Comercio Justo and Justice: An Examination of Fair Trade

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Review of Radical Political EconomicsXX(X) 1 –12

© 2013 Union for Radical Political Economics

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DOI: 10.1177/0486613412475189http://rrpe.sagepub.com

XXX10.1177/0486613412475189Review of Radical Political EconomicsStenn2013

1Keene State College, Keene, NH, USA

Date accepted: July 11, 2012

Corresponding Author:Tamara Stenn, Keene State College, SCI 183, Mailstop 2001, Keene, NH 03435-1301, USA. Email: [email protected]

Comercio Justo and Justice: An Examination of Fair Trade

Tamara Stenn1[AQ: 1]

Abstract

The paper examines the theoretical basis of fair trade as justice. Grounded largely in the work of Amartya Sen, it looks at the origins, motivations, and elements of fair trade. Fair trade is examined as a potentially transformational form of justice. The intellectual merit of this paper is to examine how fair trade outcomes advance our theoretical understanding of justice. The broader impact is to create a dialogue around understanding fair trade which can lead to further development of just and equitable trade systems worldwide.

JEL classifications: P, O, F.

Keywords

fair trade, justice, globalization, humanistic economics, development

1. IntroductionAmartya Sen in his Idea of Justice proposed that justice needed to be understood in a broad sense and though institutions could play a part in it, it was greater than just the institution itself. “Justice,” Sen wrote, “is ultimately connected with the way people’s lives go, and not merely with the nature of institutions surrounding them.” However, I argue that an institution could provide a model for justice and be a catalyst for the development of a more just and fair society. One such example was the institution of fair trade.

Fair trade operates as an oasis of justice in the tumultuous seas of free market, global capital-ism. At a time of growing inequality and unfairness, an institutional model of justice seems unlikely, yet one exists and is growing strong. Sen agreed that though “often overlooked or marginalized in the dominant traditions of contemporary Western discourse…ideas of justice, fairness, responsibility, duty, goodness and rightness have been pursued in many parts of the world” (2009: xiv). Fair trade is an example of an institutional model which pursues economic and social justice and environmental sustainability in many unseen and marginalized parts of the world.

To date, there has not been much Western literature written about fair trade as justice. This paper applies Sen’s concepts of justice to the rationale for the practice of fair trade. The

2 Review of Radical Political Economics XX(X)

intellectual merit of this paper is to deepen the understanding of justice as defined by Sen and to debate the emergence of fair trade as a model of justice. The broader impact is to create a dialog around fair trade which leads to the development of even more just and equitable trade systems worldwide.

2. Defining Fair TradeSen proposed a theory of justice which advanced and promoted global justice through the rec-ognition of our shared humanity and interconnectedness. It echoed many of the objectives and beliefs shared by institutions and individuals, such as myself, working in fair trade. Fair trade is a form of commerce developed in 1946 and refined in the 1960s and again in the 1980s by American and European institutions as a way to promote cultural and environmental sustain-ability and bring greater economic return to marginalized producers. It is supported by producers who voluntarily embrace the guidelines of fair trade by working together cooperatively, sharing resources, improving product quality, and providing transparency. Fair trade is also supported by consumers who embrace its socially responsible values and/or product qualities by choosing to purchase fair trade goods.

Rawls saw institutions as being supported by people within the context of their societies; if people believed that the institutions were just and fair and others were supporting them, then they would too (1993). It was this long-term development of trust and confidence through a coopera-tive arrangement which gave an institution its strength. Sen agreed with Rawls’s interpretation of institutions but cautioned against too much focus being put on people’s good behavior. He felt that truly just institutions would encompass all, not just the well behaved.

