EN Official Journal of the European Union C 318/29

Opinion of the European Economic and Social Committee on ‘Fair trade food products: self-regulation or legislation?’ (Own-initiative opinion)

2009/C 318/06

Rapporteur: Mr COUPEAU

On 10 July 2008, acting under Rule 29(2) of its Rules of Procedure, the European Economic and Social Committee decided to draw up an own-initiative opinion on

‘Fair trade food products: self-regulation or legislation?’

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 2 September 2009. The rapporteur was Mr COUPEAU.

At its 456th plenary session, held on 30 September and 1 October 2009 (meeting of 1 October), the European Economic and Social Committee adopted the following opinion by 164 votes to one, with four abstentions.

1. Conclusions

1.1 Fair trade in agricultural products aims to introduce the principle of fairer distribution of commercial revenue into international trade, so as to enable producers in developing countries to:

— launch a process of economic development (structuring production chains, organising branches of activity, etc.);

— establish a process of social development (setting up health and education services, etc.);

— start addressing environmental management (preserving biodiversity, managing CO2 emissions, etc.).

1.2 Europe is the biggest market for fair trade products, laying claim to around 65 % of the world market. Products are sold in mail order catalogues, online, through caterers and in institutional, community and business retail outlets, totalling over 79 000 sales points in 25 countries. Turnover in 2008 exceeded EUR 1.5 billion. Growth in sales has been fairly steady, at around 20 % a year. Nevertheless, the figure remains very modest compared with the European agrifood industry’s 2007 turnover of EUR 913 bn.

1.3 There are two complementary approaches to certification: product-based (FLO, which has set standards for 18 categories of food products) and process-based (WFTO, which certifies the supply chain and management system of the main fair trade organisations, in both developed and developing countries). Both have improved consumer assurance and reduced abuse by companies seeking to capitalise on this form of ethical trade without meeting criteria endorsed by the major international development agencies.

1.4 Certification effectively promotes this type of trade and protects small and medium enterprises wishing to engage in it.

1.4.1 These certifications seek to respect the multi-dimensional nature of fair trade: — Trade: fostering a balanced relationship benefiting disadvantaged southern producers and workers — Development: strengthening producer organisations financially, technologically and operationally — Education: providing information and raising awareness among the general public and southern partners — Political: a commitment to fairer rules on conventional international trade.

1.4.2 Despite the progress made on self-regulation, the EESC would draw attention to the need to base the model on the European certification system which, among other things, requires compliance with technical requirements to be subject to external monitoring by an independent, accredited body - without prejudice to the requirement to comply with general legal provisions governing the marketing of food products.

2. Introduction

2.1 This opinion deals specifically with fair trade itself, that is to say the alternative trade partnership linking producers and consumers which has been built up over recent decades by the fair trade movement. There are other programmes which aim to assess the sustainability of trading activities but they are not dealt with here, since they do not meet all the criteria for fair trade referred to in point 1.4.1.

2.2 Fair trade was developed with the ambition of building trade relations with producers from developing countries sidelined by international trade. Aimed at achieving sustainable development, it makes a major contribution to society in southern countries. It seeks to help reduce poverty, including through support for producer organisations. In northern countries, it aims to foster a more sustainable model of consumption.

2.3 Still young and evolving, the sector is expanding rapidly with increasing interest from European consumers.

2.4 However, consumer confidence needs to be consolidated for while consumers are attracted to fair trade, many say that they lack information and may feel that large companies or retailers may abuse the system.

2.5 Specialised networks continue to be important outlets for fair trade products. There are many such structures, which are small in scale and appreciated by consumers.

3. Background

3.1 Article 23 of the 1948 Universal Declaration of Human Rights states that: ‘Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity’.

3.2 Fair trade activities began in the 1950s in the USA and then the UK, followed by the rest of Europe, in response to a growing awareness of the social and environmental damage caused by industrialised countries’ import chains.

3.3 In 1964, UNCTAD (the United Nations Conference on Trade and Development) denounced inequality in the terms of trade and alerted the international community to the unsustainable nature of the rules governing international trade from a human and social point of view. Southern countries stress the need for more equitable commerce (‘Trade, not aid’).

