Introduction: 
Some parts of this research paper are based on anecdotal evidence from two African missionaries and friends involved in the Fair Trade movement.  Because these friends have not had a chance to review this report, I have protected their identities.  I hope to give them credit for their ideas as soon as possible.  The conversations with my missionary friends occurred over the course of the summer of 2005, and therefore the commentary is cited as “Anonymous, 2005”.  Short of my actually visiting Africa, their expertise has been the closest I could come to the issues addressed here.  Their passionate commitment has made them an invaluable source of knowledge and encouragement.
Because the topic of Fair Trade leadership is so broad, I have had to fight “mission creep” with this paper.  At times I would have liked to spend more time on the history and background on unions and politics.  The research on these is plentiful.  What I have attempted to do is consolidate disparate sources of information and ideas into a cohesive progression of ideas as “leanly” as possible.   I use examples from Africa primarily, because that is where my missionary friends and so many others are concentrating their efforts.  Africa is also in the public eye with recent concerts and demonstrations.  This is not to suggest that Fair Trade does not exist elsewhere.  Fair Trade practices are actively promoted in the “third world” in every inhabited continent.  Combining this research with prior business coursework and experience, and information gleaned from recent Public Broadcasting System (PBS) specials, I have developed a thesis as follows:
1) Fair Trade is essentially a unionization movement attempting to fill the void that traditional unions, governments and global corporations has created.
2) There is unnecessary prejudice and ignorance about the root causes of the imbalance in trade with third world countries, and the suffering of their impoverished producers.
3) Non-governmental organizations (NGOs) that are trying a “leaner” approach seem to be having success at creating long term growth in sustainable economic activity than government or corporate giving, or NGOs that impose their visionary projects unilaterally rather than developing cooperatives. 
4) This leaner approach will likely communicate the true nature of Africa’s plight, lead to a rise of “traditional” trade unions there, and contribute to a course-correction to set aright the trade imbalances with the third world.
This report briefly reviews theories of the origins of trade imbalances, and the history of NGOs and unions.  It then turns to the current status of Sub-Saharan trade and the potential solutions that the Fair Trade movement provides.  What follows afterward is a brief market analysis of Fair Trade Federation and its membership.  Throughout this report, my focus is on the managerial challenges of education the public and developing producer/supplier/buyer network in a largely volunteer environment.
One final note in this introduction: Although I have attempted to preserve the privacy of persons giving anecdotal evidence until such time as I can have them proofread my words for accuracy of their own intent, once permission is given to quote these individuals directly, I may attempt to publish a revision of this report, perhaps in a series of columns in a newspaper, to help “get the word out”.   If the reader has any suggestions or corrections for this report, please bring them to my attention.  It remains my hope to make this essay as accurate a portrayal of the current situation as possible.
David Morrissey
 
 
Chapter 1: Nonprofit Enterprise and International Nongovernmental Organizations 
A Case for Nonprofit Fair Trade Enterprise
Faith-based groups around the world are maintaining Fair Trade stores, often volunteering time and resources to sell products purchased from Fair Trade producers and intermediaries.  Their goal is to, in the process of selling, educate the public as to their mission to give as much back down the supply chain to the producers as possible.  In “Enterprise Strategies for Generating Revenue”, the ideas of Cynthia Massarsky are particularly relevant to the Fair Trade movement, and are paraphrased for the rest of this section.
As Massarsky points out, legally, nonprofits should not pass on profits to equity shareholders, and nonprofit businesses must relate to the mission in order to remain tax exempt.  Proactive strategies can be developed to move to entrepreneurial self-reliance, innovative risk-taking, and a market-driven mode.  Earned income can then enable nonprofits to adapt financially to a changing fundraising market.  Product sales can be considered as either for-profit subsidiaries, or nonprofit.  Nonprofit entrepreneurial associations exist to aid efforts along the lines of what is termed “nonprofit enterprise”.  Business plans are advantageous, not only in competitions, but for funders.  Program-related products and services are believed the best business ventures because they usually fit with mission.  Use of intellectual property is also possible.  (Massarsky, 2005)