Several fair trade institutions provide the infrastructure for the fair trade industry. These include the U.S.-based Fair Trade Federation (FTF) which serves artisan producers with loca-tions in the United States and Canada, and the European-based World Fair Trade Federation (WFTO) which represents producer groups from all around the world and has foreign field offices set up in different countries. Fair trade institutions also provide support and materials to educate consumers about fair trade. FairTradeUSA and FairTradeUK promote fair trade in European and U.S. communities through their successful Fair Trade Towns and Schools pro-grams. The Fair Labeling Organizations, FLO (also known as FairTrade International), created standards for 17 fair trade certified product categories: bananas, cocoa, coffee, cotton, flowers, fresh fruit, honey, juices, nuts and oilseeds, rice, spices and herbs, sports balls, sugar, tea, wine, manufactured clothing, and composite food products. FLO works with 20 national initiatives and two producer networks to spread fair trade principles and distribute fair trade certified products. FairTradeUSA formerly worked with FLO but now licenses fair trade certified products for the U.S. market under its own name (Fair Trade Federation 2009). Fair trade producer groups and distributors apply and pay membership fees to join these institutions. The institutions then use these fees to promote fair trade to consumers and internally support members though the devel-opment of sales opportunities, business and technical assistance, trade show attendance, net-working, and fair trade advocacy.

The primary focus of fair trade is to improve the lives of the most disadvantaged people in developing countries through market access (Nicholls and Opal 2006). It is a broad, expansive, long-term vision which incorporates not just producers but communities and consumers as well. In fair trade, trade is the means by which the end, the improvement of lives, is achieved. The vari-ous institutions working in regulating fair trade have specific guidelines that participants follow to ensure full fairness or justice. These vary from one institution to the next but all include aspects of transparency, fair wages, technical assistance, access to credit, long-term trade rela-tionships, and environmental sustainability.

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“Institutional change and policy reform,” wrote Sen in the forward to a 2002 Oxfam trade report, “can radically alter the prevailing levels of inequality and poverty, without wrecking the global economy.” Oxfam is an international confederation of 15 organizations working together to find solutions to poverty and injustice. They are active in the development of producer projects for fair trade sales (Oxfam 2012).

3. Experiencing JusticeJustice itself is concept that can be understood in different ways. To help one to understand justice in its different contexts, it is useful to borrow language from others who have more spe-cific vocabularies about it. The language of Sanskrit, explained Sen, has several terms for jus-tice. Nyaaya is Sanskrit for “justice” and stands for a “comprehensive concept of realized justice” (Sen 2009: 20; Spoken Sanskrit 2011). Niti is also Sanskrit for “justice,” though one that is more concrete, tangible, and narrowly applied, often referring to “organizational propriety and behavioral correctness” (2009: 20). The niti concept of justice is what may initially come to mind when the topic of justice is brought up. However, it is within the complexities and expan-siveness of the nyaaya where a larger, transformational understanding of justice lies.

The meaning of “fair” in the fair trade model is that of “justice” and can be understood as niti: a justice that is more concrete, tangible, and narrowly applied. The fair trade model has rules, regulations, and a degree of consensus. The fair trade model, however, also incorporates nyaaya, a comprehensive concept of realized justice as each institution has its own interpretation of jus-tice and slightly different regulations, markets, and approaches. Fair trade is a dual model of justice engaging in both inti through rudimentary rules and regulations and nyaaya by its goal of improving lives through several different routes.

Fair trade operates within the tumultuous seas of global capitalism. This erodes its ability to enhance justice evenly in the different places where it developed. Different trade agreements, societies, and policies affect the amount of injustice that fair trade can actually remove. These remaining injustices are borne by fair trade producers. The competitive, market-driven pressures of global capitalism push for ever more efficiency, growth, and earnings. This creates adverse conditions for the fair trade model as it too is battered and buffeted by global capitalism’s increas-ing demands for more mass produced, competitively priced fair trade goods. Different industries and regions of fair trade experience the pressures of global capitalism differently. This results in fair trade institutions unequally enhancing justice.

The word “fair” in English has many different meanings. “Fair” is an English word which originally meant “pretty” or “pleasing.” It was changed in meaning in Middle English to signify “justice” or “equal-ness.” The principle of fair trade is that people engaged in the fair trade model are supporting and experiencing justice. When translated into Spanish, fair trade is called comer-cio justo or “just trade” as in justice trade.

