Economics HLNavarra Competition

11.10.10

MIS 3

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How do Fair-trade regulations contribute to world peace? Navarra Competition Essay

By: Philip Schumacher, Wanja Gründl, Sarah Beck & Maximilian König

Economics HLNavarra Competition

11.10.10

How do Fair-trade regulations contribute to world peace?

Fair trade is considered as a financial covenant between all parties involved in a trade network. These parties include the producers, sellers, and consumers. According to the Fair-trade Labeling Organization (FLO), fair trade defines: “an alternative approach to conventional trade and is based on a partnership between producers and consumers.” Furthermore, fair trade ensures that producers in deprived countries receive a reasonable deal to at least sustain a minimal quality of live. This deal includes: civilized working conditions, certain commitment from buyers towards sellers and impartial prices for goods and services. What is most significant about fair trade is that it promotes economics of peace, as in a system of fair trade every region in the world is confronted with the same set of trading rules, introduced by the World Trade Organization (WTO), an organization that liberalizes and manages trade. Within this essay, the system of fair trade will be evaluated for its effectiveness and contribution to world peace.

Trade in the whole engenders incredible wealth and links different countries and individuals to each other, which ideally leads to world peace. World peace promotes the happiness of every person around the world. According to peacexpeace.org: “Peace is more than the absence of violence. To be sustained, peace must have substance—financial equity, education, participatory democracy, restorative justice, and open communication”. Organizations, such as the WTO seek to achieve so called “fair trade” by maintaining a set of rules and regulations. The WTO is a forum where individual countries have the right to declare their position on trade rules. Furthermore trade disagreements are solved and sets of rules are preserved. One of the things that are regulated within fair-trade are minimum prices. This set price level ensures that producers can cover the costs that are established when trying to prolong a sustainable production. One example, which outlines the significance of minimum prices, is the production of coffee. Many coffee farmers in South America are told to set low prices for their goods. These prices are often lower then the costs of production, driving the producers into a cycle of poverty. By establishing so-called minimum prices, the producers would not produce at a higher rate then the consumer price and therefore profit from the production. The coffee farmers would automatically not depend on foreign aid, but can sustain on their own. This would promote world peace as producers and consumers, who are most likely to be from different parts of the world, have the chance to build up a closer connection, as equality is introduced when minimum prices are regulated. Furthermore, a decrease of poverty is promoted as a minimum live standard can be ensured, which encourages a decrease of criminality and an improvement in the social and economic infrastructure, leading to a more peaceful environment.

Another factor that contributes to world peace in terms of fair trade is the establishment of civilized and sophisticated working conditions. These include the prohibition and removal of child labor, which means no children under the legal age of 16 are aloud to work. Moreover fair-trade ensures that fair wages are paid, which correspond to the work of the individuals and each company tries to ensure for the health and safety of all workers. One might think that fair wages would

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Economics HLNavarra Competition

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result in higher prices for the consumers, but since fair trade organizations work directly with the producers of the different goods, the prices are able to be decreased and subsequently return at higher rate, then the retail price percentage. One example, where the establishment of a suitable workplace has proven itself advantageous is the nomad clothing company that was founded in India. All throughout India it is illegal to employ children below the age of 16, however not many companies stick to this law. The nomad clothing company does not employ children below the legal age. Furthermore, the nomad company workers are paid a fair wage for each hour of their work. The company has no influence over the wages as these are regulated by the Indian government, according to the qualification and education of the individuals. The reason why a suitable workplace promotes world peace is because employees are no longer charged low rates, but receive enough money to sustain. If enough workers are able to sustain, less foreign financial aid is required and the dependency of one country to another (usually LEDC on MEDC) is decreased. This change distresses trading relationships and the producing countries can develop to economically equivalent partners.

The last factor, which is part of the free trade philosophy, is a certain commitment of the buyers and the producers. The federal government maintains a list of all those that are trading, what they are trading and the target country. The reason why this was initiated is to see what goods are sold in which part of the world coinciding with their production. Certain rules need to be respected from both sides; for example, it is not aloud to sell more goods while the market prices go up, in order to profit. Many corn farmers do this by not selling all their corn at once, as they believe for the price to eventually go up, enabling them to earn extra profits. Furthermore there is a supplementary sum of money other then the fair-trade price supplied to workers and farmers called the Fair-trade Premium. According to transfair.org this money is used “to improve their social, economic and environmental conditions.” The reason why these certain regulations and commitments from all parties would not only benefit the fair trade in general, but promote world peace is because of the justice that is implemented. Everyone benefits from the trade in the end and the communication is enhanced between the producer and consumer, eliminating misunderstandings. This encourages the connection between certain regions, initiating world peace.

Fair Trade is a considerable solution to the world peace crisis, as it fuses people of all around the world together by assuring consumers that the goods they consume where purchased under fair conditions. Furthermore fair trade guarantees safe and good work places, where the employees are paid fair wages and their health insurance is taken care of. Moreover, minimum and maximum prices are regulated so the producers don’t make losses and not too much profit, compared to supplementary firms. Fair trade also defines: community and schooling. Trade also ensures that everyone is respected and that the human self-respect is kept upright. All these factors mentioned above should contribute to equality and justice. Justice is essential because it results in peace,as there can be no peace without justice.The absence of the free trade brand mark would have negative outcomes, because without free trade many suppliers from developing countries might be held back

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Economics HLNavarra Competition

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from accessing any market. The places resulting in high profits are often countries with high unemployment rates, because not a lot of people are hired. Although fair trade goods are usually more expensive then normal goods, they are beneficial for the foreign producers and in their final outcomes they are beneficial for all global relationships.In conclusion it can be said that peace is significantly influenced and promoted by fair trade, as long all the policies and regulation are maintained. Furthermore it is necessary to persuade the world, to buy more fair-trade products in order to keep the positive effects retrieved out of this up right. Moreover, it is necessary to try to expand fair trade, as it does not only profit the producer, but the consumers are confident that there products were produced under fair-trade regulations, where decent work places are encouraged and advertised. The future will indicate the magnitude of fair trade effectiveness.

Word count: 1406 (with bibliography and title)

Bibliography:

Image on title page:

"Earth Viewer." Hochschule für Technik und Wirtschaft Dresden - University of Applied Sciences Dresden. N.p., n.d. Web. 10 Oct. 2010. <http://www2.htw-dresden.de/~fegis/DA/DA_JINDRA_2007/allgmein/earthviewer.html>.

Further Information:

"World Trade Organization - Home page." World Trade Organization - Home page. N.p., n.d. Web. 2 Oct. 2010. <http://www.wto.org/>.

"Fairtrade Labelling Organizations International (FLO)." Fairtrade Labelling Organizations International (FLO). N.p., n.d. Web. 5 Oct. 2010. <http://www.fairtrade.net/>.

"Fair Trade Clothing - Trade Not Aid." Fair Trade Clothing, Hippy, Tie Dye, Bohemian, Gypsy, Ethnic Clothes - Nomads Clothing. N.p., n.d. Web. 2 Oct. 2010. <http://www.nomadsclothing.com/fair-trade-clothing/fair-trade-clothing.htm>.

"Ethnic & Fair Trade Clothes." The Wholesaler UK trade directory of wholesalers and trade suppliers. N.p., n.d. Web. 2 Oct. 2010. <http://www.thewholesaler.co.uk>.

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Economics HLNavarra Competition

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