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  • 5.3.2-MARKET SEGMENTS-‘FAIR TRADE’ COTTON

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  • ‘Fair trade’ cotton

    Chapter 5 - Market segments - Organic cotton: an opportunity for trade 

     
     
    Fair trade’ is promoted by a wide array of organizations internationally. In 2001 the four umbrella organizations for fair trade initiatives agreed upon the following definition of ‘fair trade’: ‘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 actively engaged in supporting producers, in awareness raising and in campaigning for changes in the rules and practices of conventional international trade.’ (Krier, 2005.)

    Fair trade’s strategic intent is ‘to deliberately work with marginalized producers and workers in order to help them move from a position of vulnerability to security and economic self-sufficiency, to empower producers and workers as stakeholders in their own organizations, and to actively play a wider role in the global area to achieve greater equity in international trade’ (Krier, 2005).

    Textiles and clothing made of fair trade cotton have been for sale in several European countries since 2005. This ‘fair trade’ cotton is produced by farmers whose producer organizations have been certified according to the standards of Fairtrade Labelling Organizations International (FLO), one of the four umbrella organizations referred to above. FLO is the leading ‘fair trade’ standard setting and certification body.

    FLO works with labelling initiatives in 15 European countries as well as Australia and New Zealand, Canada, Japan, Mexico and the United States. FLO regularly inspects and certifies about 500 producer organizations in more than 50 countries in Africa, Asia and Latin America. Producers from countries in Europe, the United States and Turkey, among others, are not currently eligible to sell under fair trade.

    Fair trade favours the transparent management of producer organizations and the empowerment of producers. Fair trade cotton contributes to higher producer income and to poverty reduction.

    Standards

    Smallholders participate in fair trade through membership-based producer organizations (cooperatives, producer groups, associations, etc.). FLO controls and verifies these organizations according to two sets of standards: generic standards and product standards.24 The generic standards aim to ensure transparency in management of the producer organizations. Progress requirements are used in addition to encourage producers to continuously improve their livelihoods and organization (FLO, 2005).

    Product standards now exist for bananas, cane sugar, cocoa, coffee, dried fruit, flowers, fresh fruits and vegetables, fruit juices, herbs and spices, honey, nuts and oilseeds, quinoa, rice, seed cotton, sport balls, tea and wine grapes. The product standards for seed cotton were established in 2004 and revised in 2006 (FLO, 2006a). There are no standards yet for the processing and trade of fair trade cotton throughout the cotton textile production chain. Generic standards for traders are under development.

    Fair trade is based on paying producers a guaranteed minimum price. The minimum price should be high enough to cover the costs of production and the producer’s costs of living, plus the costs of control and certification by the inspection body FLO-Cert which certifies against the fair trade standards established by FLO. In addition to the minimum producer price, a communal premium is paid to the producer organization for investment in projects that have been collectively decided upon by its members.

    The product standards for fair trade cotton caution producers about pesticide use. FLO works with a list of prohibited materials which includes a number of pesticides that are in use in conventional cotton production in some countries, such as the insecticides endosulfan, metamidophos, monocrotophos and triazophos, and the fungicides lindane and paraquat (FLO, 2006b). The prohibition of these highly toxic pesticides reduces the hazards of pesticide poisoning and food contamination. FLO further encourages producers and their organizations to reduce their overall pesticide use through integrated pest management (IPM) strategies.

    Development of fair trade cotton

    FLO works with a guaranteed minimum price for producers that varies according to the production context of each country. In West Africa, the minimum price was fixed at FCFA 238 per kg of seed cotton (EUR 0.36 per kg; i.e. 43 US cents per kg, or 20 US cents per pound), which is well above the local conventional price. For example, in Burkina Faso and in Mali the conventional price was FCFA 210 per kg in 2004/05, and FCFA 175 in Burkina Faso and FCFA 160 in Mali in 2005/06. The producer price of the fair trade cotton was thus 13% higher than for conventional cotton in 2004/05, 36% higher in Burkina Faso in 2005/06, and 49% higher in Mali in 2005/06. A communal premium price of FCFA 34 per kg of seed cotton was paid as well, after sale of the fibre.

    The higher price of fair trade cotton must be put in context though. Firstly, the producer price also covers the costs of registration, inspection and certification by FLO-Cert. Secondly, the producers in West Africa agreed to select their seed cotton more thoroughly at harvest in order to ensure quality.25 They sold seed cotton of a higher value to the ginning and trading companies than in conventional trade. Thirdly, the producers receive the communal premium only for the cotton fibre quantities that have actually been sold by the buyer in the marketplace as fair trade cotton.

    Fair trade cotton, certified by FLO-Cert, is in its third year of existence. In 2006 there were eight FLO-certified groups in six countries: Burkina Faso, Cameroon, India, Mali, Peru and Senegal. In 2005, the first season of sale, trade in FLO-certified cotton involved 1,400 tons, half of which went to France and half to Switzerland. Since then, sale of fair trade cotton products has extended to Austria, Belgium, Luxembourg and the United Kingdom. Sales will be launched in the Netherlands in 2007. Germany and the United States may follow suit. Sales in 2006 were approximately 4,000 tons of cotton fibre.

    Actors currently involved in the processing and distribution of fair trade cotton include a variety of textile and clothing producers selling, among others, socks, T-shirts, polo shirts, household textiles, and cotton products for cosmetics. Distribution channels include mail order, department stores, independent shops and specialized boutiques.

    *The FLO generic standards for smallholder farmers’ organizations and the FLO standards for seed cotton for smallholder farmers’ organizations are available at: www.fairtrade.net/standards.html.
    **This is not a formal requirement of FLO, but was rather the result of a voluntary agreement between the buyer, the French group Dagris, and the fair trade cotton producers in West Africa.