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Fair Trade


In a healthy economy, determining the price of a product roughly works as follows: First is established what the team members who make the product, need to earn each month in order to have a decent existence. Then, all costs incurred by the company are added: the purchase of raw materials, the rental of buildings, repayments of loans, and so on. The total expenditure per month, divided by the number of products the team members can make, results in the price per product.


In other words: everyone who cooperated in the production process, should get his or her fair share. Each team member should get as much as he or she needs to lead a decent life, both for himself and for those who depend on him.


In the modern economy, things work differently. Consumers want to pay as little as possible, while producers want to have the hightest possible profit margin. This combination easily leads to wages that are (too) low; and, by the way, also to production processes that damage the environment.


In Western countries, this process has been steered in a better direction through social legislation. We have minimum wages. In practice, the system of minimum wages determines the bottom line of a product’s pricing structure.


Developing countries


However, countries with an underdeveloped economy and politico-legal life don’t have such social legislation. There are no minimum wages, and if there are, they are either far too low or they aren’t put into practice.


The documentary China Blue (2005) shows what’s going on in the jeans industry in China. Workers have to make long hours, up to 7 days a week during several months, and they don’t get paid for overtime. There are no breaks, and even visiting toilets is discouraged. For every minute they show up late, workers are fined. Working days of 17 hours are no exception when an order from a foreign buyer has to be finished in time. If Western companies or other organizations send observers to check labour conditions, workers have to lie about the actual situation.


A worker in a Chinese jeans factory earns about 1 yuan per hour (at that moment, 12 dollar cents). Incidentally, workers appearing in China Blue are from factories that produce for Levi’s and Walmart. The owner of a jeans factory reports that labour costs for the production of one pair of jeans amount to one dollar. Western companies force him to produce at rock-bottom prices, he says, and because of the fierce competition he has no other options. The jeans that have been produced this way, are sold in the West for 50 to 90 dollars a piece.


Fair trade


Fair trade changes this situation. Fair trade departs from the social minimum that should count for everyone involved in creating the product. Fair trade means that we extend the principle of solidarity, which we have realized in Western countries to a certain level, across national borders.


It would be even better if developing countries would adopt and enforce their own social legislation. If every country in the world had minimum wages, enabling a decent existence for all workers, fair trade would be superfluous. But the fact that we’re talking of developing countries, means that this can take considerable time. Until then, fair trade is the second best solution. Moreover, fair trade enhances our awareness of what constitutes a fair price. We very much need that awareness in our own countries too.


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