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Friday 18th of April 2014 12:24:24 AM
 

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Inside the fair trade movement

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Why Africa should fight for free trade, not fair trade; for competitiveness in global markets and not kindness in consumers

Everyday there is an effort mainly in the West to save Africa from something – tyranny, impunity, poverty, disease, ignorance – whatever. Always, the savior is an institution or person from Western Europe and its off-shoots in North America. This “savior” is presented as kind, generous and altruistic. Consequently, the supposed beneficiaries need not be active participants in the efforts to save them.

They are “victims” to be “helped.” It was in this context that last week, I attended a presentation by researchers from the University of London on a new mantra to end poverty, “fair trade.”    There is a global debate on how to end poverty in Africa. Some (like professors Paul Collier and Jeffrey Sachs) argue that the solution is a massive injection of financial and technical aid from rich to poor countries. Others argue that Africa needs trade and investment.

 

Yet, even within this trade and investment camp, the view that self-righteousness (as opposed to self-interest) and charity (as opposed to profit) should be the driving motive abounds. It seeks to “help” Africa’s poor get a fair price for their crop in international markets.

An entire industry has developed and is growing in London, Paris, New York and Brussels called “the ethical market.” The Fair Trade Foundation argues that “fair trade seeks to change the lives of the poorest of the poor” and that “fair trade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers.

It enables them to “improve their position and have more control over their lives.” Hence high-minded consumers of coffee, tea, cocoa, etc in Western countries are asked to pay a premium price for goods produced by Africa’s impoverished masses to express their solidarity with these wretched of the earth.

Professors John Sender, Chris Cramer and their colleagues have been doing research in Uganda and Ethiopia to establish the validity of claims that fair-trade certified products actually benefit these poor masses. Their focus of study are the poorest people in rural areas, the landless or land-poor wage earners in agriculture. Although our view is that most peasants own their own land, they found that many actually are landless or land poor and depend largely or sometimes entirely on wages for their survival.

I have always had a problem with fair-trade. All countries that developed through trade have done so by producing and exporting high value products at the most competitive price. Some have done this through purely market mechanisms, others through deliberate strategic interventions in the market.

Whichever path they chose, success at export-led growth resulted from innovations in policies, institutions, technologies and organization. Why then should Africa’s “success” at trade come as a result of the kindness of consumers in the West, not the innovation of our firms and farms?

Secondly, I am chronically suspicious of these “save the poor” movements perhaps because I have greater faith in the selfishness of man than his altruism. In my experience on earth, I have learnt to prefer the self-interested to the self- righteous. I find it much easier to negotiate anything with businessman Sudir Ruperelia than Pastor Martin Sempa: the former’s self-interest makes him flexible and accommodating; the latter’s self-righteousness (“I am speaking on behalf of The Almighty”) makes him rigid and uncompromising.

Like in all globally organized “save the world” movements, the benefits of the campaign go to those who work in its advocacy institution before (if ever) trickling down to intended beneficiaries. Even in the remotest part of poor Africa, ordinary people know that you benefit more by working for a charity than being a beneficiary of its work.

Even at the International Criminal Court (ICC), which many African elites embrace, it is better for you to be its employee than to be a recipient of its justice. For example, over the last ten years of its existence, it has spent US$ 900m and convicted one person. Certainly, that is justice for those it employs at The Hague and in the field as investigators, not the “victims of impunity.”

So, I listened attentively as Deborah Johnston, Carlos Oya, John Sender and Sam Bbosa spoke on the impact of “fair-trade” certification on the poorest households in Uganda. According to the research findings, a basic analysis of the data shows that tea and coffee workers on fair-trade certified cooperative production sites are paid less or at least not more than those on non-certified sites.

In coffee and tea, for example, the proportion of workers in fair-trade certified cooperatives who earn wages below 60% of the median wage is 18 percent (for coffee) and 30% (for tea); in non certified cooperatives, it is 4% (for coffee) and 5% (for tea).