3.4 Landmarks in fair trade: — 1860 - Eduard Douwes Dekker’s novel ‘Max Havelaar’ is published — Late 1940s - Ten Thousand Villages and SERRV, in the United States, start trading with poor communities in southern countries — Late 1950s - OXFAM UK sells craftwork made by Chinese refugees in its UK shops — 1957 - Young Dutch Catholics set up an association to import products from developing countries — 1964 - OXFAM UK sets up the first alternative trade organisation (ATO) — 1967 - The first fair trade organisation is established in the Netherlands — 1969 - The first fair trade shops are opened in the Netherlands — 1971 - The first fair trade cooperative is set up in Bangladesh (jute work) — 1973 - The first fair trade coffee is sold in the Netherlands — 1988 - The first coffee with the Max Havelaar fair trade label goes on sale — 1989 - The International Federation for Alternative Trade (IFAT) is established, and subsequently renamed the World Fair Trade Organisation (WFTO) — 1990 - The European Fair Trade Organisation (EFTA) is established — 1993 - The Transfair labelling body is established in Germany — 1994 - Tea is brought into the fair trade system — The Network of European Worldshops (NEWS) is established — 1996 - Bananas are brought into the fair trade system in the Netherlands — 1997 - The labelling bodies (Max Havelaar, Transfair, Rattvisemarkt, Faire Trade, etc.) unite to form the Fairtrade Labelling Organisations (FLO) Monoprix and Auchan agree to sell fair trade coffee — 1998 - The fair trade organisations (FLO, IFAT, NEWS and EFTA) unite, forming FINE — 2004 - Fair trade products distributed in some French canteens.

3.5 The World Trade Organisation rules do not take human, social or environmental concerns into account. The need to redress this situation encourages people to support a form of trade which promotes human values. For them fair trade is proof that it is possible to change the world. Fair trade promotes transparency, good governance and accountability and in this way contributes to sustainable development.

4. Description

4.1 The aim of fair trade, and more generally of ethical, responsible and civic-minded consumption, is to define the means to entrench the success achieved among the general public by: — ensuring that fair trade is transparent, visible and understandable; — guaranteeing that the purchase will help agricultural development in developing countries.

4.2 The EESC notes that basic labour rights (ILO), respect for environmental standards and biodiversity and a better return for producers in international trade relations have been taken into account in formulating fair trade standards.

4.3 To some, the expression ‘fair trade’ may seem an oxymoron, since market laws are devoid of human values. However, linking trade to social dialogue, with a view to achieving greater equity in world trade, will be a challenge for the 21st century and the EESC would like to make a contribution. This new paradigm can make sustainable development possible by offering better trade conditions and guaranteeing the rights of producers and workers sidelined by the Doha round.

4.4 New players’ labels and codes of conduct which claim to follow the principles of fair trade also engender confusion among consumers. By watering down the concept, its principles and defining criteria, the multitude of reference and guarantee systems opens the door to opportunistic trading arrangements based on guarantee systems which are less onerous on those who bear the costs, often downstream of the industry, but which also involve less support for the development of emerging countries. The Committee is committed to an international certification system operated by fair trade organisations (see previous proposals on terminology), subject to the establishment of an independent, accredited supervisory body and, obviously, compliance with current food legislation.

4.5 The EESC calls for all fair trade products to meet the same criteria throughout the European Union. There is currently no official European definition of fair trade with legal force. The EESC wishes to support the joint definition adopted by FINE (a network comprising FLO, IFAT, NEWS! and EFTA) and used by the European Commission in its recent communication on fair trade (1): ‘Fair trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, disadvantaged producers and workers – especially in the South. Fair trade organisations (backed by consumers) are actively engaged in supporting producers in awareness raising and in campaigning for changes in the rules and practices of conventional international trade’.

5. The producers (principles)

5.1 Fair trade ensures that producers are paid as well as possible, on a stable footing, so as to provide a sufficient income by which to live decently, as determined by producers’ organisations and unions in each region and country concerned.

5.2 Price must be determined by average production cost, depending on: — time spent by the local workforce, at a rate of pay that has been adjusted in order to secure a decent standard of living; — the medium- and long-term investments needed to meet the economic, environmental and social standards of fair trade; — a market analysis; — the policy choices of most fair trade players: 60 % prefinancing for producers before the harvest, a stable relationship between producers and distributors so as to secure outlets for producers and supplies for distributors.

5.3 Fair trade must carry certain requirements such as a ban on exploitative work, particularly involving children, and adherence to International Labour Organisation (ILO) standards, even when that is not required by national social legislation.

5.4 Fair trade secures the partial pre-payment of foodstuffs in order to enable producers to finance raw materials.

5.5 It is of the utmost importance that the manufacturing process for foodstuffs be respectful of the environment, natural resources and the laws in force in the European Union.

5.6 Fair trade enables the creation of socially useful jobs both up and downstream (and also enables the most vulnerable members of society to recover their dignity through employment).

5.7 Fair trade provides genuine traceability and total, permanent and public transparency regarding activities at all stages in the process chains (context, price, margin, etc.).

