Communication from the Commission to the Council on "fair trade"
Date: 1999-11-29
Institutions: European Commission
Subjects: North-South trade, World Trade Organisation, approval, tariff policy, trade policy

EN

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 29.11.1999
COM(1999) 619 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

on "fair trade"

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

on "fair trade"

TABLE OF CONTENTS

1. Introduction ........................................................................................................... 3

2. The concept of fair trade........................................................................................ 3

3. How does fair trade work in practice?.................................................................... 5

3.1.

3.2.

3.3.

The traditional Fair trade Movement............................................................. 5

Labelling initiatives ...................................................................................... 5

Key organisations involved in fair trade........................................................ 6

4. Fair trade within the European Union.................................................................... 7

4.1.

4.2.

4.3.

Commercial activity ..................................................................................... 7

Political activity............................................................................................ 8

Consumer interest......................................................................................... 8

5. Current EU activities in support of fair trade ......................................................... 9

5.1.

5.2.

5.3.

5.4.

Financial support for organisations involved in fair trade ............................. 9

Other financial support ................................................................................. 9

Legislation.................................................................................................. 10

Other allied activities - ethical trade/codes of conduct ................................ 11

6. Fair trade, the WTO and the growth of global trade............................................. 12

7. Issues when considering further EU support of fair trade activities ...................... 13

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1.

INTRODUCTION

Article 177 of the Treaty establishing the European Community states that Community policy
in the sphere of development co-operation shall foster:

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–

–

"the sustainable economic and social development of the developing countries, and
more particularly the most disadvantaged among them,

the smooth and gradual integration of the developing countries into the world
economy,

the campaign against poverty in the developing countries."

“Fair trade” is an example of development occurring through trading relationships and
improved commercial opportunities to bridge the gap between developed and developing
countries and to facilitate the better integration of developing countries in the world economy.
“Fair trade” initiatives give consumers the opportunity to contribute towards sustainable
economic and social development
in developing countries through their purchasing
preferences.

This document has been prepared following the undertaking by the Commission at the
1998 June Council to provide a Communication on fair trade and the Parliament request for a
Communication (Fassa Report).

It describes the concept of fair trade and gives a brief outline of the current situation with a
view to assisting discussion on courses of action the EU could adopt to assist the development
of fair trade within the EU, and thus contribute to the key aims of EU development policy as
set out in Article 177 of the Treaty.

This Communication therefore, provides the initial first step from which the Commission will
develop its position in respect of fair trade and how this will
integrate with existing
Community policies.

2.

THE CONCEPT OF FAIR TRADE

The fair trade concept has been developing in western nations throughout the past 40 years or
so, in response to a growing recognition that benefits accruing from trading and trade growth
are not necessarily shared by all countries and all layers of the population within each country
in a comparable manner.

The objective of fair trade is to ensure that producers receive a price which reflects an
adequate return on their input of skill, labour and resources, and a share of the total profit
commensurate with their input. This is normally effected through an agreement by the
participants in the fair trade initiative to pay a fair price which is negotiated on a case by case
basis. In situations where the price of goods is agreed internationally (e.g. coffee and cocoa), a
minimum price is set so that producers receive a return above the world price for their
produce. This enables producers to adopt
improved production systems and working
conditions to the benefit of farmers and workers and the environment.

Fair trade gives producers in developing countries higher revenues for their goods as well as
increased opportunities to find new markets. In so doing fair trade aims to contribute to

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establishing the conditions that can foster a higher level of social and environmental
protection in developing countries. In Europe our citizens are protected by Community and
national
laws governing areas such as health and safety at work, protection of the
environment, and employers and employees statutory rights and obligations. Similar statutory
rights (for example, the core labour standards as they are embodied in the ILO declaration on
fundamental rights at work of 18 June 1998) are still in the process of development in many
developing countries, and even where these exist economic or other conditions may make it
difficult to ensure that the law is respected. Fair trade aims to alleviate these conditions by
enhancing sound economic development and sustainable growth from the bottom up. Fair
trade also hopes to reduce some of the disparities that have evolved over the decades between
industrialised and developing countries as a result of the relative decrease in the prices of
basic and notably agricultural commodities.

fair trade is particularly helpful

For example,
to small-scale producers, especially in
agriculture and the handicraft sector since small-scale producers in developing countries are
often living in isolated rural areas and do not produce a sufficient quantity to export directly.
They become dependent on intermediaries for both selling their products and providing credit
facilities. Some farmers have reduced this dependency by forming their own marketing
co-operatives, enabling them to pool resources and shared technical expertise and facilities,
including in some cases community services such as health clinics and schools. Alternative
trading organisations (which are explained later in this document) can provide a critical
bridge in the development of a successful co-operative through paying a fair trade price and
by providing assistance as diverse as helping the co-operative to become established as an
exporter to purchasing a fax machine.

