Cotton must be processed to realize its full value.

"We would deliver the cotton by bullock cart but the trader would always find a reason to give us a bad price," says Khima Ranchhod, an Indian cotton farmer who recently began selling his cotton to Agrocel, a local grower's organization that is Fairtrade Certified.¹

Before partnering with Agrocel, Khima struggled to earn enough money to send his son to the village school but could never manage to save enough to send his daughters to school as well. When Khima began receiving the Fairtrade price of cotton, which is higher and more stable than the market price, his prospects changed for the better. Now, he can afford to send all his children to school. Khima plans to use the money leftover to replace the thatched roof of his mud-walled house with tiles, an improvement that would have been inconceivable without the help of the Fairtrade program.²

Khima's newfound prosperity was made possible by Fairtrade Labeling Organizations International (FLO). FLO is an association of labeling organizations dedicated to alleviating the crushing poverty afflicting the majority of the world's farmers and workers by setting and certifying the compliance of producers with stringent, socially-conscious production standards. FLO also facilitates business between fair trade producers and traders.³

In addition, FLO helps determine the price of goods sold under its certification. It does this by setting a baseline price that is pegged to the estimated values of a sustainable living wage in the source country and also takes into account the basic social and economic development needs of producers. If the baseline price is lower than the world market price, FLO adds a premium and extra funds are dedicated to social and economic development.⁴

Fairtrade Labeling Organizations International (FLO) sets a baseline price that is pegged to the estimated values of a sustainable living wage in the source country.

Already, FLO has helped many disadvantaged producers sell goods such as coffee, chocolate, and honey at a "fair" price.⁵ Ultimately, FLO hopes not only to help individual workers and farmers but also to reform the international trading system. FLO has joined other fair-trade organizations to start an advocacy wing headquartered in Belgium. One of the group's main goals is to develop an integrated monitoring system for fair trade products around the world.

Recently, FLO has been aggressive in trying to broaden the reach of the fair trade movement. To that end, it announced that cotton would be eligible to receive Fairtrade Certification for the first time in 2005.⁶ The initial class of producers receiving certification for cotton was limited to a small group of farmers in India, Mali, Peru, and Senegal.⁷ FLO plans to extend cotton certification to Burkina Faso, Pakistan, Egypt, and Brazil in the near future.⁸

A Vicious Product

Extending Fairtrade Certification to cotton was a bold move for FLO because cotton's supply chain is more complex than that of the typical Fairtrade product. Coffee, for example, is relatively simple to produce: coffee growers harvest the beans, roast them, and ship them to sellers around the world. In contrast, cotton must first be processed into usable textiles and manufactured into clothing before it realizes its full value. These advanced steps are beyond the capacity of the average cotton farmer in the developing world, making cotton's supply chain particularly intricate.⁹

If this new certification program is successful, the Fairtrade movement will have taken a step toward overcoming cotton's uniquely troubled history. Cotton fueled the Industrial Revolution, but in doing so it became closely tied to the enslavement of millions in the American South during the 19th century to handpick cotton. In India, cotton production was closely linked to the imperialism of the British Empire, which exploited its colony to ensure a stable cotton supply and a market for British textiles.¹⁰

Extending Fairtrade Certification to cotton was a bold move for FLO because cotton's supply chain is more complex than that of the typical Fairtrade product.

Today, even though the cotton trade is no longer driven by slavery and imperialism, many cotton farmers across the developing world still suffer. They lack access to technology, credit, and government support and are vulnerable to pestilence, bad weather, and debt.¹¹

In recent years, violent fluctuations and downward trends in global prices have made cotton farming an even more precarious livelihood, increasing poverty levels in those countries whose economies are dependent on cotton production.¹²

Economists Nicholas Minot and Lisa Daniels estimate, for example, that a 40 percent reduction in cotton prices in Benin has increased rural poverty between six and eight percent.¹³

Recognizing the effects of low prices on the 100 million people around the world who rely on cotton for their income, FLO hopes its certification program will help poor cotton farmers get a "fair" price for their goods.

A Drop in the Bucket

While FLO is helping many farmers live better lives through its Fairtrade Certification program, it cannot save everyone. Laljibhai Narranbhai, a cotton farmer from India participating in the program, says, "I will finally be able to support my family thanks to the Fairtrade price we will get for our cotton."¹⁴ But Mr. Narranhbhai is one of only a lucky few to benefit from the Fairtrade program.

Even though sales of Fairtrade products have increased between 40 and 60 percent in the past three years, the market share (the proportion of the total sales in a given market) of Fairtrade products is low. While there has been an increase in the number of fair trade products available, the vast majority of farmers still do not receive "fair" prices. Only 24,000 farmers to date have access to the program worldwide,¹⁵ but there are over ten million people who are depending on cotton farming in Western and Central Africa alone.¹⁶

Many farmers who do not have access to the Fairtrade program remain impoverished because the price of cotton is kept artificially low by subsidies and trade protections maintained by large economies, such as the United States, the European Union, and China.

Even though sales of Fairtrade products have increased between 40 and 60 percent in the past three years, the market share of Fairtrade products is low.