Massarsky continues that some nonprofits link with for-profits in “cause-related” marketing efforts, where a “joint message” is promoted, and joint awareness is garnered in the venture and a percentage of sales is often donated to the nonprofit.  Licensing of the nonprofit’s name can also generate royalties.  (Massarsky, 2005)
Massarsky suggests that an organization must analyze and plan the business venture rigorously.  A common pitfall is pricing the business as you would price a program – in effect “giving it away”.  Strong management must be committed to generating a distinct profit if it is to support the general mission.  Management must also be experienced in business ventures.  Getting sufficient capital, establishing partnerships with third party vendors and sponsors as appropriate, trying to stick to what you do well and farming out the rest as much as possible – these are keys to success.  Use of volunteers may be in conflict with these goals, and needs further discussion.  Finally, the organization must feel comfortable with the potential business venture. (Massarsky, 2005)

INGO Cultures and Fair Trade:

The Fair Trade movement often brings together diverse groups – religious, environmental, human rights.  They also often advocate with governments and otherwise try to support third world communities.  Anheier and Themundo in their essay “Internationalization of the Nonprofit Sector” present compelling research as to the overall state of Internationalize NGOs, “INGOs”.  What follows is largely a paraphrased version of their essay:
The authors note that International Non-Governmental Organizations (INGOs) (e.g., the Fair Trade Federation), are the most volunteeristic and donative part of the nonprofit sector (58%), after religions (73%) followed by civic and advocacy (56%) and environment (56%).  (Anheier & Themundo, 2005, p. 103)  They surmise that the causes embraced by INGOs may be behind such mobilization numbers, noting that INGOs are on the rise (in private giving) while government (public) giving is on the decrease, with especially high growth in INGOs in central and eastern European.  Organizational links are more complex in these groups.  26.1% of INGOs are devoted to economic development, 20.5% to research, science & knowledge based.  Up from 5% in 1982, International Philanthropy such as the Bill and Melinda Gates Foundation which helps vaccinate against Malaria and treats Aids victims now accounts for 16% of INGOs.  (Anheier & Themundo, 2005)
They continue by citing that INGOs in general are favored by liberals and conservatives alike, and serve the growing needs in the world as the result of the end of the cold war.  Technology changes have increased their ability to have a global presence.  In effect, INGOs are “spinoffs” of states, acting as agents of international contact.  (Anheier & Themundo, 2005)
Anheier and Themundo identified four cultures they called the “Davos Culture” (growth oriented international business community), the “Faculty Club” (taming oriented intellectual response), the “MacWorld” (consumerism and the spread of pop culture) and “Religious Revival” (Protestant and Islamic fundamentalists proselytizing around the world).  (Anheier & Themundo, 2005)  Although Fair Trade engages the entire spectrum of cultures, I believe that it is within the Davos Culture, where Fair Trade is trying to take a greater portion of trade, that Fair Trade INGOs find their greatest challenge.
Where I differ with Anheier and Themundo is in their assertion that these since these four cultures are often at odds with each other, and are colliding, it may account for a possible trend toward slower international growth now in the 2000s, compared with the 1990s.  (Anheier & Themundo, 2005)   In my opinion, Religious Revival and Faculty Club are catching up with and inhibiting growth in the Davos culture (through highly visible advocacy) and Mac World culture (through education).  This is most recently evidenced in the recent debt forgiveness achievements of British Prime Minister Tony Blair in the summer of 2005.
The implications for management of INGOs are many.  Anheier and Themundo point to a high constituent involvement causing efficiency issues, less government oversight of INGOs resulting in more internal operations checks needed to ensure compliance to mission and to monitor staff.  The authors site a spectrum of INGO accountability where the American Red Cross and Amnesty International are on the high end and are very accountable, well ahead of the World Trade Organization (WTO) and OESC (Anheier & Themundo, 2005).   Fair Trade, I suspect, is somewhere in the middle because of problems inherent in accounting for disparate remote trade operations and mostly volunteer retailers (in the developed world) and service providers (in the developing world).  There is little money, though, to account for!
Anheier and Themundo go on, stating that INGOs perform better with regard to members’ democratic control of the organization than other types of international organizations, but are less adept than others at providing access to information generally.  The conclusion of the authors is that whereas in the 1990s INGOs used more corporate and public management approaches, in the 2000s they now use more activism and self-activism.  (Anheier and Themundo, 2005)  In my observation, Fair Trade is doing exactly that, and may need to re-focus with accounting best practices and other “businesslike” activities to confront the “Free Trade” movement and to become self-sustaining enterprises in the long term.
 
