Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, a variety of other government regulations. Proponents claim that protectionist policies shield the producers and workers of the import-competing sector in the country from foreign competitors. However, they reduce trade and adversely affect consumers in general, harm the producers and workers in export sectors, both in the country implementing protectionist policies, in the countries protected against. There is a consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth; some scholars have implicated protectionism as the cause of some economic crises, most notably the Great Depression. However, trade liberalization can sometimes result in large and unequally distributed losses and gains, can, in the short run, cause significant economic dislocation of workers in import-competing sectors.
A variety of policies have been used to achieve protectionist goals. These include: Tariffs and import quotas are the most common types of protectionist policies. A tariff is an excise tax. Imposed to raise government revenue, modern tariffs are now more designed to protect domestic producers that compete with foreign importers. An import quota is a limit on the volume of a good that may be imported established through an import licensing regime. Protection of technologies, patents and scientific knowledge Restrictions on foreign direct investment, such as restrictions on the acquisition of domestic firms by foreign investors. Administrative barriers: Countries are sometimes accused of using their various administrative rules as a way to introduce barriers to imports. Anti-dumping legislation: "Dumping" is the practice of firms selling to export markets at lower prices than are charged in domestic markets. Supporters of anti-dumping laws argue that they prevent import of cheaper foreign goods that would cause local firms to close down.
However, in practice, anti-dumping laws are used to impose trade tariffs on foreign exporters. Direct subsidies: Government subsidies are sometimes given to local firms that cannot compete well against imports; these subsidies are purported to "protect" local jobs, to help local firms adjust to the world markets. Export subsidies: Export subsidies are used by governments to increase exports. Export subsidies have the opposite effect of export tariffs because exporters get payment, a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, in a country with floating exchange rates, have effects similar to import subsidies. Exchange rate control: A government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance. However, such a policy is only effective in the short run, as it will lead to higher inflation in the country in the long run, which will in turn raise the real cost of exports, reduce the relative price of imports.
International patent systems: There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Two strands of this argument exist: one when patents held by one country form part of a system of exploitable relative advantage in trade negotiations against another, a second where adhering to a worldwide system of patents confers "good citizenship" status despite'de facto protectionism'. Peter Drahos explains that "States realized that patent systems could be used to cloak protectionist strategies. There were reputational advantages for states to be seen to be sticking to intellectual property systems. One could attend the various revisions of the Paris and Berne conventions, participate in the cosmopolitan moral dialogue about the need to protect the fruits of authorial labor and inventive genius...knowing all the while that one's domestic intellectual property system was a handy protectionist weapon." Political campaigns advocating domestic consumption Preferential governmental spending, such as the Buy American Act, federal legislation which called upon the United States government to prefer US-made products in its purchases.
In the modern trade arena many other initiatives besides tariffs have been called protectionist. For example, some commentators, such as Jagdish Bhagwati, see developed countries efforts in imposing their own labor or environmental standards as protectionism; the imposition of restrictive certification procedures on imports are seen in this light. Further, others point out that free trade agreements have protectionist provisions such as intellectual property and patent restrictions that benefit large corporations; these provisions restrict trade in music, pharmaceuticals and other manufactured items to high cost producers with quotas from low cost producers set to zero. Protectionism was associated with economic theories such as mercantilism, import substitution. In the 18th century, Adam Smith famously warned against the "interested sophistry" of industry
Mercantilism is a national economic policy, designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries in the form of economic interventionism, it promotes government regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade of finished goods; such policies led to war and motivated colonial expansion. Mercantilist theory has evolved over time. High tariffs on manufactured goods, was an universal feature of mercantilist policy; these policies aim to reach a current account surplus. With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.
