Brussels, May 2006

The international Fair Trade movement and EURO COOP welcome the draft report on Fair Trade and Development as a first step towards developing a coherent EU-wide policy framework on Fair Trade. However, we are deeply concerned about some amendments which would significantly weaken the report and might even harm the further development of Fair Trade.

The international Fair Trade movement brings together over one million Fair Trade producers, 20 national labelling initiatives, more than 200 importers, 3000 worldshops and several thousands volunteers. EURO COOP is the European Association of Consumer Cooperatives. It represents the interests of consumer cooperatives, actively involved in the promotion of Fair Trade, and their 22 million consumer-members across 17 European countries.

Our key concerns are:

• the widening of the report to "other sustainable and ethical trading initiatives" and the suggestions to reduce the criteria that need to be fulfilled under "Fair Trade". These amendments would lead to the dilution of the concept and increase the confusion of consumers;
• the deletion of the reference to the Cotonou Agreement as a legal basis for the EU's support to Fair Trade;
• the deletion of references to policy measures that would improve overall trading conditions for the benefit of disadvantaged producers.

If these concerns are taken into consideration, we are convinced that the EP report can support and strengthen Fair Trade for the benefit of disadvantaged producers and poor workers in Developing Countries.

Fair Trade is proved to raise producers' living standards, reduce poverty and contribute towards sustainable development . The impact of Fair Trade is being achieved thanks to a comprehensive approach: Not only do producers receive a fair price and pre-financing on request, but they are also supported in improving the quality of their production, in converting their produce into organic, in increasing capacity and in respecting the environment. Based on the compliance with strict and systematically monitored standards, the concept of Fair Trade has achieved a high degree of credibility among European consumers who are increasingly interested in ethical purchasing. European Fair Trade sales have been growing at average 20% for five consecutive years.

1) Consumers need to be protected against misleading ethical and "fair trade" claims

In response to the growing consumer interest in ethical purchasing, more and more companies are developing "sustainable" or "ethical" trading initiatives or product lines. This is a welcome development as long as these initiatives contribute to the improvement of the producers' living and working conditions and if they follow clear and transparent standards.

However, many "sustainability" or "ethical" claims lack the backing of credible and verifiable standards . In some cases, even the term "fair trade" is being used without respecting the related criteria. Consequently, consumers find it ever more difficult to obtain appropriate information in the crowded "ethical" market place.

If there is no clear distinction between the Fair Trade concept and "other sustainable and ethical trading initiatives", non-compliance with ethical claims in one initiative may result in a general loss of consumer confidence and harm the credibility of Fair Trade itself.

The European Parliament report can contribute to the protection of consumers against misleading claims by

• Clearly spelling out the criteria that need to be fulfilled under the term "Fair Trade" as suggested in the draft report. Fair Trade follows a comprehensive approach, combining fair trading conditions with producer support, capacity building and awareness raising. It is the combination of these different criteria that has proved to be successful for poverty reduction and sustainable development. A dilution of the concept would endanger the effectiveness of Fair Trade;
• Supporting the overall idea of the report to invite the European Commission to draft a recommendation with concrete measures to strengthen and support the development of Fair Trade, based on the related criteria.

2) What is "sustainable" or "ethical" trade?

Contrary to certain allegations , Fair Trade is not a "brand" but a concept that aims at providing fair trading conditions for producers and workers in developing countries.

While Fair Trade is a well-established concept, the terms "sustainable" and "ethical" trade are not clearly defined. "Sustainable" or "ethical trade" initiatives range from the protection of the environment or animals (e.g. dolphins or birds) to products made without the use of slave or child labour. In 2005, the European Economic and Social Committee came to the conclusion that "it is not feasible or desirable to have a central definition of "ethical trade".

Without such a definition, however, a clear policy framework is difficult, if not impossible to achieve. Hence, national legislation initiatives in this area as currently developed in France and Belgium are limited to the regulation of Fair Trade.

• This report can only lead to further action by European Institutions if it is focused on Fair Trade.
• There is a need for differentiation among different "sustainable and ethical trading initiatives". Only initiatives that comply with transparent standards, involve producers in standard setting, support capacity building, improve living and working conditions and are systematically monitored, can contribute to sustainable development.

3) The Cotonou Agreement is a legal basis for support to Fair Trade

Article 23 g) of the Cotonou Agreement states that "Cooperation shall support… trade development, including the promotion of fair trade". The Compendium, which intends to "provide detailed reference texts as regards objectives, policy orientations and operational guidelines in specific areas or sectors of co-operation" , does not leave any doubt that Article 23 g) refers to the concept of Fair Trade.

Several other EU documents recognize the effectiveness of Fair Trade and suggest greater support to this concept, even though not all of these documents spell Fair Trade with capital letters.

• The report should refer to the Cotonou Agreement and to other EU documents, e.g. the Commodities Action Plan (COM(2004)89 final), as legal basis for the European Union's support to Fair Trade.

4) Better international trading conditions are needed to fulfill the Millennium Development Goals

Fair Trade benefits more than one million producers by offering them fair and stable trading terms. But other millions of producers and workers in Developing Countries work under exploitative and unacceptable conditions and some even have to sell their products below the costs of production. Improving the general trading conditions is indispensable to achieving sustainable development, the eradication of poverty and the Millennium Development Goals.

The Fair Trade experience shows that trade can benefit the poor if carried out under fair and sustainable conditions. Lessons from this experience can be drawn for general trade policy making.

• The report should refer to relevant policy options as suggested in the draft.

If these considerations are taken into account we firmly believe that this report can play an important role in developing a coherent EU Fair Trade policy framework that could enable hundreds of thousands poor producers and workers in Developing Countries to live and work in dignity.

For further information please contact:

Anja Osterhaus, Fair Trade Advocacy Co-ordinator - +32(0)22173617/+32(0)486322086
Javier Calvo, Senior Adviser, EURO COOP - +32 (0)2 2850076