Fair trade initiatives can include provision for advance payments to producers and the
establishment of contractual relationships to give longer-term security. Thus, the stability of
revenues is improved, facilitating planning and investment, and producers have more control
over decisions concerning the processing and marketing of their output. Fair trade can also
provide the possibility for some of the revenue gained to be used for capacity building for
such things as the establishment of producer groups (as previously described) and facilities to
add value e.g. coffee bean processing. It should be emphasised that profits from fair trade are
for the benefit of a community as a whole and not for personal gain.

The fair trade concept applies especially to trade between developing countries and more
developed states. It is not directly relevant to goods produced within the EU, where social and
environmental standards are already enshrined in law. All domestic production, producers,
and workers already benefit from levels of social and environmental protection at least as high
as those established for fair trade products.

Fair trade initiatives originate in private non-governmental organisations. They are incentive-
based in the sense that they rely on consumer choice and do not manage trade or otherwise
erect barriers to market access in different countries. Consumers are therefore given the
opportunity to increase the standard of living and quality of life of producers in developing
countries through a sustainable market-oriented approach.

It should be noted that whilst the term fair trade may be considered a form of ethical trade the
term is usually used with reference to fair trading operations which strengthen the economic
position of small-scale producers and landowners which may otherwise be marginalised in
mainstream patterns of trading. The term ‘Ethical trade’ is more usually used in relation to
activities (e.g. codes of conduct) by multinational companies operating in developing

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countries, which demonstrate their ethical and social responsibilities to employees or other
associates.

3.

HOW DOES FAIR TRADE WORK IN PRACTICE?

There are a number of routes through which fair trade goods are made available to
consumers. All routes are through private initiatives with the most common being through the
traditional fair trade movement (including alternative trading organisations) and labelling
initiatives, however, some individual companies or retailers not affiliated to any particular
organisation, may make fair trade claims about some or all of their products.

3.1.

The traditional Fair trade Movement

The concept of fair trade was originally developed by Non-Governmental Organisations
(NGOs) interested in trade and development. The first fair trade initiatives involved the
creation of alternative trading organisations or “fair trade businesses”. These were often
started by churches or charities, although several have now become independent companies.

The whole philosophy of this traditional fair trade route is based upon using fair trade
principles as the foundation for commercial relationships with producers and suppliers in
developing countries. The importing organisations identify and source products, import them
and market them to consumers using a variety of methods, for example, direct retailing
through “World Shops”, other NGOs, church groups, mail order, etc.

All aspects of their commercial operations are based on a fair trade ethos, and as much of the
final price as possible is passed back to the producers. In many cases any profits generated are
devoted to development causes, although some are conventional commercial operations. The
majority of products marketed through World Shops are not labelled as such; the purchase is
done on the basis of confidence. The “brand names” or identities of these organisations are in
themselves a sign to consumers that the products and business practices are in accordance
with fair trade principles. However, there are established criteria and some monitoring take
place by the organisations themselves or by their associates in the developing country.

3.2.

Labelling initiatives

The second marketing route, which has developed steadily from its origins in the Netherlands
in 1988, is through fair trade certification. The objective here is to follow normal distribution
patterns in order to facilitate greater access to fair trade products. There is therefore, no
longer the confidence of the close link between producer and outlet as with the traditional fair
trade movement. Here, the importers and traders are normal commercial companies, and the
goods are sold through normal retail outlets, but a fair trade label, awarded by a fair trade
certification agency, signifies to the consumer that the goods and the marketing chain respect
fair trade principles. The four fair trade labels used within the EU are “Max Havelaar”,
“Transfair”, the “Fairtrade Mark” and “Rättvisemärkt”. The certification organisations (same
name as the label) awarding them are all members of FLO (Fair Trade Labelling
Organisations International) which co-ordinates at an EU level and at an international level.