Mercantilism became the dominant school of economic thought in Europe throughout the late Renaissance and the early-modern period. Evidence of mercantilistic practices appeared in early-modern Venice and Pisa regarding control of the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first began to quantify large-scale trade marked mercantilism's birth as a codified school of economic theories. Mercantilism in its simplest form is bullionism, yet mercantilist writers emphasize the circulation of money and reject hoarding, their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money-supply. Fiat money and floating exchange rates have since rendered specie concerns irrelevant. In time, industrial policy supplanted the heavy emphasis on money, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist theory recommends selective high tariffs for "infant" industries or the promotion of the mutual growth of countries through national industrial specialization.
England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era. An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them." The period featured various but disjointed efforts by the court of Queen Elizabeth to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping. A systematic and coherent explanation of balance of trade emerged in Thomas Mun's argument England's Treasure by Forraign Trade or the Balance of our Forraign Trade is The Rule of Our Treasure - written in the 1620s and published in 1664. Elizabeth's efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, in turn, paved the foundation for establishing a global empire in the 19th century.
Authors noted most for establishing the English mercantilist system include Gerard de Malynes and Thomas Mun, who first articulated the Elizabethan system, which Josiah Child developed further. Numerous French authors helped cement French policy around mercantilism in the 17th century. Jean-Baptiste Colbert best articulated this French mercantilism. French economic policy liberalized under Napoleon Many nations applied the theory, notably France, the most important state economically in Europe at the time. King Louis XIV followed the guidance of Jean Baptiste Colbert, his Controller-General of Finances from 1665 to 1683, it was determined that the state should rule in the economic realm as it did in the diplomatic, that the interests of the state as identified by the king were superior to those of merchants and of everyone else. Mercantilist economic policies aimed to build up the state in an age of incessant warfare, theorists charged the state with looking for ways to strengthen the economy and to weaken foreign adversaries.
In Europe, academic belief in mercantilism began to fade in the late-18th century in Britain, in light of the arguments of Adam Smith and of the classical economists. The British Parliament's repeal of the Corn Laws under Robert Peel in 1846 symbolized the emergence of free trade as an alternative system. Most of the European economists who wrote between 1500 and 1750 are today considered mercantilists; the standard English term was "mercantile system". The word "mercantilism" was introduced into English from German in the early 19th century; the bulk of what is called "mercantilist literature" appeared in the 1620s in Great Britain. Smith saw the English merchant Thomas Mun as a major creator of the mercantile system in his posthumousl
Foreign exchange controls
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. Common foreign exchange controls include: Banning the use of foreign currency within the country Banning locals from possessing foreign currency Restricting currency exchange to government-approved exchangers Fixed exchange rates Restrictions on the amount of currency that may be imported or exportedCountries with foreign exchange controls are known as "Article 14 countries", after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies; such controls used to be common in most countries poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries are the exception rather than the rule. Foreign exchange controls can result in the creation of black markets to exchange the weaker currency for stronger currencies.
This leads to a situation where the exchange rate for the foreign currency is much higher than the rate set by the government, therefore creates a shadow currency exchange market. As such, it is unclear. Note that this list is incomplete. Egypt - until 1995 Finland - until 1990 Israel - until 1994 Taiwan - until 1987 United Kingdom - until 1979 Currency transaction tax Financial transaction tax Spahn tax Sterling Area Tobin tax
A currency union involves two or more states sharing the same currency without them having any further integration. Three types of currency unions exist: Informal – unilateral adoption of foreign currency Formal – adoption of foreign currency by virtue of bilateral or multilateral agreement with the issuing authority, sometimes supplemented by issue of local currency in currency peg regime Formal with common policy – establishment by multiple countries of a common monetary policy and issuing authority for their common currencyThe theory of the optimal currency area addresses the question of how to determine what geographical regions should share a currency in order to maximize economic efficiency. Note: Every customs and monetary union and economic and monetary union has a currency union. Zimbabwe is theoretically in a currency union with four blocs as the South African rand, Botswana pula, British pound and US dollar circulate, the US Dollar was until 2016 official tender.. Additionally the autonomous and dependent territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory from their mainland state or have varying arrangements of formal or de facto customs union, common market and currency union with the mainland and in regards to third countries through the trade pacts signed by the mainland state.