Chapter 2. Historical Perspective of Sub-Saharan Trade

Guns, Germs, Steel and Colonialism
It is important to help those in the developed and industrialized world understand the history of trade imbalances with regard to the third world.  In his book “Guns, Germs and Steel: The Fates of Human Societies”, noted biologist Jared Diamond has developed a theory of the root causes which is based on an understanding of climate and its effects on the origins of humankind. 
Every human being on earth can trace their ancestry to African roots.  As Diamond describes, those that migrated north away from tropical Sub-Sahara discovered animals that could be domesticated for the first time.  Farm productivity increased in these communities, now Europe.  Crop surpluses led to societal and technical evolution as free time available resources allowed the creation of steel as a replacement for stones as tools.  This technological evolution did not occur in places like New Guinea, Africa, Central America and other areas now “third world” nations.  Climate and tropical diseases such as malaria caused small isolated tribes of humans to exist but not to connect, in effect perpetuating the Stone Age for these people.  (Diamond, 1999)
Diamond connects the impact of this evolution in the world with the fact that millennia later, Dutch settlers, who by the 1830s had developed their steel into flint lock rifles and sophisticated farming apparatus for use with animals, came to South Africa and found a climate similar to Europe.  They exploited what resources they could, eventually establishing a viable colony, but they brought animal-based diseases with them in their genetic code.  Europeans had developed immunities to such diseases over the centuries, but at the point of first contact, animal based diseases began killing the South African natives.  On the other hand, as the Europeans moved northward into the tropical regions of Sub-Saharan Africa, they and their animals died as well, since they had not built up resistances to malarial diseases.  Some Europeans, like the Belgians in Zambia, resorted to enslaving African laborers in order to mine rubber and copper and build railroads so that they could at least build an export industry.  (Diamond, 1999)  African society became imbalanced as a result of this colonialism, and it continued well into the 1900s.

Development of Labor Movements and Socialism in Africa:
Ben Wattenberg, PBS host of the syndicated “Think Tank” television program, presented a series recently, entitled “Heaven on Earth: The Rise and Fall of Socialism”.  The following is a paraphrase as it pertains to the subject of this report:
Wattenberg points out that the 1800s saw the beginnings of both socialism and the modern labor movement, each borrowing from Karl Marx’s Communist Manifesto published in 1848.   Whereas by around 1900, Samuel Gompers had developed “pure and simple unionism”, using strikes rather than politics in the America Federation of Labor to achieve industrial labors’ goals, farming communities were left behind.  Many farmers around the world began supporting the alternative of Socialism.  Their philosophical split with industry left agricultural societies with hope in non-economic cooperative communities.(Wattenberg, 2005)
Wattenberg points out that Marx’s communism naturally took hold in Africa, where tribal (communal) living was a way of life.  By the 1970s, African organizations like the Ujamaa collective (Ujamaa being Swahili for brotherhood) in Tanzania, were developed by then President Nyerere to scorn outside investment, and exalt socialist ideals in the fight against ignorance, poverty and disease through developing “the collective”.  Eventually, the problems of competition in the socialist framework overtook early successes, and Nyerere established a dictatorship which banned all political parties but his own, which caused further decline.  Massive village relocations were forcing natives into collectives.  The lack of food became such that Tanzania, once an exporter of wheat, became an importer.  Factories lagged, operating at 4% capacity, as workers were unmotivated to produce more than the next person.  (Wattenberg, 2005)  Socialism’s early public relations successes, which was hoped to solve the problems colonialism left behind, resulted in utter failure in practice. 
Wattenberg distinguishes applications of socialism in the U.S. as having been applied to people as they are (in the form of Social Security, Unemployment insurance, “pure and simple unionism”, etc.) whereas in other parts of the world, socialism was applied to people as they ideally should be.  The evidence presented shows that Socialism hurt Africa as much as colonialism. (Wattenberg, 2005)
Today, trade unions do not flourish in the current conservative global climate.  International for-profit companies have developed ever-more sophisticated methods of extracting goods from the entire world.  They have been accused by organizations such as the Fair Trade Federation in their essay “Why Fair Trade?  A Brief Look at Free Trade in the Global Economy” as having helped create sweatshops oversees.  Fair Trade organizations in contrast have promoted the alternatives of social investing, governmental debt forgiveness and fair wages for workers in the developing countries. (Fair Trade Federation, 2002)  Fair Trade is in effect picking up the mantle dropped by Colonialism, Socialism and the modern Labor movement. 
 