The United States, the world's worst offender spends $4 billion annually on cotton subsidies—more than the entire gross domestic product of many poor cotton-growing countries in Africa.¹⁷ These subsidies ensure that American farmers are able to grow and sell their cotton, but they also distort the commodity's price. Artificially high prices benefit relatively wealthy cotton growers at the expense of extremely poor ones, making it difficult for the latter to sell their goods at all let alone get a "fair" price for them.

Through the 2002 U.S. Farm Bill, Congress has ensured that cotton farmers will continue to receive a minimum payment of $0.52 per pound, as well as "counter-cyclical payments" that bring a farmer's income to a minimum $0.72 per pound of cotton he sells.¹⁸

In addition, Congress limits the importation of foreign cotton through the "Step 2" program, which further subsidizes the U.S. industry by paying textile factories to buy American cotton. ¹⁹ This practice effectively blocks foreign cotton producers from accessing the U.S. market.²⁰

While subsidies and price supports guarantee a minimum level of steady income for American cotton farmers, they also depress the world price of cotton. Global cotton prices averaged $0.38 per pound in 2004, meaning American farmers received a $0.34 premium on the market price. Thus producers were encouraged to overproduce even when it might be more economical for consumers to buy their cotton from somewhere else.²¹

Cotton surpluses from developed countries will eventually be dumped on the global market. This makes it harder for poor producers to sell their goods and forces them to accept the artificially depressed global price. It is estimated that if American cotton subsidies were eliminated it would increase the price of cotton anywhere from 3 to 15 percent, significantly raising the incomes millions of farmers around the world.²²

Focus on the Global Trading System

The Fairtrade movement can help bring economic development and social services to many communities in low-income countries and achieve success on the individual level by allowing a select few to scrape their way out of poverty by getting a "fair" price for their goods.

If activists want to improve the condition of the majority of cotton farmers in the world, structural changes in the rules of the global trading system must be sought.

But, if activists want to improve the condition of the majority of cotton farmers in the world, structural changes in the rules of the global trading system must be sought. Even the Fairtrade Foundation, a UK-based member of FLO, admits that the bulk of the burden is on high-income countries to reform their agricultural subsidy programs. The Foundation has urged rich countries to eliminate all agricultural export subsidies unilaterally by 2010 and to stop dumping agricultural goods in low-income countries.²³

This goal, however, is a challenging and long-term one. The recent suspension of the Doha Round of World Trade Organization negotiations in July 2006 reflects the difficulty of finding a comprehensive solution to the problem of barriers to market access for the agricultural goods of low-income countries.

Cotton farmers in the developing world can rejoice at a recent ruling of the WTO that declared American Step-2 cotton subsidies illegal for their distorting effects on international trade.²⁴ Many more decisions like this one will be necessary if the international trading system is to be reformed so that farmers in low income countries have a chance to be globally competitive. In the interim, poor farmers around the world will have to hope for the small victories offered by programs like Fairtrade.

---

¹ "Fairtrade Foundation Cotton Producer Profile: Agrocel Pure & Fair Cotton Growers' Association, India." The Fairtrade Foundation. 24 Sep 2006.

² Ibid.

³ "Fairtrade Labelling Organizations International." 1 Fairtrade Labelling Organizations International. 7 Aug 2006.

⁴ "About Fairtrade." The Fairtrade Foundation. 14 Aug 2006.

⁵ "Redressing a Global Imbalance: The Case for Fairtrade Certified Cotton." The Fairtrade Foundation Briefing Paper. November 2005.

⁶ Ibid, W1.

⁷ "Questions and Answers about Fairtrade certified cotton." The Fairtrade Foundation. 7 Aug 2006.

⁸ Ibid.

⁹ Beattie, W1.

¹⁰ Ibid.

¹¹ "Questions and Answers about Fairtrade certified cotton."

¹² Minot, N. and L. Daniels. 2002. Impact of Global Cotton Markets on Rural Poverty in Benin. IFPRI,Washington DC: November. Pg. 453.

¹³ Minot and Daniels, 453.

¹⁴ "Press Release." The Fairtrade Foundation. 17 Nov 2005.

¹⁵ "Fairtrade Labelling Organizations International."

¹⁶ "Cotton: From Field to Fashion Facts Behind the Fiber." LotusOrganics.com. 7 Aug 2006.

¹⁷ Beattie, W1; Rivoli, Pietra. The Travels of a T-Shirt in the Global Economy. Hoboken: John Wiley & Sons, Inc. 2005. pg. 51.

¹⁸ Rivoli, 49.

¹⁹ Ibid.

²⁰ Ibid.

²¹ Ibid, 50.

²² Ibid, 51.

²³ "Questions and Answers about Fairtrade certified cotton."

²⁴ Brazil says to ask WTO for panel on US cotton." Yahoo News! 8 Aug 2006.






Contributed by a Center for Strategic and International Studies staff writer. Reprinted with permission from Center for Strategic and International Studies.

To read another Global Envision article about the cotton trade, see Sahelian Cotton Farmers on Their Knees.



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