Between Bahrain and Abu Dhabi using the Bahraini dinar between Bahrain, Oman and the Trucial States, using the Gulf rupee from 1959 until 1966 between Aden and South Arabia, Kenya, Oman, British Somaliland, the Trucial States, Uganda and British India using the Indian rupee between Belgium and the Grand-Duchy of Luxemburg using the Belgian/Luxembourgish franc from 1921 to the Euro between British India and the Straits Settlements using the Indian rupee between Czech Republic and Slovakia using the Czechoslovak koruna between Ethiopia and Eritrea using the Ethiopian birr between France and Andorra using the French franc between the Eastern Caribbean, Barbados and Tobago and British Guiana using the British West Indies dollar between the Eastern Caribbean, Barbados and Tobago and British Guiana using the Eastern Caribbean dollar between Italy, Vatican City, San Marino using the Italian lira between Jamaica and the Cayman Islands using the Jamaican pound and Jamaican dollar between Kenya and Zanzibar using the East African rupee between Kenya and Zanzibar using the East African florin between Kenya and Zanzibar, South Arabia, British Somaliland and Italian Somaliland using the East African shilling Latin Monetary Union between France, Belgium and Switzerland, involving Greece, Romania and other countries.
Between Liberia and the United States using the United States dollar between Mauritius and Seychelles using the Mauritian rupee between Nigeria, the Gambia, Sierra Leone, the Gold Coast and Liberia using the British West African pound between Prussia and the North German states using the North German thaler between Russia and the former Soviet republics using the Soviet ruble between Qatar and all the emirates of the UAE, except Abu Dhabi using the Qatari and Dubai riyal between Saudi Arabia and Qatar using the Saudi riyal between Samoa and New Zealand using the New Zealand pound Scandinavian Monetary Union, between Denmark and Sweden between the Solomon Islands, Papua New Guinea and Australia using the Australian dollar South German guilder between Spain and Andorra using the Spanish peseta between Trinidad and Tobago and Grenada using the Trinidad and Tobago dollar between Brunei and Singapore using the Malaya and British Borneo dollar between Cambodia and Vietnam using the French Indochinese piastre between South Africa and Botswana using the South African rand between Egypt and Sudan using the Egyptian pound – until 1956 between West Germany and East Germany between 1 July 1990 and 3 October 1990, as part of a temporary, so-called "Monetary and Social Union" prior to German reunification.
Between what became the Republic of Ireland and the United Kingdom, between 1928 and 1979. The Irish Pound was held at the same value as Sterling for this period, although it was not accepted for payments in the UK. proposed pan-American monetary union – abandoned in the form proposed by Argentina proposed monetary union between the United Kingdom and Norway using the pound sterling during the late 1940s and early 1950s proposed gold-backed, pan-African monetary union put forward by Muammar Gaddafi prior to his death List of pegged currencies North American Currency Union Acocella, N. and Di Bartolomeo, G. and Tirelli, P. ‘Monetary conservatism and fiscal coordination in a monetary union’, in: ‘Economics Letters’, 94: 56-63. Bergin, Paul. "Monetary Union". In David R. Henderson. Concise Encyclopedia of Economics. Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267. CS1 maint: Extra text: editors list West Africa opts for currency union Economist- Antipodean currencies Reasons for the collapse of the Rouble Zone OECD Development Centre – the Rand Zone
World Trade Organization
The World Trade Organization is an intergovernmental organization, concerned with the regulation of international trade between nations. The WTO commenced on 1 January 1995 under the Marrakesh Agreement, signed by 124 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade, which commenced in 1948, it is the largest international economic organization in the world. The WTO deals with regulation of trade in goods and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments; the WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, other important goals. Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process; the WTO's current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in Geneva, Switzerland.