The certification agencies 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, and are developed from
international instruments such as the ILO (International Labour Organisation) Conventions
and the United Nations’ Agenda 21 recommendations. They cover for example, such things as
employment conditions, controls to prevent pesticides from contaminating rivers and drinking

5

water, and the protection of natural ecosystems. Currently criteria are developed on a product
by product basis to enable the specific characteristics of production systems and trading
patterns to be taken into account.

Producers and traders can apply to the certification agencies to request the right to display a
fair trade label on their produce. This is awarded to goods imported from producers in
developing countries once the certifying agency is satisfied that
the fair trade criteria
governing production and marketing are respected. Producers and importers who have been
assessed as complying with the fair trade criteria are included in international fair trade
registers. Traders who wish to market fair trade products must buy from certified sources, as
well as respecting the relevant inspection requirements for their own business operations.

The certifying agencies are responsible for continuing to monitor producers, importers and
traders qualifying to use fair trade labels to ensure that the criteria are strictly respected.

Fair trade labelling schemes are financed by licence fees paid by importers and the traders
who market fair trade products. These fees are related to turnover and volume of sales. The
aim of the certification agencies is to be self-financing through the licence fees, but this only
occurs once a sufficient volume of trade is built up, since the registration and licence fees
must be set at levels which make certification viable for importers and traders, and ensure that
participation in fair trade schemes generates additional benefits to producers. Initially
therefore, costs can exceed revenue for the certification agencies, and many receive some
financial support from other sources such as Governments or development NGOs.

A fair trade symbol is displayed on the packaging, certifying that
the production and
marketing processes respect fair trade criteria. The label is additional to other labelling
information requirements, such as quality classification and origin, which are governed by the
normal statutory rules.

3.3.

Key organisations involved in fair trade

NEWS! (Network of European World Shops) - created in 1994.
NEWS! brings together the federations of the world shops in 13 European Countries (All
Member States are members with the exception of Luxembourg, Portugal and Greece.
Switzerland is also a member). Not all shops are within a federation; the situation varies
according to the country. In certain cases all the shops are within a federation, in others not all
of the shops are members, in other countries there are several federations or isolated groups.
In addition to being sales points the shops also provide awareness raising through various
activities such as fair trade days. NEWS acts as a co-ordinator for such activities.

EFTA (European Fair Trade Association) – was established informally in 1987 and was
officially registered as a European foundation in 1990. It represents 12 importers from
Italy,
9 European Countries (8 Member States - Austria, Belgium, France, Germany,
Netherlands, Spain, United Kingdom - and Switzerland). The World Shops generally get their
products from national importers who may be linked to the shops. EFTA represents 60% of
sales in the sector.

IFAT (International Federation for Alternative Trade) - created in 1989 by alternative trading
organisations in Africa, Asia, Australia, Japan, Europe, North America, and South America.
IFAT is a coalition to promote fair trade and a forum for the exchange of information. It links
agricultural and craft producers in the South with organisations in both the North and South.

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FLO (Fair Trade Labelling Organisations International) -created in 1997, FLO International is
responsible for the co-ordination of fair trade certification initiatives, the development of
standard international fair trade criteria for each product, and co-ordinating monitoring to
ensure that traders and producers respect the criteria. It is an umbrella body whose members
are the various independent fair trade certification agencies which operate at national level
within individual countries. Currently, there are 4 of these (previously mentioned) which
operate in 12 Member States. These agencies hold a common product register of producer
organisations - 300 producers in 29 countries.

NEWS, EFTA, and IFAT form part of the traditional fair trade movement and FLO relates
solely to the label. The traditional fair trade movement and the labelling organisations are
interdependent since around 50% in value of labelled products are sold by the alternative
marketing outlets such as the World Shop network or mail order. Moreover, the co-ordination
carried out by the World Shop network at local level provides support and promotion of
labelled products which do not have the structures or means to provide adequate sales
promotion alone.

In 1998 these organisations joined together to form FINE, which is an informal structure with
the objective of information sharing, co-ordinating activities and arriving at common criteria.

4.

FAIR TRADE WITHIN THE EUROPEAN UNION

4.1.

Commercial activity

Initially the majority of fair trade goods available in Europe were imported by the alternative
trading organisations and sold through specialist outlets such as the “world shops”. Such
organisations continue to be an important channel for marketing fair trade products, and
account for a high proportion of total sales. Most shops are managed at a local level by
volunteers. There are more than 3 000 World Shops and 70 000 points of sale in Europe with
approximately 100 000 volunteers. All play a significant role in raising awareness of
development issues and the fair trade concept. In all EU Member States where fair trade
labels exist (exist in all Member States with the exception of Spain, Portugal and Greece) the
concept is now crossing over into the mainstream, and fair trade products are also available
through supermarkets. In some cases supermarkets’ “own brand” products have qualified for
fair trade labels.