It is a common joke amongst fair trade producers in Latin America to ask in Spanish – usually when exhausted by a tight production deadline or while examining their relatively meager earn-ings in comparison to high product mark-ups by Western retailers – if “el comercio justo es justo?” Meaning, was fair trade fair? Justo in Spanish translated to “just” as in justice. So the producers are essentially asking if fair trade is just; if it is a form of justice.

4. The Plural Grounding of JusticeThe experience of fair trade within global capitalism can be examined and better understood using Sen’s tool of “plural grounding” to illuminate and understand the different nuances of justice. Plural grounding, explained Sen, is the grouping together of several ideas in order to


achieve greater understanding. This could happen without any single idea being agreed upon and could even include conflicting ideas. Plural grounding is essential for the understanding of jus-tice which as in nyaaya is multifaceted, complex, and large. Plural grounding helps to recognize the nuances of justice within the fair trade model as different fair trade institutions embrace different guidelines, and build a greater understanding of what fair trade as justice is. By engag-ing in plural grounding one avoids the pitfalls of argument over what fair trade concepts are right, work, or present the correct point of view.

Though different fair trade institutions share a common goal of supporting and promoting fair trade, they intentionally choose to be independent in their operations. The guidelines, though similar, vary from institution to institution. Some are enforced by pledges, others by complex certifications. All are based on similar principles of access to credit, training, community devel-opment, fair wages, and transparency. Being similar though not identical enables the fair trade institutions to reduce redundancy in their services, better direct resources, address different nuances of trade such as regulation and definition, and prevent a monopoly for fair trade access. The spirit of plural grounding, the acceptance of differences, and the understanding that a single thing can be made up of many different and sometimes conflicting parts, is what make fair trade work. Rather than trying to consolidate and become solely niti, fair trade organizers are respect-ful of each other’s differences and strive to learn and grow from them by seeking out conversa-tion, debate, attending each other’s conferences and meetings, and sharing the same transparency and communication that they require of their members.

As a fair trader myself, I enjoy having dual memberships with FTF and WFTO. FTF gave me a grounded U.S. marketing approach to fair trade while the WFTO (known as IFAT at the time) helped me to understand the global governance, policy, and development of fair trade across many borders. All of this together – institution, producer, consumer, and varying principles -- in the spirit of plural grounding make up Fair Trade.

Plural grounding also sidesteps the debate about the real motivation for a firm within a global capitalist market to engage in fair trade. Whether the decision of a firm to engage in fair trade stems from student and consumer activism pressure, powered by organizations who focus on issues of unfair labor practices and environmental degradation within global commodity chains, or an ethical motivation by the firm itself, the justice provided by the fair trade institution still exists (Bonacich and Appelbaum 2000). There was debate and division amongst fair trade insti-tutions as to what motivation for fair trade engagement was the right one. FairTradeUSA moved to certify large supply chains within the coffee industry as fair trade rather than building oppor-tunities for small fair trade farmers to cooperate and compete with the large supply chains (FairTradeUSA 2011). Many other fair trade institutions and student groups called these actions unfair. They felt fair trade was set up to help and protect small farmers, while FairTradeUSA felt Fair Trade was set up to lessen injustices and saw supply chain certification as an opportunity to help large corporations quickly respond to consumer and global capitalist demands to make their production more ethical. Both scenarios whether driven in response to activists or ethics, result in the advancement of some sort of justice, as fair trade principles are engaged, even though the degree of justice realized varies. Justice in its universality and largeness can be many different things at once. Plural grounding enables one to recognize this within the fair trade model.