On almost every issue, cooperatives that are certified for fair trade perform worse than those that are not. For example, only 28% of workers in fair trade certified coffee cooperatives get free meals; in non fair trade certified, it is 63%. When it comes to access to clean toilets, it is 20% for certified and 82% for non certified; overtime compensation, fair trade certified is only 7%, non certified is 94%.

No one working with fair trade certified coffee cooperatives had access to a shower; at least 20% of those working in non free trade certified coffee cooperatives had access to a shower. And DFID has been funding fair trade in Uganda.

Let the research speak for itself. “Detailed working life histories (30+ in Uganda coffee sites) and focus group interviews suggest: Workers either do not know about or generally do not believe that they benefit from, the ‘social’ benefits supposedly associated with fair trade price premiums. It is very easy to find very young children who work for wages particularly in coffee areas.

Most of the poorest wage workers in the sample started to work for wages when they were 10-14 years. To pay health and schooling costs, many people have incurred debts at usurious interest rates, restricting options in labour and coffee markets.” So if fair trade does not help the poor, who does it help?

Well, a supermarket in the UK earns ten times more from coffee than a producer in Uganda. An employee of the Ankole Cooperative Union earns 15 times more than the man who picks coffee. A fair-trade official in UK earns 500 times more than a coffee picker. So much for fair trade!