The principal products currently sold in the EU through fair trade initiatives, including both
alternative trading organisations and labelling schemes, are coffee, craft products (including
textiles and clothes), tea, chocolate, dried fruit, honey, sugar and bananas. Currently the only
products labelled are coffee, cocoa, tea, bananas, sugar, and honey. In 1994, it was estimated
that the total turnover of fair trade products in the EU was around EUR 175 million. Whilst in
1997 the figure was estimated to be in the region of EUR 200 to 250 million.

Food products represent around 60% of retail turnover of fair trade products and of this figure
almost half is from coffee sales. However, fair trade coffee represents only around 2% of the
total coffee market in the EU. Fair trade bananas which are a more recent fair trade ‘product’
than coffee represent around 0.2% of the total EU banana market.

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4.2.

Political activity

In addition to this commercial activity, there has been increasing political activity within the
EU on the subject of fair trade in recent years. In January 1994 the European Parliament
adopted a resolution on “promoting fairness and solidarity in North-South trade”1 calling for
EC level initiatives to support fair trade, dedicated funding and the inclusion of fair trade in
Community development and co-operation policy. In 1994 the Commission published a
document on Alternative Trade, expressing its support for strengthening fair trade both in the
South and the North. In 1996, the Economic and Social Committee issued an opinion on the
“European “fair trade” marking movement”2 which in its conclusion welcomed the
development of fair trade labelling initiatives and called on the Commission to create a
dedicated Budget Line to support fair trade activities. This request was reiterated in the report
on Fair trade (Fassa Report)3 adopted by the European Parliament in 1998 which also put
forward a number of proposals for further Commission actions in support of fair trade.

In addition to the interest in fair trade in general politicians, NGOs and lobby groups have
been raising the issue of fair trade specifically in relation to bananas. The Commission has
been questioned about its intentions as regards support for fair trade bananas by both the
European Parliament and the Council of Ministers, and gave undertakings to investigate the
measures that could be taken. Also, in October 1997 the EU-ACP Joint Assembly passed a
resolution requesting the Commission to take action to assist those wishing to market fair
trade bananas within the EU.

4.3.

Consumer interest

An EUROBAROMETER survey, conducted on behalf of the Commission in 1997 gave an
indication of the level of public interest in fair trade products. Overall, 11% of the EU
fair trade goods, with the proportion varying widely
population have already bought
throughout the different Member States, from only 3% in Portugal and Greece, up to 49% in
the Netherlands.

The survey also revealed that almost three quarters (74%) of the EU population say they
would buy fair trade bananas if they were available in the shops alongside “standard”
bananas. A total of 37% of EU consumers said they would be prepared to pay a premium of
10% above the price of normal bananas for bananas of equivalent quality produced according
to fair trade standards.

Further analysis of the survey replies revealed that people with previous experience of fair
trade products are much more likely to buy fair trade bananas, and would be willing to pay
more for them. More than 9 out of 10 (93%) of consumers who had already bought fair trade
goods would be prepared to buy fair trade bananas, and 7 out of 10 (70%) would pay a
premium of at least 10% over the price of normal bananas.

There is also evidence that retailers are becoming aware of and beginning to respond to
consumer demand for some guarantees concerning the production conditions of goods they
buy.

1

2

3

EP document A3-0373/93, PE 206.396
CES 538/96 E/as
EP document A4-0198/98, PE 225.945

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5.

CURRENT EU ACTIVITIES IN SUPPORT OF FAIR TRADE

5.1.

Financial support for organisations involved in fair trade

The Commission has already provided some limited financial support for activities relating to
fair trade to NGOs within the EU and to producer groups in developing countries. The
majority of this funding has been provided through Budget Line B7-6000 with a smaller
amount from B7-6200. At present fair trade and ethical trade initiatives are included under
the same heading of alternative trade.

Under these budget lines assistance given so far has included finance to:

–

–

–

Fair trade labelling organisations for their activities to promote new products lines:
these have included coffee, cocoa, bananas and orange juice. Activities have
included principally consumer awareness campaigns and, educational activities.
Currently, the Commission contributes towards the funding of all of the fair trade
labelling organisations in member states,

World shops - types of activities supported vary according to the needs of the
different organisations. Most of these organisations are mainly concerned with the
sale of goods and Commission support is for capacity building and promotional
activities,

EFTA for its advocacy activities, research, awareness raising, and campaigning.