How could Sen endorse justice when it is less just for one group, the fair trade farmers, than for another, the large producers? It could be argued that this is in fact a fault in Sen’s theory of justice. However, along with plural grounding, Sen also called for public reasoning. This, he explained, was the creation of spaces where argument, conversation, and debate could be shared and heard by all. It would be through public reasoning that the differences in fair trade interpreta-tion and implementation by institutions could be aired and understood. Through public reasoning and the subsequent democratic process, which supports public reasoning, Sen explained, justice

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could be enhanced and inequalities removed. Justice, wrote Sen, was an ongoing practice. One did not simply achieve, make, or do justice; rather it was something which was constantly shift-ing and evolving as new discussion, demands, and scenarios arose. Sen sought “to address ques-tions of enhancing justice and removing injustice, rather than to offer resolutions of questions about the nature of perfect justice” (2009).

5. The Risk of PovertyAnother example of using plural grounding to better understand fair trade as a catalyst for eco-nomic justice can be seen in an argument made in Unfair Trade, a 2008 report challenging the effectiveness of fair trade. The report argued that fair trade participation reduced long-term development prospects by discouraging diversification and structural change amongst producers (Sidwell 2008). The economic diversification that Sidwell wrote about is generally understood as the process in which a growing range of economic outputs is produced as a result of new development (United Nations 2011). This was manifest in the “globalization project” defined as the changing policy orientations of countries across the global South as many abandoned import-substitution, state-led industrialization schemes in favor of an export-oriented develop-ment strategy, such as large-scale coffee, or commodity, production (McMichael 1996). Sidwell expressed concern that with fair trade’s strong focus on the cultivation of coffee, for example, farmers would be prevented from naturally diversifying and perhaps developing their own roast-ing and packaging facilities, coffee line, coffee shops, and other competitive products. Diversification creates new industry and jobs and is believed to be a path for developing coun-tries to follow out of poverty.

Diversification is a niti argument looking at a perceived future outcome of fair trade farmers’ reliance on fair trade minimum coffee price guarantees and technical assistance and declaring it “unfair” (or unjust). By using plural grounding and taking the nyaaya approach this argument can be understood in a larger perspective. Fair trade farmers operate in an environment of pov-erty with high risk and uncertainty which make long-term planning difficult. In poverty there exists a lack of infrastructure, inputs, and markets to support diversification. Poor farmers do not have the capabilities or resources to diversify. Fair trade provides long-term contracts, price sta-bility, and training which lead to meaningful growth (Smith 2009).

It is important to note that fair trade does not restrict entrepreneurial activities. Many fair trad-ers have other sources of income. Fair trade knitting in Bolivia provides a supplemental income to families who also farm, participate in local markets, and earn occasional wage income from the informal sector (Stenn 2010). Farming is a seasonal industry. Fair trade coffee growers in Honduras also operate pig farms, grow watermelon for sale in city markets, and raise chickens (Green Mountain 2011). Many of the skills learned from fair trade and the extra income it pro-vides help producers to diversify and pursue new business opportunities. These opportunities lead to job creation as the farmer hires workers for the pig slaughter or watermelon harvest. These workers are often the same laborers who help in the coffee fields during the harvest. Being able to provide steady, year-round employment is key for building regional stability and growth. Fair trade provides a place for this to happen.

At the moment that Sidwell was examining fair trade coffee production from a strictly global capitalist perspective, he saw what he believed to be a strong case for a lack of diversification amongst fair trade coffee producers and negative effects of a fixed fair trade price. After under-standing fair trade holistically one saw that there were many other elements that were taking place alongside the apparent non-diversification. These included environmental development from better farming methods and the careful sourcing and processing of raw materials and com-munity strengthening through regular, organized work and capacity-building. Capacity-building


is realized through better production and quality, the development of organizational and manage-rial skills, and infrastructure building. Often not measureable in purely economic terms and therefore easily overlooked in economic analysis, these non-monetary elements are important aspects of fair trade and lead to long-term, sustainable development.