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Comments (25)Add Comment
Trade for Africa is a "Fair Isle"
written by Rajab Kakyama, November 17, 2013
This Article is joking. If for anything Africa needs more aid. In modern banking there is "collateral management", this is where the security pledged for the repayment of the loan is being managed by the issuing bank. With the rampant corruption in Africa, the donors need also to donate managers for the aid. That aside, it won't be a bad thing to dream but sometimes also dreams need to have "sincere reflections" for narration. In the year 2012, Africa's total exports to the U.S.A were $ 33 billion. $ 8 billion out of the total exports was by S. Africa.
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written by Rajab Kakyama, November 17, 2013
Which means that the remaining $ 25 billion was shared amongst the remaining 54 "sovereign" African states. Uganda bringing in a penurious $ 100 million. In comparison, the UK, which is the size of Uganda, had total exports of $ 55 billion in the year 2012. The UK has a population of 50 million people compared to Africa's 1 billion people. However, it earned twice as much as the whole of Africa. Are we going to talk about "competitive trade", "fair trade" or "aid?" And if it is trade, do we underline it with "Sustainability?" A UNHCR report released this year showed that a full four-fifths (80%) of the world's refugees is being hosted by developing countries.
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written by Rajab Kakyama, November 17, 2013
For instance, the democratic Republic of Congo has the second biggest economic impact with 475 refugees for a dollar of its per capita GDP. It is followed by Kenya with 247 refugees for each US dollar. Before we talk about "competitive trade" I think such situations demand an "equitable solution" and not simply a "linear argument" to "quench" someone's fantasy. Finally, I will use the analogy of a sick and hungry person. To effectively regain his full health, such a person won't only be administered on medication but also fed. I am not saying Africa should "eat" aid. I am only querying whether it is our primary source of our problems.
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written by Rajab Kakyama, November 17, 2013
If for instance, I had planned to travel to Kampala by public means, why would it matter if I were offered "a lift" along the way? The transport would become "my pocket change." But in Africa we seem to "eat" anything and everything including our; forests, rivers, game parks, oil, gold etc. If we have our objectives right, aid will act as a "centripetal."
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written by OJA, November 17, 2013
Only countries with serious leadership and nationalistic view can achieve, otherwise all this blah blah without addressing the real ills of Africa. For example, Hitler a nationalist was the brain behind providing every German with a car so then the Volks Wagen (people's car) was produced...See today, that is the biggest car maker in Europe and a global power...More than 70 years down the road, Hitlers legacy remains and keeps driving the German economy with its massive export of things...Meanwhile, the masqueraders in Uganda will never do anything about investment which can cause an enormous benefit to the Ugandan citizen and economy. I think they are foreigners hell-bent on self-aggrandisement (self-interest) which Mr Andrew Mwenda ironically glorifies!
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written by OJA, November 17, 2013
Only countries with serious leadership, nationalistic can achieve a lot. Methinks Uganda or Africa needs both trade and aid. Either way when used prudently, it can cause a lot of positive change. In many a serious African country this has brought about a tremendous change. But localising all this in the Ugandan context where there is leadership void except vultures, vampires, crocodile liberators, masqueraders, nothing moves on even though they are already a total of "donkey years" in power. What is there to show? NIHIL. I read in yesterday's paper that the Uganda gov't has refused to buy commercial planes from a US company because they are not interested in airline business...let us think about that in context...!!!!
How do we use simplicity to explain complexty?
written by Denis Musinguzi, November 18, 2013
Andrew, your articles casting doubt on the role of the West toward Africa’s development often bring forth isolated (certainly very useful) facts, leaving the complex problem almost entirely untouched. I do agree that innovation and competitiveness, not free trade offers objective and time-tested solution for Africa’s development. However, the isolated facts (which I will call simplicity) brought forth in the article(s) often romanticize, paving no way meaningful way towards a solution to the complex problem.
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written by Denis Musinguzi, November 18, 2013
I certainly do believe grand solution towards the complex problem cannot simply come from heaven as God-given, but need be paved through reflective understanding of the problem (simplicity of accumulated facts) and cumulative formulation of step-by-step solutions. The question remains: how do we begin, progress, and arrive there?
Trade should evolve organically
written by Ariaka Geria, November 18, 2013
Andrew, yes, selfish interest is way superior to self-righteousness, point well made here. Africa has been played the victim (sic) for so long that it seems a new narrative and a fresh set of actions to lift the continent out of poverty is in order. The private sector holds that key and to open the door, the rules of trade has to be simple. Apply business principles: define the need, connect that need with a customer, create necessary infrastructure to satisfy the need on an ongoing and constantly improving basis. The laws of demand and supply are universal, they demand opportunity, quality and sets of benefits that command congruent value. Let's play in that field and forget self-righteousness.
Self righteous first stomach later!
written by Marvin ya Kuku, November 19, 2013
"I, Mwenda prefer the self-interested to the self- righteous. I find it much easier to negotiate with businessmen than Pastors". What is there to negotiate with a pastor? The very reason this debate happened is because policy, innovation, technologies etc on the continent have not helped as much as they could! So in slightly remixed version of sorts, the majority of Africa prefers to negotiatedeal with the self righteous wazungus and leave big business to do deals with the corrupt leaders. The day you can chat with both the Pastor and business without a hassle is the day such useless coffee briefings will stop happening in Western cities.
Black and White Trivia
written by Ocheto, November 19, 2013
This is somebody who, when it is convenient to toute his horn, waxes nuance, but in actuality both the premisses and the conclusions he always draws are anything but nuanced. Instead if anything he always paints in black and white. This reads like those elementary debates in elementary schools: which is better the eye or the ear? This is a downer devoit of anything substantive, bordering on the trivial.
Black and White Trivia
written by Rwasubutare, November 20, 2013
Ocheto, you have said my words.
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written by winnie, November 20, 2013
