Fair Trade

After War World 2, some of NGOs in the western world started a commercial activity to support their social missions. With experimental import and distribution initiative goods from Third Nations, NGOs try to adapt market mechanisms to pursue their social purpose,

such as poverty alleviation for small-scale producers.

Because of FTOs’ multidimensional mission, which combines economic, social and sometimes political dimensions, FTOs have been quite early taken as examples of "social enterprises" and have contributed to the shaping of the SE concept (Huybrechts and Defourny, 2010). Becchetti and Huybrechts (2008) also noted that because of adopting very heterogeneous organizational strategies to pursue social purposes, making FT a highly diversified organizational landscape.

According to Moore (2004), the FINE’s definition (an informal association created in 1998 of the 4 main Fair Trade networks, FLO¹, IFTA², NEWS³, and EFTA⁴) of FT is the most agreed and most widely used by the field actors and academics:

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 marginalized producers and workers - especially in the South. Fair Trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade. (FINE, 2001, http://goo.gl/0lgAC4)

1 Fairtrade Labelling Organizations International

2 International Federation of Alternative Traders, currently The World Fair Trade Organization (WFTO)

3 Network of European Worldshops

4 European Fair Trade Association

Huybrechts and Defourny (2010) summarized and combined FT elements under three categories, (1) Fairness, (2) Trade and (3) Education, regulation and advocacy. All these categories can easily be linked to the three types of dimensions identified throughout the different approaches of SE. For better understanding and discriminating between different types of FT social enterprises, Huybrechts and Defourny (2010) also proposed a simple theoretical framework (Figure 2.4) to illustrate the relationship of those three main FT dimensions. Wilkinson (2007) suggested that because in practice most of the FTOs/FTSEs combine these three dimensions in some way, therefore these three dimensions are often interrelated and sometimes undistinguishable, and also vary very much among the priorities.

Source: Huybrechts and Defourny (2010)

Figure 2.4 – The Fair Trade Social Enterprise Triangle

The implication of the FTSE Triangle (Huybrechts and Defourny, 2010):

Political (Education, Regulation and Advocacy): Such as active in advocacy, through lobbying public authorities and denouncing unethical trading practices and education campaigns directed to the consumers.

Economic (Trade): Included all the economic functions (import, transformation, distribution and etc.) linked to trading initiative. The position of trade can vary among FTSEs, because some considered "trade as a mean" and some considered "trade as a goal".

Social (Producer Support): Providing a better income for producers and also empowering them and leveraging development opportunities for their wider communities.

2.5.2 Fair Trade Coffee

Coffee was the world’s second most valuably traded commodity, second only to oil. Milford (2004) reported that a coffee bean could change hands as many as 150 times along the commodity chain between the producer and the consumer (Figure 2.5), and this multifarious process not only lack of transparency but also exploit the benefit of many small producers.

Sources: Modified from Milford (2004) and Ransom (2006) Figure 2.5 – Commodity Coffee Chain and Revenue Breakdown

According to Locke and et al. (2010), Fair Trade expanded to coffee in 1973. Initially FT coffee were just distributed exclusively through Alternative Trade Organizations (ATOs) which established long-standing relationships with the democratic producer cooperatives from which they purchased coffee, linked producers directly with consumers and typically sold products in specialty shops. For many ATOs, they mostly operated without independent certification, and some of them instead set and monitored their own standards.

Later in 1997, Fairtrade Labeling Organization (FLO) was established to set and monitor Fair Trade standards, FLO connect Fair Trade buyers with suppliers, and promote Fair Trade market share and their own standard based certification. While ATOs continued to market Fair Trade handicrafts, standards-based certification eventually replaced organization-based certification in Fair Trade coffee (Locke and et al., 2010).

Cameron (2007) illustrated two types of FT value chain (Figure 2.6), and from the comparison she stated that ATO model creates shorter social distances between consumers and producers by creating tighter network based on trust and fairness. In another hand, standard-based model rely on independent certification organization establishes standards based on process and production methods (PPMs), and these model makes it possible for any coffee company to purchase fair trade coffee from producers and sell it to consumers with a recognized fair trade label.

Source: Diane Cameron (2006)

Figure 2.6 – Fair Trade Coffee Value Chain Comparison

2.5.3 Fair Trade in Taiwan

During 2000s when FT movement started to boom in western world, in order to catch on the growth, Starbucks started to promote and provide FT coffee in its retail shops in America and around the world. In year 2003, Starbucks Taiwan followed it’s headquarter global strategy also started to provide FT coffee in Taiwan retail shops (only occasionally) and became the first ever company offer certified FT coffee in Taiwan.

In 2006, 地球樹 started to import certified FT handcraft products from Japan and in the same year 馥聚 Foody also started to import FT brand “Equal Exchange” from America.

Later in 2007, Oko Green became the first company in Great China Region to get the FLO

certification. Worked together with other FTSEs, the founders of Oko Green also founded the Fairtrade Taiwan Association in 2010 in order to better promote the concept of FT.

In contrast with Oko Green’s model, the founder of Rain Forest Coffee established a FT coffee company in 2008 by adopting a more rarely ATO model, and he also became the first Taiwanese who direct involved in the FT coffee plantation and production community giving back program in Indonesia.

Although FT movement in Taiwan starts relatively late compare with other countries, through the relentless promotion, education and media exposure, those countable pioneer FTSEs in Taiwan have already grown became a steady company. Because of increasing social awareness and public support, the trade volume of FT products in Taiwan has already surpassed South Korea in 2011 and will soon catch up Japan and others western nations.