A trade facilitation agreement, part of the Bali Package of decisions, was agreed by all members on 7 December 2013, the first comprehensive agreement in the organization's history. On 23 January 2017, the amendment to the WTO Trade Related Aspects of Intellectual Property Rights Agreement marks the first time since the organization opened in 1995 that WTO accords have been amended, this change should secure for developing countries a legal pathway to access affordable remedies under WTO rules. Studies show that the WTO boosted trade, that barriers to trade would be higher in the absence of the WTO; the WTO has influenced the text of trade agreements, as "nearly all recent reference the WTO explicitly dozens of times across multiple chapters... in many of these same PTAs we find that substantial portions of treaty language—sometime the majority of a chapter—is copied verbatim from a WTO agreement." The WTO's predecessor, the General Agreement on Tariffs and Trade, was established by a multilateral treaty of 23 countries in 1947 after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation—such as the World Bank and the International Monetary Fund.
A comparable international institution for trade, named the International Trade Organization never started as the U. S. and other signatories did not ratify the establishment treaty, so GATT became a de facto international organization. Seven rounds of negotiations occurred under GATT; the first real GATT trade rounds concentrated on further reducing tariffs. The Kennedy Round in the mid-sixties brought about a GATT anti-dumping Agreement and a section on development; the Tokyo Round during the seventies represented the first major attempt to tackle trade barriers that do not take the form of tariffs, to improve the system, adopting a series of agreements on non-tariff barriers, which in some cases interpreted existing GATT rules, in others broke new ground. Because not all GATT members accepted these plurilateral agreements, they were informally called "codes". Several of these codes were amended in the Uruguay Round and turned into multilateral commitments accepted by all WTO members. Only four remained plurilateral, but in 1997 WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two.
Despite attempts in the mid-1950s and 1960s to establish some form of institutional mechanism for international trade, the GATT continued to operate for half a century as a semi-institutionalized multilateral treaty regime on a provisional basis. Well before GATT's 40th anniversary, its members concluded that the GATT system was straining to adapt to a new globalizing world economy. In response to the problems identified in the 1982 Ministerial Declaration, the eighth GATT round—known as the Uruguay Round—was launched in September 1986, in Punta del Este, Uruguay, it was the biggest negotiating mandate on trade agreed: the talks aimed to extend the trading system into several new areas, notably trade in services and intellectual property, to reform trade in the sensitive sectors of agriculture and textiles. The Final Act concluding the Uruguay Round and establishing the WTO regime was signed 15 April 1994, during the ministerial meeting at Marrakesh and hence is known as the Marrakesh Agreement.
The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. GATT 1994 is not however the only binding agreement included via the Final Act at Marrakesh; the agreements fall into six main parts: the Agreement Establishing the WTO the Multilateral Agreements on Trade in Goods the General Agreement on Trade in Services the Agreement on Trade-Related Aspects of Intellectual Property Rights dispute settlement reviews of governments' trade policiesIn terms of the WTO's principle relating to tariff "ceiling-binding", the Uruguay Round has been successful in increasing binding commitments by both developed and developing countries, as may be seen in the percentages of tariffs bound before and after the 1986–1994
Timeline of international trade
The history of international trade chronicles notable events that have affected the trade between various countries. In the era before the rise of the nation state, the term'international' trade cannot be applied, but means trade over long distances. In the 21st century, the European Union and the United States are the three largest trading markets in the world. Records from the 19th century BE attest to the existence of an Assyrian merchant colony at Kane sh in Cappuccino; the domestication of camel allows Arabian nomads to control long distance trade in spices and silk from the Far East. The Egyptians trade in the Red Sea, importing spice from Arabia. Indian goods are brought in Arabian vessels to Aden; the "ships of Tarnish", a Syrian fleet equipped at Zion Gerber, make several trading voyages to the East bringing back gold, silver and precious stones. Goliath-Piles er III attacks Gaza; the Greek Ptolemaic dynasty exploits trading opportunities with India prior to the Roman involvement. The cargo from the India and Egypt trade is shipped to Aden.