One of the main roles of a citizen is to be patriotic its even written in the Constitution.What has Ocheto said honestly if one can reason well???Ugandans don't like topics concerning trade its coz they don't understand. Agriculture is the way to go but you find a poor person saying how can "they" find me in the village farming ?guys are here making chapati and riding bodas so what do you expect to sell to other countries we just need to,
1. Wake up from this big joke and slumber we are in
2. Forget about politics after all what is better politics or money?
3. Improve on the packaging and quality of our products.
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written by winnie, November 20, 2013
Today after a very ,very, long time Charles Oyango Oboo has made a point in his article on KCCA i hope he was not under gun point otherwise if he had began on this gear he would be very far by now. welcome to the world of reason,reality and objectivity and not "pretence"keep it up
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
Your article Andrew, although it carefully exposes the potential pitfalls of fair trade—what I would say is, yet another analogous “Washington consensus Plus” policy proposal of the western development economics ‘experts’—it does little to offer any reasonable or relevant solutions to our biggest development challenges.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
Perhaps the only alternative policy strategy that can be deciphered from your writing is the proposition of free trade, a clearly well certified illusory policy of the neoliberal market doctrine predicated upon the untrammeled belief in the efficiency of self-regulating markets. But you labored less to explain precisely how it (free trade) will unlock our slow-paced and inefficient markets and place them on the road to allocative efficiency, the moral universe and consequence underlying the philosophy of free market doctrine—your most sworn and unquestionable alternative to government intervention in market operations.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
I should endeavor to draw your attention Andrew and indeed that of our readers, to the fact that there is no country in the history of development economics that achieved development without their governments taking an active role in settings the fundamentals for growth right. Even western countries such as Britain (the forerunner of industrial revolution), you will recall (and I am sure you do because you are a very good student of history), that their governments then and now took an active role in reorganizing markets—the Speenhamland system for instance was implemented against the support of Speenhamland law with the underlying goal of reallocating land in way that enhanced agricultural productivity which was needed to give drive and momentum to industrial expansion.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
We can point recent examples from China where the government of China has been lauded for taking a cautionary approach (quite at odds with the prescription of Washington consensus that many African countries implemented and have continued to implement without question—to implementation of economic and structural reforms that unlocked the economic potential of China to account for much of her impressive growth in last three decades that have lifted millions of Chinese out of poverty.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
In 1997-98 when Asia financial crisis ominously threatened to decimate their financial system, you will recall that Hong Kong and a few other East Asian countries took an active role in restricting capital flows, a move that attenuated a lot of speculative tendencies from global markets traders whose actions were eroding the financial health of their economies.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
The examples are inexhaustible but If think there are any clearest instances of the failures in free trade and its accompanying policy cousins that we can adequately relate to, is almost one decade that most Latin American countries had to endure in rebuilding their economies that has so painfully suffered from the debt crisis of 1980s. Subsequent crises such as 1995 Russian crisis, 1997-98 Asian crisis, and more recently 2008 financial crisis didactically expand the catalogue of the outcomes of free market doctrine. One thing that has strongly characterized these crises is the fact that almost all have come as a consequence of unsuspecting adoption neoliberal market policies encapsulated in the “Washington consensus”.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
So in lambasting the fair trade, you either deliberately or inadvertently provoked the resurgence of old debate concerning how much should governments intervene in markets and what kind of role should they play, particularly in poor countries where governments have suffered a very embellished bad publicity so much so that we have ceased to see any reasonable purposes they can serve in allocation of resources.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
We can be so critical to extend to realms of abusing and even feeling indignant about our governments but their lack of fortitude measured by institutional quality and performance in generating the right policies (context specific) and the subsequent proposition of their removal in taking an active role in shaping market operations, will undoubtedly leave us susceptible (and economic history vindicates me) to the exploitation of a private sector whose sole motive is wholly self-interest and hence won’t necessarily generate efficiency outcomes like equitable and sustainable income distribution, political stability and so forth.
Neither Free trade nor fair trade will do it for us, we need strong governments
written by Michael B. Mugisha, November 21, 2013
I therefore think neither free trade nor fair trade will solve our problems, I still believe we need to strengthen our governments so that they can dispense their national obligations beginning with the most fundamental—quality education and health and ensuring fair system of allocation of the means of production such as land and capital. Rwanda offers a very good example of what a strong government can achieve in terms of setting the foundation of growth and development right.
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written by Staff Gen. Adam Kifalisso, November 24, 2013
Andrew my friend ....Are behind the relocation of Luzira prisons to clear the locality to develop your luxury estates ? Just asking , I heard some rumours that you to develop Luzira into something like Miami ....anyways its Winnie who told me
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written by kabayekka, December 24, 2013
Interesting article indeed. And very much understanding the global financial dilemma this Afrcan continet faces these days. One hopes that with modern developing technology there is hope for the poor of this world. One makes one wonder why a country like Uganda that has failed to produce a single modern device in its industrial complex, like a normal domestic TV, puts up a 70 percent tariff on the item as it is imported into its country? Then to add injury to this sort of financial problem, the expensive guns thousands of them imported into the country by government trade are not taxed at all.



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