Chapter 3 –Trading in Sub-Saharan Africa Today
Conflicting Opinions Regarding Africa’s “Perfect Storm”
A bad crop year in 2005 due to a locust infestation and drought combines with rampant HIV cases, a history of Socialism, struggling democracies in their infancy and mounting debt-servicing creating a “perfect storm”, crippling Sub-Saharan Africa. It leads to the lowest productivity in the world, and unimaginable famine.  The need seems like a bottomless pit, impossible to fill. 
Conservatives are quick to suggest that the global economy is the best means to handle poverty, creating jobs all over the world, falling prices and a competitive marketplace.  Isn’t Wal-Mart the best organization in the world because it brings cheap goods to the masses? 
As Sobornost points out on their website in the FAQs’ “Why Do People of Sub-Saharan Africa Need Our Help?”, universal primary education is not expected in the area until 2029, and most people live on less than $2 per day and 20,000 die each day. (Sobornost, 2005)  The food that exists in Africa is unaffordable to these people.  Perhaps, if Wal-Mart set up shops in Kenya and Zambia there would be cheaper food, but would that happen in the next 20 or 50 years in a place where universal primary education is not expected until 2029?  Wal-Mart is not moving in to such an unstable market any time soon.  Safety nets, so prevalent in the developed world, will not arrive in Africa’s governments for another 25 years at least. 
As our missionary friends point out, universal primary education is available but remains unrealistic for the child laborers.  There is a need for organizations to facilitate labor standards so that children can attend school without also laboring in the field full time.  The global economy needs a global labor counterpart as ombudsman to this underclass that cannot speak for itself.  (Anonymous, 2005)
Yet trade unions have not reached Africa, and much of the third world.  The reasons for this go beyond the scope of this paper, but some theories can be made.  They may have not been permitted into Africa’s socialist and dictator governments.  Unions normally try to infiltrate a new area by using grass roots membership drives.  They require some kind of communication infrastructure, and public visibility.    None of these seems immediately likely in an environment like tropical Sub-Saharan Africa, where laborers are often forgotten and corrupt dictatorial governments censor public discourse.  This is ironic because the early history of trade unions was closely linked with socialism.  Perhaps that commonality is seen as a threat.  Or, perhaps there are government controlled businesses naturally oppose organized labor.  The topic is worth investigation beyond the scope of this report. 
There is certainly enough blame to go around.  Our missionary friends point out that many in Africa still blame colonialism for their plight, which ended decades ago in the region. Internal competition may seem suspect in the cultural backdrop of Socialism.  The missionaries tell us that academic education has been promoted as a solution to Africa’s problems, and it has been developed, but to the detriment of the trades.  The result is a sever shortage of skilled labor.  Stories circulate among missionaries that when NGOs attempt to provide a tractor or build a school with pre-fabricated parts, but when the tractor brakes down, or the school needs repairs there is no infrastructure to fix it.  The farmer waits for the NGO to fix the tractor, but the NGO may have moved on or have exhausted funds or any number of other reasons.  The “foreigners” (NGO members) are expected to fix the school.  There appears to be no personal “ownership” of the school or the tractor.   In order for that to happen, the trades need to be involved in the developmental process, which is an “inside job” no foreign entity can provide.  They cannot control such a “cultural evolution”, only facilitate organic development – i.e., grass roots involvement.  “Think back to America’s early economy” our friend says.  (Anonymous, 2005)  I concur, noting that if a sense of ownership can be cultivated, indigenous trade associations could be developed as well.

