You can see them every day. Whether you find one in your lunch box, with your breakfast cereal or maybe you have childhood memories of them ‘running down the stairs’ in their pyjamas.
You can see them every day. Whether you find one in your lunch box, with your breakfast cereal or maybe you have childhood memories of them ‘running down the stairs’ in their pyjamas. They are bananas, and while they may look like just a fruit, they represent a variety of issues that are hotly debated in the economic arena today.
One such issue is whether governments support free trade or fair trade. So what exactly is the difference between free and fair trade?
Free trade can be understood as a policy in which government does not interfere with exports – by granting subsidies, or imports – by applying tariffs.
The basic idea is that global prices will be determined by the global market and that mutual gains can be made from trade if it is free from interference. Fair trade policy, on the other hand, aims rather to assist developing countries who may not be able to compete on the global market with large multinationals.
So where do bananas feature in all this? Bananas, as simple as they are, are currently one of the largest profit makers in supermarkets in the developed world.
Issues concerning fair trade arise when developing countries, like those in Latin America that are primary producers of bananas, have to meet the demands of such supermarkets while still competing in the global market.
The result looks like a page out of the Charles Dickens novel, italHard Times/ital, in which workers are forced to work long hours in hazardous working conditions. Producers often employ child labour and employees work for next to nothing.
An obvious solution to such a situation would be to impose fair trade policies, but convincing developed countries to do this, such as the USA, for whom bananas account for 2% of the total turnover of grocery retailers, is not an easy task – or so it may seem.
Fair trade is becoming increasingly popular in developing countries, but why?
It has been suggested that there is a movement away from the 1970s self-concerned consumer towards a consumer who focuses on values and is concerned with issues such as labour exploitation. This suggests that companies actually stand to gain from adopting fair trade policy as they may contribute to a positive brand image while also fulfilling corporate social responsibilities.
While in theory this may sound good and well, it remains to be seen whether fair trade policies will be welcomed with open arms by developed countries.
* This article was written as part of a requirement for a course in the Economic History Department at Rhodes University