The Sustainability of the North American Fair Trade Market

Abstract

Extreme poverty remains a persistent problem across the globe. Academics, practitioners, politicians and activists have sought ways to address this persistent problem. Traditional approaches to dealing with endemic poverty have centered around international aid and trade. The band aid approach of using aid alone to alleviate poverty has, at best, been ineffectual. International trade has also often been used as a means to increase the economic standing of an impoverished country. Trade has the potential to increase a country's economic position (e.g., gross domestic product) however it does not necessarily reduce poverty. It has become apparent that more effect means of reducing poverty are needed. In recent years, several bottom-up alternative approaches have emerged. Fair Trade is one such approach that seeks to balance the inequalities of traditional trade and provide a market where those on the bottom can participate more fully and fairly in economic enterprise. This study investigates the state of the alternative form of trade known as Fair Trade. Specifically, this study examines the development, functioning, and sustainability of the North American Fair Trade market. Realistically speaking, Fair Trade, which accounts for only a very small percentage of global trade, currently does not appear to be a replacement for traditional free trade. However, this study investigates if the Fair Trade market has the potential to become an important component of general efforts (e.g., by the United Nations and World Bank) to raise the living standards of the world's poor and function as an alternative market to the traditional free trade market. Two key areas of the market were examined in this study to ascertain the sustainability of the Fair Trade market. Specifically, the financial sustainability of the Fair Trade market was assessed. Quantitative data on sales and growth of Fair Trade goods over the past several decades was compiled to illustrate the relative significance and the future prospects of this market's financial status. These data were supplemented with an analysis of the financial records of available years of operation from a sample of Fair Trade businesses. Also, the organizational structure of the Fair Trade market was examined to ascertain the operational sustainability of the market. Organizational data were compiled to identify the business choices made by Fair Trade businesses. Results suggest that financially the North American Fair Trade market is growing at or above the pace of comparable non-Fair Trade businesses. Further, this study highlights a distinct and largely self sustaining organizational structure of the North American Fair Trade market.