Diversification is a traditionally held goal for poverty alleviation. Many diversification pro-grams do not recognize poverty’s obstacles of risk, uncertainty, and a lack of infrastructure, instability, resources, and capabilities. These obstacles are the injustices of poverty. There is no Small Business Development Administration to go to for technical assistance and a low-interest loan. There are no trade associations with detailed industry growth trends and reports to use for future forecasting. There are no consumer studies and in many cases no year-round roads, mail delivery, internet access, or even electricity. Plus, as governments change so do the rules. And in some instances, government changes quite often whether local or national. Not taking these obstacles into account when seeking diversification as a development outcome results in the general failure of many developing countries to diversify and grow within the global capitalist market.

Using plural grounding an initially “bad” situation, the lack of diversification and unfairness Sidwell saw in the fair trade model is now able to be better understood in a fuller context. There is no longer a feeling of right or wrong but rather a greater appreciation for the complexities of development in a poverty environment and a recognition of the importance of fair trade’s neces-sary, non-monetary events. Plural grounding enables the complexities of justice to be recognized and understood within the global capitalist economy without having to debate and challenge individual differences. It leads to a broader understanding of justice and creates new and original thought.

6. Transcending FairSen noted that during the European Enlightenment, a time when justice was being studied anew, two different views were taken towards institutions and justice. A transcendental institution as first identified by Thomas Hobbes in the seventh century and examined by Sen is one that defines perfect justice for what it is – which simply is, justice -- independent of other compari-sons. A transcendental institution working with perfect justice does not try to improve what is currently in existence; rather it creates something entirely new. For example, a transcendental institution does not look at what might be lacking in justice elsewhere and then try to fix it or create something better; rather it starts fresh with new identifiers and develops its own definition or formula for justice. It is believed that once a perfect justice is found and supported by the transcendental institution, then societal justice will follow. The focus is on the institution in a singular, independent form rather than society for bringing forth justice. The transcendental institution is the catalyst for justice. “If a theory of justice is to guide reasoned choice of policies, strategies, or institutions,” wrote Sen, “then the identification of fully just social arrangements is neither necessary nor sufficient.”

It could be argued that fair trade is a transcendental institution; it takes a unique approach to jus-tice, creates guidelines -- such as transparency, training, access to credit, fair wages, and safe work-ing conditions -- that ensure justice is served to producers and their communities. Fair trade does not try to improve justice or offer more justice than another institution; rather it uniquely defines and addresses it completely. Fair trade develops in a society as a membership institution with the intent of improving justice within that society (Nicholls and Opal 2006). Fair trade is a global model, spans many societies, and has the potential for defining justice globally as well as locally.

When examining justice it is helpful to take a transcendental approach, but one must have caution in assuming that all societies are congruent followers of the transcendental institution

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(Sen 2009). As much as fair trade works to reduce inequalities, it still operates in societies where different levels and states of inequalities exist. For example, fair trade amongst Andean knitters in Bolivia is different than fair trade amongst Andean knitters in Peru because of inequalities in government infrastructure, wealth, and support (Stenn 2010). So even though fair trade institu-tions are guiding justice independent of social arrangements, the differences in these arrange-ments are significant.

For example, the Peruvian government and international aid organizations invested millions of dollars into developing the Peruvian alpaca fiber industry which exported about $50 million a year (New Deal 2009). Peru also hosted internationally recognized trade shows such as Peru Moda which was considered to be one of the most important fashion industry events in Latin America attracting buyers from across the globe. (FEMALE entrepreneurs 2010). The neighbor-ing Bolivian alpaca industry in comparison did not receive much government support or interna-tional attention and was much smaller and less developed (Stenn 2010).

Fair trade access and rules however were the same for producers in both countries. As a result, there were eight well-developed fair trade alpaca producer groups in Peru and only two in Bolivia (IFAT 2010). All of the Peruvian alpaca fair trade groups had their own multi-lingual web sites, catalogs, and online ordering targeted towards export customers and linked to the Latin American Fair Trade Organization web site. None of the Bolivian groups had these marketing tools. This competition and inequality are inherent in the global capitalist model. As long as this model dominates the trade arena, fair trade as an institution cannot be completely fair. Sen urged for the “discussion of the kind of institutional architecture that may best serve the interests of the poor and the deprived…through the diagnosis of institutional features that impede a more equitable sharing of the fruits of trade and exchange” (Oxfam 2012). I believe, however, that while an institution can provide a model for justice and be a catalyst for the development of a more just and fair society, an institution alone cannot be solely responsible for the advancement of all justice.

