• Inclusive growth through fair trade

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    REYNALDO A. BAUTISTA JR.

    REYNALDO A. BAUTISTA JR.

    The increasing disparity of income levels among countries has triggered a global discussion on how to minimize the wealth gap among nations. Developed countries continue to progress while the developing ones stagnate or deteriorate further. Recognizing the extent of the problem, socially aware citizens organized numerous movements aimed at addressing this alarming issue, thus, paving the way for the formation of Fair Trade (FT).

    The goal of Fair Trade is to set fair prices for products, alleviate poverty and assist producers marginalized by the traditional economic model. As such, Fair Trade certification is designed to ameliorate the social, as well as economic and environmental conditions of producers in the developing world through production and trade standards (De Pelsmacker and Janssens, 2007).

    Hoping to improve the quality of their lives, many farmers from underdeveloped countries have started to trade their products to importers under the Fair Trade certification programs. The promotion of better trading relations and secured rights such as a guaranteed fair price, reasonable return for work, continuity of income and decent working conditions to disadvantaged producers (Reynolds et. al., 2004) helped the FT movement to gain global support, putting FT in the limelight of social development.

    The Philippines is among the numerous developing countries in Asia that could benefit from the FT movement. According to the National Statistical Coordination Board (NSCB), the country has been experiencing stable and robust economic growth in the past few years. The country has recently been transitioning from an agricultural to a services and manufacturing economy. In spite of this industry development, recent data suggests that a 39 million workforce is mostly employed by the agriculture sector. About 32 percent of the workforce are in the agriculture sector, yet the sector has experienced a decline in GDP share, contributing only 13.8 percent in 2009.

    Furthermore, according to NSCB, poverty levels in the Philippines have remained high despite the country’s robust growth. About 45 percent of the population consists of those who earn less than two US dollars a day. Digging deeper in the low-income class in the Philippines, NSCB estimates that 27 percent or 3.7 million families belong to the poor segment. Fishermen, farmers, and children comprise the poorest three sectors in 2006, with poverty incidences of 49.9 percent, 44.0 percent and 40.8 percent, respectively.

    The FT concept has been in the Philippines for several decades now. It has slowly gained membership as more organizations aspire to become members of FT in the hope of reaping the rewards of having a certification. The initial challenge was to consolidate the efforts of numerous local FT organizations as they operate independently from one another. As of the last count, there are 29 FT certified organizations working together under the World FT Organization-Philippines (WFTO-Philippines).

    Considering the rapid growth of FT-certified products, it is critical to analyze FT’s impact on these farmers and their families in order to determine the effectiveness of FT certification as an economic tool aimed at improving the quality of life of the population. It is comforting to note that majority of the studies show the positive effects of FT from improvement in economic performance to better trading relations (Taylor, 2005; Raynolds et al. and 2004; Utting, 2009). Recognizing that these are foreign studies, one might ask whether the same holds true in the Philippines.

    Among the limited researches conducted on Fair Trade in the Philippines is the recent study I made. I examined the effects of social capital on the subjective well-being and quality of life of two coffee farmer cooperatives, one that supplies FT organizations and another which does not supply FT organizations in the Benguet region. In summary, the research shows that cooperatives that supply FT organizations derive numerous benefits from the business transactions. Fair Trade helps build long-term trading relationships with buyers that enable coffee growing communities to improve livelihood through fairer terms of trade. FT also provides additional resources for producers to invest in business improvements and community development.

    For us consumers, Fair Trade allows us to help coffee farmers better their lives. By patronizing products that are FT-certified, we contribute to promoting inclusive growth in the country.

    Reynaldo A. Bautista, Jr., DBA, is an assistant professor at the Marketing Management Department of the Ramon V. del Rosario College of Business at the De La Salle University. He teaches marketing research and methods of research subjects. The views expressed above are the author’s and do not necessarily reflect the official position of the De La Salle University and its faculty and administrators.

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    2 Comments

    1. Leopoldo H. Altillo on

      Being an agricultural country, the government should devise a strategic and effective ways to improved the sectors’ output to be able to contribute more to country’s GNP. Since 32% of the workforce are in this sector, I think the government should strengthen the cooperative system wherein the farmers themselves can market their produce so that they can get a better price and benefit them in return. The cooperative also can buy fertilizers, pesticides, farm tools, etc. by bulk and sell it to the farmers at discounted prices. This is one of the steps that the government should be given priority to help elevate present condition of or farmers.

    2. Fair N Square on

      The disparity of income levels among developed and developing countries will continue to increase. The disparity in income between the rich and poor in any nation will continue to increase as well. How can a country like the Philippines catch up with a country like America? And, how can poor Juan de la Cruz match the incomes of the Sy’s, Gokongwei, Ayala, Tan, etc? The poor will continue to be poor and the rich will own more and more of the country’s wealth. Sad, but that’s just the way it is.