the means to addressthose needs, by creating development projects and supporting local activities tobetter their community.

How Development Comes Through Business Enterprises

The heritage tourism sector is expected to continue to grow rapidly overthe next fewyears as a result of changes in the international marketplace, andcorresponding

repositioning attempts in the local destination as a response to thosechanges.Increases in the number of travelers seeking authentic experiences andnot contrivedfabrications of the real; a growing number of visitors demandingresponsible tourism bothin terms of environmental and social accountability, is changing theinternationalmarketplace. Even the mainstream visitor is catching up with thesechanges andresponding positively. The question is, will it continue, will it be

sustained, or is it justanother of those fads that come and go, and are simply capitalized uponby cleverbusinesspersons hoping to increase market share? Whatever the casemay be, St. Luciamust respond to the opportunities that this presents, and capitalize onits comparativeadvantages. In a real way, the work of the St. Lucia Heritage TourismProgramme, which began in 1998, has placed Saint Lucia in a verycompetitive position relative to its island


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neighbours. The island therefore, has an opportunity to carve a newniche for itself. Butis this development thrust necessarily good for Saint Lucia? Why shouldthere becontinued investment in it, and why should the island abandon thetraditional coastalbased tourism, which typifies most island tourismdestinations, anyway?The truth is that sustainable development through tourism, as promotedby the St. LuciaHeritage Tourism Programme, will allow for greater revenue flowsdirectly to hostscommunities and local businesses, and by extension reduce economicleakages, whichunfortunately, is the hallmark of traditional tourism in St. Lucia and mostislanddestinations. Some persons argue that the global economic landscapehas changed so much that we cannot speak in terms of economic

leakages anymore in view the global economic space that we nowoperate within. But that is a pretext perpetuated by the developedcorporateworld to continue to exploit the resources of the developingworld, this time in the formof our tourism resources. Protectionism stillcontinues in the developed world (Europeand the USA) particularly in thearea of agriculture. Technology continues to be dominated by self-regulating firms like Microsoft, who have found ways to circumvent USanti-trust laws. Developing countries like those in the Caribbean mustopen their eyes and cease playing second fiddle to economic systemsthat operate in ways beyond their own understanding. The developingworld must make hard decisions that are selfishly focused. Regular

formal and informal consultations and study continue to propose thatthe heritage tourism sectors approach to tourism development justifiesthe following strategy as a response to the challenge of sustainableeconomic development through tourism.

1. Local Investment:

Banks and other financial institutions must find ways to capitalize localtourismventures, even through equity financing. Of course, strict controls willhave to be put

in place to protect these investments, but this is the only way that thelocal tourismbusiness sector can be afforded a fair chance to compete. The highliquidity situationin our Banks must be resolved through viable investment opportunities.Theseopportunities can be found through a well-conceived combination ofbusinessdevelopment and focused marketing initiatives. The marketing strategyis discussedlater in this article.


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2. Agriculture:

Farmers should continue to be farmers and should resist the temptationor the cajolingto become tourism entrepreneurs. Appropriate vertical and horizontallinkages shouldbe explored to facilitate the appropriate systems for supplying tourismfacilities. Themajor problems associated with this have been identified as delayedpayments byhotels and inconsistency of quality and availability on the part offarmers. Theseproblems can be resolved through a fund that ensures regular paymentsto farmers,thereby allowing them to meet the demands for consistency; andsecondly investment

in training and technology upgrades to address the issues related toquality. This willrequire a diverting of human resource development funds from otherless productiveareas to agricultural pursuits connected to the tourism industry. Asimilar approachmay be applied to culture and the arts.

3. Use of common property:

Clear policy directions and corresponding legislation, as well as the

instruments forimplementation, must emerge to provide for community management ofcommonproperty resources like waterfalls, waterways, forests and coastalresources. Such asystem will ensure that irresponsible tourism entrepreneurs do notexploit inland aswell as coastal resources, but that host communities will have theopportunity andcapacity to provide top quality tourism products and services. This is nota farfetched

scenario because there are many good examples to demonstrate this.TheAnse-La Raye Fish Fry is a perfect example of a community able toproduce aproduct of a high standard, and simultaneously able to attract consistentflows ofvisitors very Friday evening. The Mabouya Valley is doing similarly withtheirnature and historical park, and the Des Barras community in Babonneauwith theirnightly Turtle Watch activities during the nesting season.


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4. Marketing:

Finally, it is proposed that there be a shift to a more proactive ratherthan responsemode of marketing the destination. The practice of responding toexternal invitationsand interventions should cease, and be replaced by actively seeking outthose marketsthat will respond to the product type. Marketing of the destination needsto be morefocused and more precise, and should not be carried out in a card-blanche manner.St. Lucia is a small island, and most experts would agree that the annualvisitorcapacity should not exceed more than 365,000 stay-over visitors peryear. Sensitive

and focused niche marketing will reward Saint Lucia one hundred-foldand attractvisitors with spending power and a desire to patronize the product onoffer.Successful hotels in Soufriere have demonstrated the value of thisapproach. The twobest-known hotel properties in Soufriere were hardly affected by theinternationallyimpacted events of 9-11. These provide prime examples of thewisdom of thisstrategy.

This is the proposed path offered by the heritage tourism sector as newuseful ways tobuild the national economy through responsible tourism.

why is trade important

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