Possible Solutions to Conflicts:
What our missionary friends have suggested is “less is more”.  Mobilize local volunteers and hire skilled local laborers to construct the school using indigenous materials.  For example, fund the roof, but not the walls.  Then the community members perceive themselves as the owners of the school. (Anonymous, 2005)
There seems to be little scholarly work available regarding the specific development of fair trading practices such as these.  Indeed, it seems as if we in the developed world seek to put the blame back on Africa for its woes.  However, the twin plagues of “Ignorance and Want” do have a spiraling effect on a nation.  More scholarship is needed.
Our friends tell us the African governments seem to be relenting from the weight of the need, finally allowing some aid to arrive to the suffering. (Anonymous, 2005)
As FTF’s “Why Fair Trade?” article points out, at the heart of the Fair Trade Federation and the movement in general is the belief that the global economy has grown without subsequent protections for workers.  Fair Trade has its roots in labor (and missionary) movements of the past.  Yet it is more than union membership Fair trade proscribes.  It seeks to change the face of globalization, using public awareness campaigns to promote fair wages.   Members in the Fair Trade movement sell goods from the third world in storefronts and coffee houses in every state in the U.S, and in Europe and Canada, returning more in profit directly back to the producers than their for-profit neighbors.   For coffee, the average is 50% more in profit directly back to the producers.  Fair Traders seek to protect and nurture the artisans that international unions have not reached for whatever reason.  They see themselves as a counterbalance to both Capitalism and governments which should help Capitalism more available and sustainable everywhere.
Adherents to the global Fair Trade movement are nevertheless taking on many of the roles of business and government to help the third world.  They are a loosely allied association of organizations and businesses, and some may even be “for-profit”.  They have surprising unanimity on the broad subject of Fair Trade, a concept which has many facets.  Their multi-pronged effort for Sub-Saharan Africa and elsewhere is to achieve debt forgiveness and charitable aid from creditor governments, confront corporate ethical inconsistencies in global trade, and to develop aid efforts within the market economy with certification of goods as “Fair Trade Certified” and the moral high ground as their competitive advantage.  Donations are graciously accepted, but getting the word out seems more important to these organizations than conscious fundraising.  The funds seem to follow naturally, albeit not enough. 
Fair Trade is never promoted in isolation, because the public needs first to be educated as to the existence of the organization and its purpose.  Paradoxically, fundraising special events only work if the “draw” is not Fair Trade alone.  It is often combined with activism, volunteerism and charitable donations.  However, its effectiveness in raising awareness to the global economy seems frustrated by its broad mix of goals that require a long education process and can be resisted by the public at various levels. 
In FTF’s web page “Stories of Hope: Lifting People Out of Poverty”, one can find many cases where Fair Trade did develop into sustainable businesses which developed communities.  (Fair Trade Federation, 1998)
 
Chapter 4 - Organizational Perspective Of Fair Trade Federation (FTF)

The Fair Trade Federation seeks to provide clarity and focus to the issue of Fair Trade.  Based in Washington, DC, they provide resources and certification.  FTF, in “Why Fair Trade?” note that approximately 200 global corporations concentrate just over 25% of the world’s production.  NAFTA and GATT protect intellectual and property rights for global companies, but there is no counterpoint to protect workers and the environment. (Fair Trade Federation, 2002g)
International Fair Trade initiatives have been developed under the auspices of the FTF (Fair Trade Federation, 2002d) which make it more like a union than ever.  Since 1992 the Fairtrade Labeling Organization International (FLO) has been setting standards and certifying goods.  This is more than the “Look for the union label” type campaigns of the past in the U.S.  More than 800,000 producer permits have been issued in 40 countries.  Since 1989, the International Federation of Alternative Trade (IFAT) developed 70 Alternative Trade Organizations (ATOs) in 30 countries.   Their mandate is to advocate with national governments and international trade institutions for exploited producers and provides information services to help increase sales and enhance benefits of Fair Trade.  There are counterpart European groups such as the European Fair Trade Association (EFTA) which has 11 organizations in 9 countries and has 550 production groups in 44 countries.  (Fair Trade Federation, 2002d)
The Independent Sector’s “Facts and Findings” newsletter, Vol. 1 No. 1, encourages nonprofits to gain a competitive edge by emphasizing their core competencies of establishing connections and respect in the community, mobilizing member networks, and providing a human touch to community service.   Fair Trade is certainly that.
In “Commercialization and Business in the Nonprofit Sector”, Galaskiewicz, Letts, Sadler and Hall say the dangers of commercialization in profit making activities not related to their mission. (Galaskiewicz et al, 1999) (However, this is not the case with Fair Trade Federation members, where the product is innately part of their mission.)  The authors recommend maximizing revenue by enhanced MIS systems and becoming “more businesslike”.  They note that for-profit companies have different missions: they maximize profits while nonprofits maximize social missions.  They note that Yale built dormitories in the early 1900s which was thought to be too commercial, whereas now it is unthinkable otherwise.  Landlords and restaurateurs protested then, to no avail.   Nonprofits need to develop systems to measure how well they are working, evaluate the business strategy and the public value. (Galaskiewicz et al, 1999)