Other NGOs which are not directly linked to the fair trade organisations but which receive
funding may also carry out some fair trade activities.

Apart from these activities in Member States the Commission has also supported projects in
developing countries.

The proportion of funding applications submitted which relate to fair trade and ethical trade
issues, and the share of such projects in total expenditure has been increasing consistently
over recent years. Over the last 5 years, EUR 9 million has been used in support of
educational development. In 1997, the Commission allocated EUR 2 911 511 under budget
trade. For 1998
line B7-6000 in support of 15 awareness raising projects on fair
approximately EUR 3 700 000 were proposed for both fair trade and ethical trade projects.

The criteria governing expenditure under these budget lines do not cover the full spectrum of
actions involved in making fair trade products available to EU consumers. For example,
whilst publicity measures to increase consumer awareness of the fair trade concept in general
are permitted, it is not possible to promote any specific fair trade product. This limits the
usefulness of these budget lines for NGOs who wish to launch fair trade products on the EU
market, where promotion accounts for a large part of the overall budget.

5.2.

Other financial support

Over the last four years assistance has also been given to three projects on socially
responsible consumption which include certain fair trade initiatives. Two of these projects
have been completed and concerned consumer awareness raising. The third will be completed
during the course of 1999 and concerns the development of a guide for consumers on
‘sustainable’ purchasing. These projects are under budget lines B5-1000 and B5-1050 and
cover a total sum of nearly EUR 140 000.

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Under the budget line B7-3000 the Commission has committed EUR 990 000 to a programme
designed to provide children working in the carpet industry in Pakistan with food, medical
care, part-time studies or skills. A further EUR 3 million have been committed for the future.

In addition, EUR 4 million have been committed for projects in Nepal and India under the
budget line B7-7070.

As concerns bananas specifically, in April 1999 the Council adopted a Council regulation
establishing a framework of assistance for traditional ACP suppliers of bananas. This
regulation includes reference to the possibility of funding fair trade initiatives4.

5.3.

Legislation

In accordance with the overarching objective of achieving a sustainable development, the
Community is committed to integrate environmental considerations into other policies and is
also placing more emphasise on the social aspects of trade globalisation. Following the line
developed at the Copenhagen Summit, the EU has declared its intention to place more
emphasis on the social aspects of the globalisation of trade. The EU is striving to make real
progress towards the goal of making good inadequacies in core social standards throughout
the world.

The EU has begun to put these ideals into practice by incorporating the principle of awarding
trade incentives for compliance with minimum social and environmental standards into its
legislation concerning external trade.

The EU Scheme of Generalised Tariff Preferences (GSP) established in Council Regulations
(EC) No 3281/94 (industrial sector) and (EC) No 1256/96 (agricultural sector) in respect of
products originating in developing countries provides for special incentive arrangements in
the form of additional preferences to be granted to countries whose domestic legal provisions
respect certain minimum social or environmental conditions.

In accordance with the requirements of these regulations, in June 1997 the Commission
presented a report to the Council on the results of the studies carried out in international fora
on the link between international trade, social standards and the environment (COM(97) 260
final). In the light of the review conducted by the Council on the basis of the report, in
October 1997 the Commission submitted a proposal for additional preferential
tariff
reductions and the modalities for benefiting from the special
incentive arrangements
concerning labour rights and environmental protection. On 25 May 1998, the Council adopted
Regulation (EC) No 1154/98 implementing those special incentive arrangements.

To take advantage of the social incentive regime the country must comply with the standards
established by the International Labour Organisation (ILO) Conventions No 87 and No 98
to organise and to bargain
concerning the application of the principles of the right
collectively, and No 138 concerning the minimum age for admission to employment.

In December 1998, the Council renewed the GSP scheme, including general and special
incentive arrangements, for another period of three years until 31 December 20015.

4

5

Regulation (EC) No 856/1999 of 22.4.1999, OJ L 108 of 27.4.1999, p. 2
Regulation (EC) No 2820/98 of 21.12.1998, OJ L 357 of 30.12.1998, p. 1

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The environmental regime addresses countries which meet the criteria of the International
Tropical Timber Organisation (ITTO). Therefore, it can apply only to industrial products
processed from tropical timber or agricultural products grown in tropical forests managed in
accordance with ITTO standards, which for the time being are the only internationally
recognised environmental standards in this area.

