Sumario: March 23, 2004: Speech by Poul Nielson, European Commissioner for Development and Humanitarian Aid. Fair Trade - A Contribution to Sustainable Development and Poverty Reduction. Fair Trade Conference (Brussels)
Honourable Members of Parliament, Ladies and Gentlemen,
I am pleased to address this conference, because I take a direct interest in fair trade. Last year indeed, I intervened to encourage wider availability of fair trade products in the Commission. Some of you will know that since the middle of last year fair trade coffee and several other fair products have been available in the Commission's cafeterias.
Let me first make a few comments about trade and development in general. History demonstrates that trade opportunities are a powerful instrument of transformation in society and for economic growth. But growth is not necessarily sustainable and it may not benefit all sections of society to the same degree. Whether or not the poor will capture the benefit from trade and whether or not this benefit will be on a sustainable basis depends on a range of policy conditions that need to be actively
pursued.
Sometimes NGOs or civil society deny the contribution of trade towards growth and poverty alleviation. While they may be right that there are particular situations where trade has not worked for development, we should look at the broader picture and carefully assess the necessary conditions in terms of governance, peace, stability, sound macroeconomic policies, human resources and infrastructure. There can be no doubt about it that trade development must be part of a wider strategy. In the
policy statements of the Commission, such as the Communication on Trade and Development, you will find more details on this.
But the fair trade movement, with its NGO origins, has demonstrated that forms of trade which contribute to development goals can also catch the imagination of the public and become an important phenomenon.
In thinking about the role fair trade has played we can actually see two different aspects. One is the actual delivery of fair trade products to consumers that are ready to pay a price premium, which ultimately leads to a better payment for the producer. The other is the positive influence of fair trade on trade practice more generally. In my view we all have to keep both of these aspects in mind. The latter point is closely related to the agricultural commodity chains.
As regards the availability and market share of fair trade products there are some interesting success stories: particularly for coffee and also bananas. The sales volume of fair trade products has been rising rapidly, partly because in addition to the original network of so-called "world shops" some big retailers are now offering fair trade products on their shelves. I think it is fair to say that this also goes along with the greatly improved quality of fair trade products. Probably fair
trade sales are now around € 500 million per year with around ten per cent representing extra revenue for the producers. This translates into a significant income boost for poor households producing fair trade goods.
But despite the success with sales of fair trade products, only a small fraction of potential producers are affected. Imports from developing countries of agricultural products into the EU in 2002 amounted to almost € 50 billion. (Hence fair trade could represent around 1 %.) Therefore I consider that the second aspect of fair trade, to which I referred earlier, is very important. Fair trade has indeed influenced trade in general. I think that more attention is being paid now by the public to
the conditions of production and to issues of poverty and sustainability, in part thanks to fair trade activities. Many companies and private sector organisations are now developing their own codes of conduct relating to labour issues, human rights and environment, as part of their policies on corporate social responsibility.
These codes have the potential to increase the number of commodity producers benefiting from them and so should be encouraged. Furthermore, large companies should be encouraged to mainstream sustainable production practices into corporate practice on the whole rather than as special brands marketed alongside other brands not benefiting from these codes.
As concerns codes of conduct in the specific area of agricultural commodity production, these should, in my view, pay specific attention to involving farmers in commodity dependent countries. They should also include specific efforts to support the upgrading of producers in such countries to meet international standards and reward them financially for the additional efforts that they are making in meeting additional market requirements.
As some of you may know the Commission recently adopted a Communication on agricultural commodity chains, dependency and poverty. The analysis and recommendations are inspired by some of the views of the fair trade movement. The proposed actions include promoting corporate social responsibility and especially enabling small farmers to benefit from it.
I would like to add that, while there is a different context and motivation behind fair trade and ecological as well as ethical trade initiatives, they all complement each other in terms of development effects.
This leads me to say something about the issue of labelling. I was pleased to see that last year the King Baudouin Foundation awarded its International Development Prize to the Fair Trade Labelling Organisation (FLO). Labelling is a very important tool to broaden the scope of fair trade so that it can benefit more producers. Promotion of fair trade labels is crucial to allow consumers to recognise these products. Because establishing a label is costly, I would recommend as much pooling of
resources as possible. It is much easier for consumers to remember a single label than to learn about a variety of labels that may have the same objective.
Beyond the effect of fair trade on producers in terms of extra security and revenue, and diminished risk, there are also more general effects on the skills and expertise that are needed for successful export operations. These skills are crucial to maintain high quality standards of perishable products. Another desirable result of fair trade is the increased awareness of the difficult conditions facing small-scale producers and the need to ensure that all those involved get a fair share for
their efforts. In this sense I think that fair trade has positive spill-over effects into other forms of development cooperation designed to improve the situation of rural households.
There is already a clear recognition of the role of fair trade in the statements on the EU's development cooperation policy. The European Parliament made a Resolution and the Commission produced a policy paper a few years ago. The promotion of fair trade is also explicitly mentioned in the Cotonou Agreement (Art. 23 g). Under the NGO budget there are several support programmes ranging from sensitisation and raising awareness about fair trade products to direct support for producers (Approximate
EU contribution in 2003 is around € 2.5 million).
I would like to mention an aspect to which in my opinion the promoters of fair trade have not yet paid sufficient attention. This is the attitude of governments in developing countries about fair trade. Many governments are worried about new trade regulations that could lead to extra costs and that could lead to restrictions on their exports. My view is that fair trade certainly does not fall in this category.
But it is necessary to clarify this subject. In fact fair trade creates extra opportunities and may lead to new valuable niche markets. It can make a difference for commodity dependent countries.
As some of you may know, the Commission recently launched a Help Desk to advise developing countries about exporting to the EU. The Help Desk in the form of a user friendly web site not only provides information on the documentation and rules of origin, but it also helps to identify trading partners. I encouraged the services in the Commission responsible for the Help Desk to ensure that there are links to the fair trade organisations so that it becomes easy to establish contacts.
In conclusion, I do not hesitate to answer the question put in the title of this conference in a positive way. Fair Trade can make a genuine contribution to sustainable development and poverty reduction. The fair trade movement together with the trade and development constituencies can help to ensure that this contribution is further growing. Still, our recognition of the benefits of fair trade should not diminish our efforts to help developing countries to get the most out of trade in general.
We are working towards better mainstreaming of trade into development. Of course we want this trade to be sustainable and fair trade can make an interesting contribution.
Thank you.
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