Another example of global capitalism’s erosion of justice as developed by fair trade institu-tions is seen in the competition for access to fair trade amongst producer groups. Many alpaca knitting groups in Bolivia want to have memberships in fair trade institutions but are prevented from doing so by their inexperience in working with global institutions, lack of an education resulting in low literacy rates and difficulty engaging with fair trade institutions online (which was required by IFAT), and poverty, where they simply do not have the resources to form a group, host meetings, or establish central access to communications such as a phone number or e-mail address (Stenn 2010). Even within similar regions there are challenges to fair trade access. All of the Bolivian handicraft members of IFAT are located in the central city of La Paz. Many excellent fair trade groups exist in the Bolivian countryside but they do not have internet connec-tions, electricity, or are as easily accessible as the urban groups. Though they are not any less fair trade in their principles, they are lesser in their recognition, privilege, visibility, and connection to trade markets. These inequalities lead to an incongruent experience of fair trade access and participation.

As Sen pointed out, though fully just social arrangements are not necessary or sufficient to realize true justice, they do affect the way in which justice is realized in the face of policies, strategies, or institutions. The nature of society varies and is also dependent on non-institutional features such people’s behaviors and their social interactions. As demonstrated, there exist inequalities within societies, which effect who has access to an institution or how it functions for them (Sen 2009). Though fair trade can be defined as a transcendental institution with its unique approach to justice through trade, some feel that the inaccessibility that different societies have to this institution create inequalities in fair trade’s ability to fully bring forth justice within the deep inequalities of a global capitalist economy. As previously stated, Sen was concerned with


the way people’s lives went, and not just with the nature of the institutions surrounding them. Understanding fair trade institutions as nayaya and seeing that they enhance justice in different ways helps one to understand fair trade institutions as catalysts for a more just global society.

Fair trade is an institution that has been having an effect on justice in trade over the past 40 years. On a larger scale it transcends countries and cultures as it operates on a truly global level by creating more opportunity and enhancing justice and removing injustice; linking trade, con-sumers, and communities worldwide. In this way, fair trade is transcendental. It has unique rules and regulations linking commerce to justice and dictating a path between the two. It is started fresh with new identifiers. As an institution it has structure, membership, and outcomes, which can be analyzed and measured in real terms. As fair trade is dynamic and growing, so is its pres-ence as a transcendental institution. Soon a tipping point will be met where economic justice will follow fair trade’s example independent of the institution itself.

Fair trade is a model of Sen’s idea of a transformational institution. It is realized differently within different societal contexts, and though it is effected by the competition and demands of global capitalism, it brings forth justice. The multiple approaches and diversity within the fair trade intuitions, the nayaya, enable justice to be defined and realized in many subtly different ways and to be flexible and holistic in how it advances justice for all.

7. A Realization-Focused Comparative: Fair Trade and Free TradeSen developed a realization-focused comparative approach to understand justice. This is an approach which involves the examination of actual institutions and their outcomes. By taking a realization-focused approach towards fair trade and comparing it to free trade economic out-comes, both trade approaches can be analyzed and equated to justice. Fair trade and free trade though similar and often confused in language are actually very different in meaning. Free trade, also known as trade liberalization or neoliberal trade, allows participants to trade across national boundaries (supposedly) without interference from respective governments. Free trade favors open, unrestricted markets with no tariffs or quotas (though these do exist) and is based on the principles of David Ricardo’s comparative advantage. This means that production will take place where the greatest advantages lay (for example unskilled manufacturing in the developing world with abundant and less costly labor). The laws of free markets favor prices that are set according to production abilities (supply) and market demands. This theoretically will lead to the best outcomes for all: adequate prices and wages with competition driving new efficiencies and innovation (Stiglitz 2005). It is important to acknowledge the un-freedoms that are inherent in free trade created by tariffs, subsidies, and trade agreements. These actually thwart the free-ness of free trade.

