World needs fairer and more sustainable trade, not less trade

20 September 2019

UNCTAD Deputy Secretary-General Isabelle Durant urges policymakers to focus not only on trade growth but also on how the benefits are shared.

Though globalization has fallen from glory and some leaders have embraced protectionist policies, discussions about whether we need more or less trade are misplaced, UNCTAD Deputy Secretary-General Isabelle Durant has said.

“What the world truly needs is not less trade, but more fair trade,” she said on 17 September at the International Fair Trade Summit in the Peruvian capital Lima.

Ms. Durant added that in terms of income inequality, trade growth over the past four decades has been both a blessing and a bane.

A study by researchers from Oxford University and the United Nations University World Institute for Development Economics has shown that “relative” income inequality – as measured by the Gini coefficient – decreased from 0.74 1975 to 0.63 in 2010.

But during the same period “absolute” income inequality increased, meaning that as the divide between nations shrunk, the gap between rich and poor within most countries widened.

“Trade has helped to make the economic pie bigger. But some people weren’t invited to the dinner table,” Ms. Durant said.

Another economic model

UNCTAD and the fair trade movement share a common conviction that the gains from trade should lead to prosperity for all.

"For trade to be a force for good, everyone must get a fair deal," Ms. Durant said. "This is a vision that we share with fair trade advocates."

And as the strong growth in sales of fair trade-certified goods, such as coffee, cacao and bananas shows, consumers across the globe increasingly share this vision. In 2017, global sales climbed 8% to €8.5 billion (US$9.74 billion), according to Fairtrade International's annual report.

This growth put an extra €178 million ($204 million) in the hands of 1.6 million farmers and workers.

“We are a movement, we promote an idea, a fair idea. We advocate for a new vision,” World Fair Trade Organization chief Enrich Sahan said.

“In a normal business, 70% of the profits go to the shareholders. In 90% of our businesses, 0% goes to the shareholders. This is another economic model altogether,” he added.

Time to innovate

Labels like Fairtrade and the associated standards have the power to push production and consumption patterns towards more sustainable pathways.

But to truly rewrite the rules of trade, Ms. Durant said, the movement must innovate.

“When we think about Fair Trade, we generally think of food products, clothing or utensils produced in a traditional and artisanal way,” she said.

While this has satisfied consumer expectations in developed countries, it limits the impact to workers in a number of sectors.

Ms. Durant therefore urged the movement to cross new frontiers, citing the example of mobile phones.      

“Everyone has a mobile phone. And if we look closely at the process of manufacturing, most of them are made from minerals extracted under deplorable environmental and social conditions and are often assembled in factories with equally deplorable conditions,” she said.

“There is a clear void that I’m convinced fair trade can fill, by making this sector more equitable and sustainable.”

UNCTAD’s second-in-command also called for more attention on the climate crisis, which risks to unfairly affect communities in developing countries that have barely contributed to global warming.

Small island developing states, for example, emit less than 1% of global greenhouse gas emissions yet are bearing the brunt of stronger, more frequent hurricanes. Dorian’s recent devastation of parts of the Bahamas was a stark reminder.

“The climate emergency leaves us no other choice but to embrace the sustainable road,” Ms. Durant said. “For trade to truly be fair, it must also treat our planet with dignity.”

The cost of labels

The popularity of fair trade and other sustainability standards, such as organic ones, means consumers must navigate hundreds of labels when walking the aisles of their local supermarkets and shops.

And producers must meet increasing requirements for certification – at a price often out of reach for smaller businesses and farmers, especially in developing countries.

In Vanuatu, for example, annual audit costs for organic certification can range between $2,000 and $10,000 – a steep fee in a country where the monthly minimum wage is only $290.

Ms. Durant said UNCTAD believes partnerships can help improve coherence between the plethora of sustainability standards and make them more accessible. 

This belief led the organization to establish in 2012 the United Nations Forum on Sustainability Standards (UNFSS) with other UN agencies.

The forum provides impartial analysis on voluntary sustainability standards and brings to the same table producers, traders, consumers, standard-setters, trade diplomats and NGOs to discuss the challenges and obstacles they face.

Such discussions coincidentally took place at the 2nd International Convention on Sustainable Trade and Standards in Rio de Janeiro from 16 to 18 September.

UNCTAD’s strong belief in partnerships was also behind the decision in October 2018 to join forces with the World Fair Trade Organization to improve the living and working conditions of artisans, workers and smallholder farmers and producers in Africa, Asia and Latin America.

The two organizations signed a memorandum of understanding during the previous International Fair Trade Summit held in Madrid in 2018.