Fair trade

This Communication aims to launch the process for the development of the Community's position on fair trade.

ACT

Communication from the Commission to the Council of 29 November 1999 on 'fair trade' [COM(1999) 619 final - Not published in the Official Journal].

SUMMARY

Background

The promotion of fair trade comes under the framework of the Community's broader objectives in relation to development cooperation, in other words the fight against poverty, economic and social development and, in particular, the gradual integration of developing countries into the world economy.

Trade has a fundamental role to play in the creation of wealth and thus development. This communication is a first stage in the development of the Community's position on this matter.

Definition of fair trade

The concept of fair trade applies in general to trade operations which strengthen the economic position of small-scale producers and landowners in order to ensure that they are not marginalised in the world economy. It mainly relates to developing countries and, under the present communication, covers two main aspects:

• ensuring that producers, including employees, receive a share of the total profit commensurate with their input;
• improving social conditions, particularly those of employees in the absence of developed structures for social services and worker representation (trade union representation for instance), etc.;

This concept has long-term development in mind. Participation in initiatives on fair trade is voluntary for both sellers and consumers.

It is important to note that the concept of 'fair trade' is not the same as that of 'ethical trade'. 'Ethical trade' usually relates to the operating methods of companies present in the country (codes of conduct, for example).

Fair trade in practice

Fair trade goods are always made available to consumers through private initiatives. The practical implementation of fair trade has changed considerably over the years.

The traditional fair trade movement

The concept was originally developed by non-governmental organisations (NGOs). The philosophy is based upon precise principles and was originally applied by alternative trading organisations often started by churches, charities, etc. The organisations are involved in every stage (sourcing, production, etc.) and the profits are often devoted to development causes. The products are not always labelled.

Labelling initiatives

Since the end of the 1980s, normal commercial companies (supermarkets, etc.) have been more likely to be involved in fair trade initiatives and the products are marketed according to the usual rules.

In this regard, systems for labelling products were introduced in order to ensure their authenticity. There are several fair trade labels ('Fairtrade Mark', etc.) and each has a certification agency which verifies all the stages in the production process to ensure that the product respects fair trade principles. The certification bodies also set the criteria that must be respected in order for a product to carry a fair trade label. These criteria are harmonised at international level. All the labels are members of the FLO (Fair Trade Labelling Organisations International) which is responsible for coordination at EU and international level.

Producers and importers who have been assessed as complying with the fair trade criteria are included in international fair trade registers. Fair trade labelling schemes are financed by licence fees paid by importers and traders. These fees are related to turnover and volume of sales.

European Union and fair trade

Fair trade accounts for a relatively substantial proportion of consumption in Europe. In 1997, the turnover in the EU of fair trade products was estimated to be in the region of EUR 200 to 250 million. Overall, 11% of the EU population buy fair trade products and surveys show that there is high demand for such products.

The EU has already implemented initiatives concerning fair trade, including European Parliament resolutions and financing of NGOs, labelling bodies and projects in developing countries. With regard to legislation, the Union implements these principles through various instruments, particularly measures concerning the EU's generalised system of preferences. Some of these regulations on fair trade benefit fair trade goods by facilitating their access to the Community market.

International community

The international community has recognised the important role played by fair trade in the development of poorer countries. The World Trade Organisation (WTO) has concluded that initiatives in this field do not represent an obstacle to the liberalisation of markets since they do not impose import restrictions or other forms of protectionism. They are thus in line with the general principles of the world economy.

Issues

The Commission identifies certain problems that should be addressed in order to ensure the continued success of fair trade initiatives. This involves ensuring greater consistency between the policies of the actors at various levels and establishing a legal definition of the concept as well as the criteria involved. Efforts should also be made to improve the substantiation, verification and control of fair trade products so as to allow consumers to make properly informed choices. In addition, consumers must be better informed about fair trade and dialogue should be continued with the movement, through the creation of a formal platform for example.

Last updated: 22.04.2008