Comparing fair trade with free trade brings a juxtaposition of words and meaning when exam-ining differences in justice. It is easy to assume by the wording that free trade is related to “free-dom.” Free trade producers are assumed to be equal. All have equal opportunity to compete in an open market and equal opportunity to benefit from trade. Paul Samuelson showed in 1962 that free trade is superior to autarky or self-sufficiency and that it is superior to any other type of restricted trade restrictions. This, he explained, is because free trade lets markets move freely and encourages the development of efficiencies and competition through unrestricted resource sourc-ing, production, and market access (Samuelson 1962). Fair trade is quite different to this where self-imposed limitations are put on production and market access.

Unrealistic assumptions were made in Samuelson’s model that produced different results. It was assumed that the efficiencies of free trade operate in a realm of full-employment and perfect risk where the economic development of markets is at an equilibrium. Perfect risk means that for

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every economic action there is an equal reaction. For example, a transnational company relocat-ing to a new country would initially be competition for the local businesses and create a risk of them failing to compete and going out of businesses. However, with perfect risk, this would not happen because the local businesses would simply modify their services and production to meet the new needs presented by the transnational company.

According to Samuelson’s models, as new technology entered and industrial plants were built with foreign investment in developing countries, then new markets would also grow. Citizens would be employed by the new transnationals as well as by their own local industries which would be steadily growing alongside those of the transnationals’. The new local industries would supply the newly present transnationals with additional services and goods, filling in new market areas where the transnationals did not compete. Industrialization, wage labor, and production would increase, helping to raise the countries’ gross domestic product (GDP) and to lift strug-gling nations out of poverty. This growth would come mostly from the urban business sectors within the developing country as they adapted new technologies and innovations to participate in the new trade. Labor would come from the countryside as people left subsistence farming for better paying wage labor. In addition it was believed that as new import products flooded local markets and created competition for local industries these industries would then innovate to cre-ate new product for export to new markets (Stiglitz 2009).

This was not the case. When the foreign markets arrived and improved efficiencies through industry, they required less labor thereby eliminating, rather than creating, jobs in existing mar-ket sectors. The competition from foreign goods was also so great that it closed local industries that were unable to innovate. This too led to higher unemployment.

The developing world, economists learned, does not have perfect information to model risk. There is instability in pricing because internal markets do not exist or work well owing to insti-tutional factors. This leads to a domination by global pricing as developing countries base their prices on the cost of goods entering into their country, rather than accounting for the real costs they assume in their own goods’ production. Cheap imports undersell local products and create unequal competition leading to the closing of many local industries.

There did not exist nor did there develop intermediate industries which would have enabled local people to serve the new transnational investors. For example a local car parts producer could have benefitted from liberalized trade by obtaining contracts to supply car parts to the new transnational automobile company; except there never existed a local car parts producer in the first place. So there were no businesses to step in as an intermediate industry.

Poverty, instability, a lack of capital and training, and the overwhelming competition brought in by foreigners prevented these new free trade markets from developing. Even worse, as the labor markets did not evolve, unemployment rose. There are no social safety nets such as unem-ployment insurance in the developing world. Developing world governments simply do not have the funds, tax base, or infrastructure to develop and support social service programs (Stiglitz 2008). The unemployed are simply out of work with no source of income or social security.

In the end, large, wealthy countries benefit more from free trade than the smaller, poorer countries. This results in an increase in inequality and trade injustice. The United Nations has noted that after 40 years of liberalized (free) trade, the gap between the rich and poor countries has widened. When examined on an individual country level, in some cases GDP is increasing, though people as a whole report being “worse off” in these higher GDP countries (i.e. China and India) as their quality of life deteriorates and growing inequalities are seen within their own societies (Stiglitz, Sen, and Fitoussi 2010).