Challenges in Managing Fair Trade Business:
The challenges facing Fair Trade are many.  Ellen Weinreb of Yale School of Management pointed out in her 1997 article “Making Supplier Codes Work” that President Clinton dealt with some of those challenges when his initiative led to the apparel industry’s “Workplace Code of Conduct” and “Principles of Monitoring” on April 14, 1997.  AFL-CIO met with the industry and nonprofits, but differences of opinion regarding fair wages were not resolved (Weinreb, 1997)  The Fair Trade movement’s short term and long term goals also require investments in politics and business, and the long term danger is that the public may stop recognizing their store fronts as nonprofits and lose interest.  Thus, the Fair Trade Movement’s balancing act must continue.
Fair Trade’s combination of advocacy and charity may become problematic.  Its advocacy is at times extremely public and high profile, subject to sound bites and “star power” of celebrities.  We all love special events, but to ultimately be successful, Fair Trade must stand on its own merit, and prove the model to be self-sustaining. Then, consistent change in the world’s poorest economies can be influenced by it.  Where Fair Trade related web pages are combined with anti-war protests regarding Iraq, as evidenced on the Global Exchange’s website (Globale Exchange, 2005), the message seems diluted.  Where charity is used to develop artisan communities, merit pay could remain a distant concept, at least in the minds of donors.
Supply of Fair Trade coffee, begun in 1998, still largely outstrips demand, which hovers at 20% of supply (Organic Consumers Association, 2005b).  Starbucks supports it to an extent, but claims the world supply is only 3% of all coffee production and is not enough to meet its demand.  (Starbucks, 2005)  Clearly there are differences of opinion on the subject. 
Although it is a young INGO, FTF can claim small successes, as shown in its “Stories of Hope” (Fair Trade Federation, 1998)  Attraction may be the key to growth.  As their “Fair Trade Facts” web page points out, less than .01% of the world’s goods are “Certified Fair Trade”.  Statistics appear to be spotty.  That number will have to increase to a critical mass yet to be determined.  At 10% of global trade, say, it would approach half a trillion dollars, with perhaps $40 billion in profits back to producers globally.   This seems to be a reasonable long range target for the next ten years, especially when one considers corporations seeing the public demand (or outcry) for Fair Trade goods rising will seek out their own promotions.   At that rate it would begin to outpace governmental economic aid.  This would be a critical turning point, a “coming of age” for the movement.  The key may be in marketing Fair Trade as “Chic”, and there are those that have promoted this idea in related nonprofit trade business with some successes.  (C Cooper, 2005)
Part of the difficulty with Fair Trade is in creating consistent reporting methods for member organizations, and consistent standards of accounting for unpaid volunteers to be developed if they want to foster equitable competitiveness.   In order to grow, one would expect competition and takeovers to develop, which regular unions often oppose.  Plus, with so many members volunteering to sell the goods, it is hard to say it is a viable business concept.  If volunteer hours were priced out, the true cost of goods would be well above current market prices.  Volunteers often bring in outside donations as a by-product, and best practice accounting methods for this situation are not clearly developed and implemented in all Fair Trade stores.  Another problem is that cannot deduct Fair Trade products from income taxes as one would a donation.  The choice of whether goods should be given away as “premiums” for major donations or sold as Fair Trade items could be different depending on the particular selling market. Pricing structures are often unavailable with small farm co-ops and hand-made goods, which complicates inventory control with storing many unique items not subject to uniformity. 
The Fair Trade movement also has a danger of becoming the conscience of the world, spread so thin it evaporates before our eyes.  If they can embrace so many diverse views, they risk falling prey to adverse public opinion.  When an organization such as “Global Exchange” includes opposition to the Iraq war and travel rights to Cuba in its advocacy positions along with Fair Trade, it is a lot of extra baggage to support.  (Global Exchange, 2005)  Public perception can understandably be skewed, and people might wonder what they are signing on to with regard to Fair Trade.
The producers of Fair Trade items eventually need to set their own agenda.  It has been noted that historically, NGOs are generally weak at setting agendas for service providers, but strong at policy implementation.  They are strong at policy advocacy, but weak at being innovators in policy development.  (Najam, 1996) 
Warning of possible conflicts of interests, the Fair Trade Federation’s newsletter article “Corporate Money and the Fair Trade Mission” said in 2000 “Since the mission requires antagonism with for profits and the public sector, it can compromise the mission to then accept funds from certain corporations involved in one’s attempts at advocacy”.  Some are especially tempting, such as the WTO, IMF, and the World Bank, as they earmark funds to reduce poverty.  These are perceived as ineffective by FTF.  (Fair Trade Federation, 2002a)
In an article “Responsible Trading: Keeping Fair Trade Business Healthy”, Executive Director of Ten Thousand Villages promoted the idea that the retail outlets have a responsibility to turn a profit.  Thus, the business model that Fair Trade innately promotes is proved.  Accepting grants to these efforts undermines the development of a sustainable supply chain where workers can turn a profit. (Meyers, Spring 2000)