5.8 Fair trade must enable the emergence of a solidarity-based economy with its sights on sustainable development.

5.9 Fair trade should be judged by specific acts and commitments only and not simply by good intentions.

5.10 Fair trade is a well-established way to initiate a new global food policy which respects human rights.

6. The products

6.1 Foodstuffs make up the bulk of fair trade’s turnover. Coffee ranks first among these products, which include tea, chocolate, dried fruit, spices, rice, cereals, sugar, honey and jam. Fresh produce has recently appeared on the market and is still marginal in fair trade networks owing to the low rate of turnover. Sales have risen considerably, however, since consumer cooperatives and other private retailers began selling fair trade products.

6.2 Fair trade aimed at helping to improve the situation of small producers in developing countries should enable the establishment of complex food production chains in order to create socially sustainable employment.

6.3 Fair trade must be in a position to concentrate on influencing a larger segment of the supply and distribution chain so as to give greater political weight to this process, while respecting producers’ interests.

7. The main countries

7.1 All countries involved in fair trade agricultural production are southern countries. Fair trade, through the relative transparency of its trading process, has highlighted the low proportion of the consumer’s purchase price that benefits the producer (for every EUR 100 spent, only EUR 20 are ploughed back into the local economy) and how much of the added value (for example in processing and retailing) is retained in the developed world. The real issue at stake is whether fair trade is capable of effecting a lasting change in the rules of international trade.

8. Legislation or certification

8.1 The Committee feels that certification offers the best guarantee for consumers. Certification is a process of verification by an independent body which is accredited (having completed a process of accreditation) and impartial, attesting that a service, product or process meets the stated requirements (which may or may not be required by law). So, while certification and accreditation are both verification procedures, accreditation checks competence whilst certification checks compliance with a set of requirements. The aim of fair trade, and more generally of ethical, responsible and civic-minded consumption, is to define the means to entrench the success achieved in order to: 1. guarantee that fair trade is transparent, visible and understandable. Information campaigns must be undertaken to explain the sector’s organisation and goals; 2. guarantee that purchasing a food product will help a village, villagers and the agricultural development of developing countries.

8.2 Fair trade has therefore instituted guarantees which are negotiated and involve various stakeholders, conferring legitimacy on the system: — The guarantee system set up by FLO establishes sets of requirements for products; — WFTO’s requirements and frame of reference focus on the practices of the organisation involved in fair trade.

8.3 FLO and WFTO are endeavouring to ensure that their guarantees are complementary. This involves identifying where their approaches converge and agree. So far, it has been limited to taking stock of the situation.

8.4 These verification systems are vital. The high level of guarantee is essential to avoid the proliferation of differing legislative systems in northern countries and in the interest of consumers. Fair trade bodies have already established an international set of requirements and agreed on a Charter of Fair Trade Principles; they must continue to cooperate on a shared certification system for producers.

9. Development aid conditions

9.1 Fair trade helps reduce poverty, while maintaining the foundations of sustainable development.

9.2 The European Union’s external policy can promote agricultural development in developing countries. Support to encourage small agricultural producers to turn to fair trade could be made a criterion for the disbursement of subsidies, contributing to sustainable development in these countries.

10. The challenges for fair trade

10.1 Fair trade is undeniably part of the commercial, social, educational and political dynamic of local and international stakeholders.

10.2 Fair trade is a social and economic innovation, supported by civil society to change international trade practices in order to take greater account of the human aspect. It should: — maintain its influence in the field of corporate social and environmental responsibility; — consolidate its social base with trade unions, consumer associations, environmentalists and cooperatives of local producers; — extend and diversify its market, as traders need to extend their range of products and their networks; — ensure that a greater proportion of added value stays with producers; — help southern producers to organise to give them greater independence; — promote local development and improvements in fundamental economic, social and cultural rights; — be able to effect a global improvement in the rules and practices of conventional trade.

11. ‘Fair’ for European producers as well?

11.1 All fair trade agricultural products originate in developing countries. However, some products such as sugar, wine and bananas are also produced by European countries with significantly higher social standards, meaning that they can be more expensive than a certified fair trade product.

11.2 In order to avoid this tricky situation, an international organisation of producers from these sectors should be set up to identify universally beneficial compromises.

12. Fair trade, a new basis for the economy

12.1 Many human rights organisations denounce the effects of international trade (WTO).

12.2 At global level, there is a wide range of fair trade players and stakeholders of varying quality. It is this very ability to cover the range of fair trade areas which gives meaning to this approach and opens up the possibility that it will have a significant impact.

Brussels, 1 October 2009. The president of the European Economic and Social Committee Mario SEPI

(1) COM(2009) 215 final.

Appendix I Margin returned to producers compared with conventional trade Trade Coffee Darjeeling tea Sugar Quinoa Basmati rice Conventional 5 % 7 % 2,5 % 6,7 % 6,5 % Fair 17 % 9,5 % 3,8 % 8,5 % 9,5 %