Fair trade in this realization-focused comparative approach has had the opposite effect by carefully creating jobs and stability in places where they were not present. Fair trade is certainly a restricted form of trade. It goes completely against the free market ideal of liberalized trade.


Fair trade favors price setting, and requires additional inputs such as extensive training, environ-mental considerations, long-term contracts, and high wages. These restrictions do not exist in the free trade environments.

The result is that while growth is more localized and specialized, it is also more sustainable and beneficial to producers. Fair trade, it could be argued, brings about justice through the purposeful creation of protected opportunities for producers. Fair trade producers are carefully educated, trained, and given access to long-term, steady work and income. They are shielded from market extremes though price guarantees and are taught to be competitive through careful product devel-opment and improved production techniques. The environment and children are protected through fair trade practices. Farmers are taught sustainable agriculture techniques and children are dis-couraged from working as agricultural laborers. In addition the higher family income from fair trade results in better nutrition and education for the children. They do not have to stay home and work on the farm since the parents have more financial resources and better management skills (efficiencies) from their fair trade participation (Arnould, Plastina, and Ball 2009). Long-term fair trade producers report feeling more hopeful, confident, and satisfied than their non-fair trade counterparts in similar industries and countries (Arnould, Plastina, and Ball 2011). Even so fair trade has not yet evolved to the scope of becoming a mainstream global trade practice. The viabil-ity of fair trade as a mainstream global trade model has yet to be understood.

Arguments for free trade and fair trade in the style of realization-focused comparison are reflective of niti. The focus is looking at the organizational propriety and its behavioral correct-ness. Realization-focused comparison provides a chance to see what might not be justice but it does not provide an opportunity to transcend that and discover something new. Realization-focused comparison results in a circle of arguments that do nothing to advance one’s understand-ing or attainment of justice. It also reduces the actual nyaaya of fair trade and justice by rendering it to small arguable points when, as we saw before, fair trade is actually rather large, fluid, and not absolutely defined. Looking outward at fair trade and considering it as a part of a theory of justice creates much more opportunity for building new understanding.

Realization-focused comparison, as Sen points out, reduces rather than broadens our under-standing of justice. As seen in plural grounding, fair trade has a broad, open definition of trade, justice, and fairness; one that is not easily quantified nor congruent throughout the industry. This also is what makes fair trade transcendental. Taking a broad view and studying the diverse ele-ments and outcomes of fair trade will deepen the understanding of fair trade as justice. In the spirit of nyaaya, a “comprehensive concept of realized justice,” Sen embraces a vast, large, long view of justice which includes past and future thinking.

There is great value in thinking about transcendental institutions from a realization focus. Sen urges the consideration of not just what happens in society but also “an examination of the kinds of lives that people can actually lead given the institutions and rules but also other influences including actual behavior that would inescapably affect human lives” (Sen 2009: 10). This, he writes, is a “realization-focused” understanding of justice rather than a mere comparison.

Looking at fair trade as a realization-focused, transcendental institution enables one to under-stand it in relation to people’s lives, to their emotions, rationality, and feelings. It enables one to look at individual and societal choice, personal freedom, and capabilities. The focus shifts from what fair trade is to the much larger what it can do and be. To engage in a realization-focus one needs to look at the human side of economics and justice.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.[AQ: 2]

Stenn 11

FundingThe author(s) received no financial support for the research, authorship, and/or publication of this article.[AQ: 3]

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Author Biography

Tamara Stenn has been working in fair trade since 1996 as both a fair trade business owner and academic. Stenn was a U.S. Peace Corps volunteer in Bolivia in the late 1990s, earned a masters in Intercultural Management from the School for International Training in Vermont in 2000, and is completing her DA in Leadership at Franklin Pierce University, New Hampshire. She is currently an adjunct in Interdisciplinary Studies at Keene State College.

Comercio Justo and Justice: An Examination of Fair Trade

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