5.4.

Other allied activities - ethical trade/codes of conduct

The New Economics Foundation carried out a study for the Commission on the use of social
trade6. Their findings were published in
labels as a means of communicating ethical
November 1998. The study reviewed the various types of social labels in use from unilateral
claims by individual manufacturers under their brand label to independently recognised labels
such as fair trade and government or publicly approved labels such as the EU Eco-label
although this is not a social label. It also outlined the preconditions for the effectiveness of a
label, such as e.g. clarity, trust, or impact. The results of this study suggest that – ‘social
labels are one possible device to deliver positive social change through the market’ and that ‘a
portfolio approach to supporting ethical trade is preferable to public policy focused solely or
indeed at all on the development of a social label’. The study underlines that ‘Social labels are
deserving of EC support, in particular fostering civil society understanding of the issues
which they address’.

Businesses – mainly in the sectors of commerce, textiles and clothing, footwear, sporting
goods and toys, but also producers of raw materials – are becoming increasingly aware of
these issues with many having already introduced their own codes of conduct.

Other initiatives carried out at European level since 1995 include joint declarations and codes
of conduct on core labour standards (commerce, textile and clothing, footwear sectors)7 issued
by the social partners within the framework of sectoral social dialogue. In addition, the EU
organised a joint seminar on codes of conduct and labour standards with the US Department
of Labour in Brussels on 20 February 1998. A follow-up was organised by the Department of
labour in Washington DC on 10-11 December 1998.

The need for monitoring codes of conduct, the involvement of all concerned and core
requirements for a code of conduct were emphasised at a workshop organised by the
Commission on 25 November 1998. The EP Committee on Development and Co-operation
also called for the Commission to consider establishing a European monitoring platform in its
draft report on ‘EU standards for European enterprises operating in developing countries:
towards a European Code of Conduct and monitoring platform’ (Howitt Report). The report
also proposed that the EP should act as the interim platform. The Committee on External
Relations also called for the Commission to develop a model code of conduct at the European
level (Sainjon Report). On 13 January 1999 the EP adopted the Sainjon Report and – with
some modifications and amendments – the Howitt report on 15 January 1999.

6

7

‘Social Labels -Tools for Ethical Trade’ - final report 1998, New Economics Foundation, Cinnamon
House, 6-8 Cole Street, London, SE1 4HY, UK
1995: Charter on child labour of the social partners of the European footwear industry, CEC and
FSE:THC. The charter was updated in 1997 and extended by consent of the European shoe retailers’
association (CEDDEC) and EuroFiet to the shoe retailing sector in 1998;
1996: Joint declaration on child labour of the social partners of the commerce sector, EuroCommerce
and EuroFiet;
1997: Code of conduct of the social partners of the textiles and clothing sector, Euratex and ETUF:TCL
containing the six ILO key labour conventions

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6.

FAIR TRADE, THE WTO AND THE GROWTH OF GLOBAL TRADE

Trade has long been recognised as fundamental to the creation of wealth. Increasing global
trade flow results in greater aggregate prosperity, and over the years the world’s trading
nations have committed themselves to a process of encouraging global trade and reducing
trade barriers. Among others this has enabled a number of lower income countries to develop
their economies very rapidly within a relatively short time span. An explicit objective of the
multilateral trading system is to ensure that the benefits of liberalisation also accrue to
countries in the early stages of development.

The process of reducing trade barriers through successive GATT rounds culminated in the
creation of the World Trade Organisation (WTO) in 1995, whose objectives, inter alia, are to:

“raise standards of living, ensure full employment allowing for an optimal use of the world’s
resources in accordance with the objective of sustainable development, seeking both to
protect and preserve the environment and doing so in a manner consistent with the respective
needs of countries at different levels of economic development,

Recognising further that there is need for positive efforts designed to ensure that developing
countries, and especially the least developed among them, secure a share in the growth in
international trade commensurate with the needs of their economic development.”

The Commission is fully committed to the aims and objectives of the WTO. A more open
multilateral trading environment is the frame work which permits countries and their citizens
to increase their prosperity and welfare.

In establishing a more liberalised trading system there were concerns about the capacity of
certain developing countries to fully benefit from the more open trading environment.
Therefore, within the Marrakech Declaration establishing the WTO, signatories declared their
intention to continue to assist and facilitate the expansion of the least developed countries’
trade and investment opportunities, and to monitor the impact of the Uruguay Round on
fragile economies.