The Silk Road is established after the diplomatic travels of the Han Dynasty Chinese envoy Zhang Ian to Central Asia, with Chinese goods making their way to India and the Roman Empire, vice versa. With the establishment of Roman Egypt, the Romans initiate trade with India; the goods from the East African trade are landed at one of the three main Roman ports, Berenice or Moos Hormones. Moos Hormones and Berenice appear to have been important ancient trading ports. Hanger controls the Incense trade routes across Arabia to the Mediterranean and exercises control over the trading of aromatics to Babylon in the 1st century BC. Additionally, it served as a port of entry for goods shipped from India to the East. Due to its prominent position in the incense trade, Yemen attracts settlers from the fertile crescent. Pres-Islamic Mecca's use the old Incense Route to benefit from the heavy Roman demand for luxury goods. In Java and Borneo, the introduction of Indian culture creates a demand for aromatics.
These trading outposts serve the Chinese and Arab markets. Following the demise of the incense trade Yemen takes to the export of coffee via the Red Sea port of la-Mocha; the Abbas ids use Alexandria, Tammie and Sirrah as entry ports to India and China. At the eastern terminus of the Silk Road, the Tang Dynasty Chinese capital at Chang'an becomes a major metropolitan center for foreign trade and residence; this role would be assumed by Hangzhou during the Song Dynasty. Guangzhou was China's greatest international seaport during the Tang Dynasty, but its importance was eclipsed by the international seaport of Lanzhou during the Song Dynasty. Merchants arriving from India in the port city of Aden pay tribute in form of musk, camphor and sandalwood to Ibn Riyadh, the sultan of Yemen. Indian exports of spices find mention in the works of Ibo Khurdadhbeh, AL-Afghani, Lakisha bin Trimaran and Al Kalashnikov; the Hanseatic League secures trading privileges and market rights in England for goods from the League's trading cities in 1157.
Due to the Turkish hold on the Levant during the second half of the 15th century the traditional Spice Route shifts from the Persian Gulf to the Red Sea. In 1492 a Spanish expedition commanded by Christopher Columbus arrive in America. Portuguese diplomat Peron ad Convivial undertakes a mission to explore the trade routes of the Near East and the adjoining regions of Asia and Africa; the exploration commenced from Santana to Barcelona, Alexandria, Cairo and to India. Portuguese explorer and adventurer Ascot DA Gama is credited with establishing another sea route from Europe to India. In the 1530s, the Portuguese ship spices to Hormuz. Japan introduced a system of foreign trade licenses to prevent smuggling and piracy in 1592; the first Dutch expedition left from Amsterdam for South East Asia. A Dutch convoy sailed in 1598 and returned one year with 600,000 pounds of spices and other East Indian products; the Dutch East India Company is formed in 1602. The first English outpost in the East Indies is established in Sumatra in 1685.
Japan introduces the closed door policy regarding trade in 1639. The 17th century saw military disturbances around the Ottawa river trade route. During the late 18th century, the French built military forts at strategic locations along the main trade routes of Canada; these forts checked the British advances, served as trading posts which included the Native Americans in fur trade and acted as communications posts. In 1799, The Dutch East India company the world's largest company goes bankrupt due to the rise of competitive free trade. Japan is served by the Portuguese from Macao and by the Dutch. Despite the late entry of the United States into the spice trade, merchants from Salem, Massachusetts trade profitably with Sumatra during the early years of the 19th century. In 1815, the first commercial shipment of nutmegs from Sumatra arrived in Europe. Grenada becomes involved in the spice trade; the Siamese-American Treaty of 1833 calls for free trade, except for export of rice and import of munitions of war.
