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Tuesday, November 01, 2005

ONE Day / Fair Trade (NOV 1, 2005)

What does Fair Trade mean?

Fair Trade means that farmers get a fair price for their produce. This helps family farmers in developing countries to gain direct access to international markets, as well as to develop the business capacity necessary to compete in the global marketplace. By learning how to market their own harvests, Fair Trade farmers are able to bootstrap their own businesses and receive a fair price for their products. This leads to higher family living standards, thriving communities and more sustainable farming practices. Fair Trade empowers farming families to take care of themselves - without developing dependency on foreign aid.

Why is there a problem?

* 75% of poor people in developing countries depend on agriculture for survival.
* Unfair barriers such as subsidies and market access prevent developing countries from competing in the world market.
* Each day, wealthy nations spend $1 billion to protect their own markets through subsidies and dumping
* Subsidies are payments wealthy nations make to producers, giving them an assured income regardless of market factors
* The result of subsidies is dumping. The practice of selling commodities in a foreign market at a lower price than in the domestic market and below the cost of production. Dumped products cut market opportunities for developing county farmers, even in there home markets. In general, they cannon compete with artificially cheap imports. Whereas richer countries can protect their farmers from the depressed world market via government payments that make up the difference, poorer countries cannot, and these farmers must make do with what the market gives them.
* Right now, trade rules are so skewed that cows in Europe receive more every day via government subsidies than half the population of Africa has to live on ($2). (Jubilee)
* Market Access: refers to the extent to which foreign producers can export products to another country without facing barriers. A country can limit access to its market in several ways. The most common example of an access barrier is the tariff, a tax put on an imported product when it enters a country. The intent of a tariff is to protect domestic production by making imports more expensive. The highest tariffs in the international trading system occur in the agricultural sector.
* Tariff escalation- refers to raising the tariff on a given commodity at every processing level.
* For example, the United States charges 7.7 cents per kilogram of almonds in the shell but 24 cents per kilogram for shelled almonds. The more valued added to a product outside the United States, the more it is taxed at the border. Tariff escalation is of concern to developing countries because it discourages development of a processing sector, thereby keeping them in the role of supplying raw products. If they processed the raw cotton, coffee or cocoa, that would create more jobs.

How can Fair Trade lift millions of people out of extreme poverty?

* In 1950, Africa's share of what the world earned from trade was 3%. In 2000 this has dropped to 1.4% (excluding South Africa), despite the fact that Africa has 12% of the world's population. If Africa had maintained its 1950 share of world trade, today it would earn $70 billion more in exports each year, nearly six times what the region receives in foreign aid.
* For every dollar given to poor countries in aid, they lose two dollars to rich countries because of unfair trade barriers against their exports.
* Economists estimate that creating fairer trade policies between the richest and poorest countries of the world could lift 300 million people out of poverty by 2015. (World Bank)



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