Enabling producers in developing countries to take up and benefit from the opportunities
offered through global trading is the basic premise of fair trade initiatives.

Fair trade initiatives operate through voluntary participation. Consumers can create demand
for fair trade products through their purchasing preferences, and producers and traders who
wish to participate offer products to meet this demand after demonstrating their compliance
with fair trade conditions, with resulting benefits for the primary producers.

that

To the extent
fair trade initiatives remain private initiatives and operate through
voluntary participation fair trade is consistent with a non-discriminatory multilateral trading
system, as it does not impose import restrictions or other forms of protectionism. Fair trade
initiatives can act as a market mechanisms which offer more choice to both producers and
consumers, as their success particularly of labelled fair trade products in main stream
shopping outlets depend on market demand.

If governments were to introduce regulatory mechanisms based on fair trade concepts they
would need to take their WTO obligations into account, so as to ensure in particular the
transparent and non-discriminatory functioning of such schemes.

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A new round of trade discussions within the WTO will begin in the near future. The
Community is pleading in favour of a comprehensive Round with a broad and balanced
agenda that appeals to all WTO Members. A prime EU objective in this regard is to pursue
trade liberalisation in such a way that it is fully compatible with sustainable development as
well as conducive to the raising of social standards and environmental protection worldwide.

7.

ISSUES WHEN CONSIDERING FURTHER EU SUPPORT OF FAIR TRADE ACTIVITIES

• Growth of Fair Trade

Whilst the fair trade movement is now aligning itself under the single banner of FINE, fair
trade initiatives are still developing on different levels. However, there is an increasing
number of individual companies, not linked to these organisations, which make fair trade
claims of a self-declaratory character or based on codes of conduct, developed by a single
company or group of companies. Both the development of fair trade and that of ethical
trade need to be dealt with in a coherent manner.

• Définition

Some of the difficulties surrounding fair trade stem from the fact that there is currently no
legal definition, which leaves it open to the possibility of abuse. In addition, a single
definition was only agreed by FINE as recently as mid 1999. Moreover, there is no single
label or symbol to identify fair trade products.

• Criteria

Criteria for fair trade products tend to be variable between products, organisations and
companies. The fair trade movement
itself notably FINE has begun the process of
outlining common criteria. The Fassa Report has proposed a set of minimum criteria for
fair trade. With the multiplication of fair trade claims and labels, there is an increasing
need for guidelines agreed between the different stakeholders with respect to fair trade
criteria. Criteria should, on the one hand contribute to preventing misleading and
unsubstantiated claims and labels and, on the other hand, facilitate participation by small
producers.

As a first step, consideration should be given to supporting NGO efforts to reinforce the
to criteria development for
capacity of fair trade labelling organisations with respect
labelling and certification so that these are established in a transparent manner and their
respect is subsequently verifiable.

• Consumer Choice: criteria and monitoring

Fair trade labels and claims need to achieve their objectives with regard to producers from
developing countries and allow consumers to make properly informed choices. There is
clearly a need, therefore, to study and review how such claims and labels are currently
substantiated, verified and controlled either by fair trade organisations themselves,
independent bodies or others. Subsequently, options for
improvements in
monitoring, verification and control of both claims and labels are to be considered, taking
into account the costs and benefits, and notably the competitiveness of fair trade products.

further

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the Directive on Misleading Advertising8 could be considered as an
For example,
instrument for ex-post verification and control in order to ensure adequate protection for
consumers. Consideration could also be given to an independent external monitoring or
accreditation system.

• Consumer information

For fair trade initiatives to develop further the consumer needs to be better informed about
the availability of fair trade products and the significance of fair trade labels.

• Voluntary participation

Participation in any fair trade scheme must remain voluntary.

• WTO Compatibility

When considering further support/actions for fair trade the Community will take into
account its WTO obligations. Fair trade schemes should act as positive and voluntary
trade incentives and mechanisms to improve both social and environmental conditions in
favour of sustainable development.

• Dialogue with the fair trade movement

Consideration should be given to establishing a formal platform for dialogue with the fair
trade movement with a view to discussing the issues outlined in this Communication and
EU assistance in the development of fair trade.

8

Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws,
regulations and administrative provisions of the Member States concerning misleading advertising,
OJ L 250 of 19.9.1984

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