Extent of fair trade market and China potential for a bigger fair trade market

EXTENT OF FAIR TRADE MARKET AND CHINA POTENTIAL FOR A BIGGER FAIR TRADE MARKET

TABLE OF CONTENTS

CHINA POTENTIAL FOR A BIG FAIR TRADE MARKET 1

TABLE OF CONTENTS 1

List of table 1

ABSTRACT 1

INTRODUCTION 2

1. The current shape of the fair trade market. 3

1.1The European fair trade market 3

1.1.2 The middle market 4

1.1.3 The new market 4

1.2 The rest of the world 5

1.2.1 The North American market 5

1.2.2 The Japanese market 5

1.2.3 The Oceania market 6

2. China potential for launching fair trade market 7

2.1 Brief overview of the rural economy in China 7

2.2 The environmental issues 7

2.3 Distribution channel of agriculture products in China 8

2.4 Positive elements encouraging the establishment of fair trade market in China 9

2.4.1 Transport and energy infrastructures 9

2.4.2 Commercial infrastructure 10

2.4.3 Existence of potential customers 10

2.3.5 Organic trade background and tendency to favor ecological agriculture 10

Conclusion 11

List of table

Table 1 Fair trade sales in the advanced group 2005-2006 4

Table 2: Fair trade sales in the advanced group 2005-2006 4

Table 3: Fair trade sales in Canada and the USA 2005-2006 5

TTable 4: Fair trade sales in Japan 2006 6

TableTable 5 : Combined Retail Sales for Fair trade Products in Australia & New Zealand 6

ABSTRACT

This paper examines the extent of the fair trade market relative to agricultural products. The fair trade market is currently limited to some developed countries mostly in Europe, North America and few other countries in rest of the world (Japan, Australia and New Zealand). The size of this market is confined so that it faces difficulties to clear the production though that production is in term of products and producers. The fair trade elan is somehow jeopardized. Some developing countries like China can help enlarging the fair trade market. China has sufficient infrastructures and potential buyers; the authorities are willing to introduce ecological farming methods in order to restrain the growing environmental concerns and their consequences. This macro level approach can be completed by a micro level approach in order to set a complete view of the question.

Key words: fair trade, market, agricultural products, China, potential

INTRODUCTION

International trade debates nowadays are marked by the uprise of alternative trade models. Fair trade among others is concentrating the attention of scholars, businesses, NGO's, producers and consumers.

According to FINE, 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. Some definition stress on the north-south relation in term of distribution and revenue, so «Fair trade is a commercial partnership between distributors in rich countries and producers in poor countries. It guarantees producers a minimum income for the purchase of their products regardless of market fluctuations. Its aim is to foster local development and improve producers' living conditions. Fair trade contributes to sustainable development»^1(*). An extended definition is given by Wikipedia that introduces the concepts of social justice, environment, label and organization: «Fair trade is an organized social movement which promotes equitable standards for international labour, environmentalism, and social policy in areas related to the production of labelled and unlabelled goods, which may range from handcrafts to agricultural commodities. The movement focuses in particular on exports from developing countries to developed countries with a particular attention to marginalized producers and workers in order to help them move from a position of vulnerability to security and economic self-sufficiency. It also aims at empowering them to become stakeholders in their own organizations and actively play a wider role in the global arena to achieve greater equity in international trade».

The remote history of fair trade is accredited to the Netherlands by the 1860's ( Claire V, 2002) due to the «culture System» instituted to make beneficial the Dutch colony of JAVA in Indonesia. Products such as such as sugar, coffee, indigo and tobacco and pepper which have to be cultivated in order to generate taxes for the colonial authorities (P. Silaen, C. and J. Smark, 2006 ). The culture system has to be abandoned among other things due to the influence of a book: Max Havelaar^2(*) published in 1860 on the farmer's unbearable working condition. The most recent history and development of fair trade is attributed to the actions of churches and NGO's by the inter World War period, in the context of various attempts to control the international commodity markets characterized by a rapid decline of the prices (Fridell, 2004). The fair trade system has the particularity to have the producers in developing countries and the other actors of the market (importer, processors, and buyers) in the developed countries. However not all of the developed countries are really involved in the fair trade products; also, even with in the traditional fair trade market the share of fair trade product is minor. The recent growing interest of farmers to the fair trade system has raised the question of the extent this market. Considering the oversupply noticed in the so-called niche market, one can think of how to enlarge it. We consider that some developing countries can contribute to the development of fair trade network in term of market expansion. Among other developing countries, we choose to talk about China. A macro level approach is used to consider China potentials for creating fair trade market with a special focus on agricultural commodities. The focus on agricultural commodities is comprehensible not only because of their importance with in the range of fair trade products but also due to their implication on people well being. The current shape of fair trade market will be presented prior to addressing China's potentialities.

1. The current shape of the fair trade market.

The fair trade system recognizes implicitly the mainstreaming strategy as the way that allows its trade to come up and raise consumers' awareness. J.M. Krier (2005) gives prominence to that idea by asserting that «fair trade has become more than a «niche market» for socially-aware and middle-class Northern consumers. It is expanding into mainstream distribution channels and is increasingly being recognized by consumers, public authorities and even private companies as an efficient tool for poverty eradication and sustainable development.»^3(*). The European market seems to be the one with the greatest numbers of countries interested in fair trade products; however noteworthy overhang is being realized in other developed countries beyond Europe.

1.1The European fair trade market

The fair trade market structure in Europe is under an on going structuring. The distribution channel is not completely mature and stable in term of strategy due to the inconsistency among the different school of thoughts behind the fair trade movement. The commercialization structures include wholesalers and retailers provided by local or international fair trade importers. The fair trade market in Europe can be divided in three groups: the advanced market, the middle market, and the beginning market.

* ¹ Resources Lexicon http://www.cite-sciences.fr

* ² Claire V. shows that the book was published by Eduard Douwes Dekker (1820-1887) under the assumed name of Multatuli and the tile of the book is Max Havelaar of de Koffijveilingen der Nederlandsche Handelmaatschappij ( Max Havelaar or sales of coffee of the commercial company of the Netherlands)

* ³ Krier J.M., Fair trade in Europe 2005, p7