An Organizational S.W.O.T. Analysis of Fair Trade Federation:

There is a danger that Fair Trade markets will be perceived as too businesslike to be a nonprofit.  If this comes to pass, they should probably become for-profit agencies.  What follows is a simple attempt to analyze FTF’s Strengths, Weaknesses, Opportunities and Threats (SWOT) on a purely business level:
• Strengths: FTF is good at increasing the public’s consciousness of the plight of producers through political action.  FTF fills the void left by international unions apparently unable or unwilling to reach the most impoverished peoples on the planet.  They are increasingly winning public opinion and funds.
• Weaknesses: Simply put, the products certified as fair trade can be bought cheaper at superstores.  Another inherent threat is “’dilution of legitimacy’ over long chains of partnership arrangements”, where organizations (such as FTF members) must deal with intermediaries and not directly with beneficiaries (Anheier and Themundo, 2005, p.122).    High constituent involvement causing efficiency issues, less government oversight of INGOs resulting in more internal operations checks needed to ensure compliance to mission and to monitor staff are also concerns.  (Anheier and Themundo, 2005)
•  Opportunities: Goals of ending hunger and poverty around the world using  business development.  Many in the movement see opportunity in the problems created by the policies of intergovernmental agencies such as the World Trade Organization (WTO) which they see as working against the development of infrastructure to support trade in the third world, favoring instead the extraction of resources a goods and then providing short term financial assistance.
• Threats: Conservatives often fear this is an attempt to circumvent the market economy.  This presents a problem in public relations, and needs to be addressed.  Socialism is innately anti-competitive, not Fair Trade.  One response could be the opportunity to make these goods more competitive by means of perceived value as a status symbol, as in the ONE organization’s rubber ONE wristbands, or Mother’s Creation’s South African beadworks (C Cooper 2005), or Butta’s “Made in Africa” (MIA) label on its undergarments.  But will this develop and last as a philanthropic effort over time if people continually buy goods at a higher cost that is not tax-deductible?  Popular cultural icons in entertainment who turn into advocates will be trying not to alienate the public as they promote Fair Trade.  A celebrity’s personal profits, based on public demand for recordings, etc., could be at risk if they promote Fair Trade products that alienate corporate owners of recording labels.  It is possible the movement will become too dependant on political action, and not enough on developing a competitive strategy and fall by the wayside (as the death of the “look for the union label” slogan so aptly illustrates can happen).

Porter’s Five Forces on FTF:
 In his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, Michael Porter details five forces of competition.  What follows is a brief application of each:
•  Supplier Power: Weak.  Coffee inventories are piling up, as noted by OCA (Organic Consumers Association, 2005b).  Inventory management is difficult, as each member group is small and cannot afford sophisticated IT systems.  There is a wide range of products, and a spread of suppliers, with minimal communication between suppliers.  Branding is desperately needed.  Creating the “Certified Fair Trade” brand is important.
•  Buyer Power: Strong.  The industrialized world has the money and can choose from many alternative substitute products. 
• Governmental Influences: WTO protests for debt relief, etc.
• Potential Entrants: FTF is welcoming potential entrant organizations quickly, while for-profit trade unions usually put up barriers to entry for other for-profits.  The implications on future growth are especially significant.  The number of nonprofits in general is growing (FTF welcoming them), while the number of for-profits (being absorbed by superstores such as Wal-Mart) is shrinking.  Fair Trade is able to decide when and where to relinquish power to normalized trade unions.
• Rivalry: A technique used by some fringe members of FTF is to Publicly protest at annual corporate board meetings (Organic Consumers Association, 2005a)