Opium War – Britain invades China to overturn the Chinese ban on opium imports. Britain unilaterally adopts a policy of free trade and abolishes the Corn Laws in 1846; the first international free trade agreement, the Cob den-Chevalier
Fair trade is an institutional arrangement designed to help producers in developing countries achieve better trading conditions. Members of the fair trade movement advocate the payment of higher prices to exporters, as well as improved social and environmental standards; the movement focuses in particular on commodities, or products which are exported from developing countries to developed countries, but consumed in domestic markets most notably handicrafts, cocoa, sugar, fresh fruit, chocolate and gold. The movement seeks to promote greater equity in international trading partnerships through dialogue and respect, it promotes sustainable development by offering better trading conditions to, securing the rights of, marginalized producers and workers in developing countries. Fair trade is grounded in three core beliefs. Secondly, the world trade practices that exist promote the unequal distribution of wealth between nations. Lastly, buying products from producers in developing countries at a fair price is a more efficient way of promoting sustainable development than traditional charity and aid.
Fair trade labelling organizations use a definition of fair trade developed by FINE, an informal association of four international fair trade networks: Fairtrade Labelling Organizations International, World Fair Trade Organization, Network of European Worldshops and European Fair Trade Association. Fair trade is a trading partnership, based on dialogue and respect, that seeks greater equity in international trade. Fair trade organizations, backed by consumers, are engaged in supporting producers, awareness raising, in campaigning for changes in the rules and practice of conventional international trade. There are several recognized fair trade certifiers, including Fairtrade International, IMO, Make Trade Fair and Eco-Social. Additionally, Fair Trade USA a licensing agency for the Fairtrade International label, broke from the system and implemented its own fair trade labelling scheme, which expanded the scope of fair trade to include independent smallholders and estates for all crops. In 2008, Fairtrade International certified of products.
The World Trade Organization publishes annual figures on the world trade of services. The fair trade movement is popular in the UK, where there are 500 Fairtrade towns, 118 universities, over 6,000 churches, over 4,000 UK schools registered in the Fairtrade Schools Scheme. In 2011, over 1.2 million farmers and workers in more than 60 countries participated in Fairtrade International's fair trade system, which included €65 million in fairtrade premium paid to producers for use developing their communities. According to Fairtrade International, nearly six out of ten consumers have seen the Fairtrade mark and nine in ten of them trust it; some criticisms have been raised about fair trade systems. One 2015 study in a journal published by the MIT Press concluded that producer benefits were close to zero because there was an oversupply of certification, only a fraction of produce classified as fair trade was sold on fair trade markets, just enough to recoup the costs of certification; some research indicates that the implementation of certain fair trade standards can cause greater inequalities in some markets where these rigid rules are inappropriate for the specific market.
In the fair trade debate there are complaints of failure to enforce the fair trade standards, with producers, cooperatives and packers profiting by evading them. One proposed alternative to fair trade is direct trade, which eliminates the overhead of the fair trade certification, allows suppliers to receive higher prices much closer to the retail value of the end product; some suppliers use relationships started in a fair trade system to autonomously springboard into direct sales relationships they negotiate themselves, whereas other direct trade systems are supplier-initiated for social responsibility reasons similar to a fair trade system. There are a large number of fair trade and ethical marketing organizations employing different marketing strategies. Most fair trade marketers believe it is necessary to sell the products through supermarkets to get a sufficient volume of trade to affect the developing world; the Fairtrade brand is by far the biggest of the fair trade coffee brands. Packers in developed countries pay a fee to The Fairtrade Foundation for the right to use the brand and logo.
Packers and retailers can charge as much. The coffee has to come from a certified fair trade cooperative, there is a minimum price when the world market is oversupplied. Additionally, the cooperatives are paid an additional 10c per lb premium by buyers for community development projects; the cooperatives can, on average, sell only a third of their output as fair trade, because of lack of demand, sell the rest at world prices. The exporting cooperative can spend the money in several ways; some go to meeting the costs of conformity and certification: as they have to meet fair trade standards on all their produce, they have to recover the costs from a small part of their turnover, sometimes as little as 8%, may not make any profit. Some meet other costs; some is spent on social projects such as health clinics and baseball pitches. Sometimes there is money left over for the farmers; the cooperatives sometimes pay farmers a higher price than farmers do, sometimes less, but there is no evidence on, more common.
The marketing system for fair trade and non-fair trade coffee is