FTF Functions:
In their Fair Trade Facts web page, FTF notes that Fair Trade accounts for $400 million in sales each year, approximately 1 tenth are in the U.S.  As a percent of all goods traded ($3.6 trillion) it is .01%.  Fair Trade businesses return 1/3 to ¼ of profits back to the producers in developing countries Fair Trade coffee growers earn approximately 50% more for their products in North American sales.  60%-70% of artisans in Fair Trade hand crafts are women, often the sole-support of families.  (FTF, 2002b) 
 Michael Porter wrote “Placing competition in a situation of conflicting goals can be a very effective strategic approach for attacking established firms that have been successful in their markets.”  (Porter, 1980, p. 70)  FTF serves to spread the word through organizational components to certify and promote fair trade.  Their strategy seems to minimize weaknesses and threats with very public communication and very broad managerial capability.  The challenge is to connect with consumers and beneficiaries alike.

FTF As a Trade Union:
A simplistic answer to the problems of the third world would be to create the infrastructure where Wal-Mart and Target can open up shops in Africa and reduce prices.  Many in Africa cannot afford the food that is available, but if you put Wal-Mart in there, they would beat the competition to the consumer.  FTF takes the mantle of trade unions to the bottom-most wrung of society.  Wal-mart was accused of unfair trade by the very fact it was producing in China.  According to Organic Consumers Association (OCA) , Wal-Mart could not survive in a truly free trade environment.  Labor costs are suppressed in China by the government.  Wal-Mart accepts U.S. Taxpayer subsidies.  (Tasini, 2005)
In his book “Winning the Future”, Newt Gingrich generalizes that unions concentrate power and do not disburse it to members.  Most conservatives would likely agree.  However, FTF is a new type of union.  It advocates, as FTF points out in “Why Fair Trade?” where the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) do little to stabilize commodity prices.  Since commodities are the primary source of trade in developing nations, prices often fall below the cost of production.  There is no safety net for workers as there is in the developed world.  FTF addresses this concern.  (FTF, 2005g)

What Would Peter Drucker Say?  (Application of ideas found in Peter Drucker’s book “Managing the Non-Profit Organization”)
Donors to Fair Trade receive self-realization in the form of a greatly meaningful effort.  Embedding Fair Trade into the psyche should involve competition with for-profits based on intangible values.  Continue taking stock of the landscape, and eliminate waste by abandoning parts of the mission, taking the new resources to build again. 
How do you focus on the successes in the Fair Trade mission?  Drucker has said the key is to define results, educate the donor, set goals twice as high as needed.  Then act on the unexpected successes, asking “how can this give us a chance to contribute?”  Find someone else who believes in it, using Segmenting, Targeting and Positioning (STP).  Think through to who you make sense, and then appeal them in a very forceful, forthright manner.  (Drucker, 1993, p. 88)  Use “Kairos” (the Greek term for “exploit the point when the new is received”).  Fair Trade has organizations that are multipliers.  Make their product quality and desirability so that fashion is aligned with mission.  (Drucker, 1993)
What are the Weakest Links?  Drucker wrote that the nonprofit does not get paid for performance, but performance justifies further fund development.  “Serve a need, create a want”.  You have long term goals that constituents can all agree on.  Continue building the organizational culture around information and communication, not hierarchy.  Set high goals for the impoverished, as  well.  Keep top management in the field, and bring top performers into the public eye for others to emulate.  You have trust when FTF certifies a product, or it shows a label “Made In Africa”.  As Aristotle said, “In essentials, unity, in action, freedom, and in all things, trust.”  (Drucker, 1993)  Trust is what Fair Trade is based on.  Without it, you have a house of cards.
 Applying what Drucker encourages nonprofits in general, the Fair Trade Federation must fill the roles of mentor, teacher, judge, evaluator, and encourager.  Executives within each member organization need to develop self-renewal to avoid burnout.  Avoid conflict with other INGOs.  Recommend board members, rather than elect them.  (Drucker, 1993)
Peter Drucker’s Self Assessment Tool:
Drucker’s Self-Assessment Tool, presents the five most important questions for any nonprofit organization to ask (Drucker, 2005).  Because FTM is standardized, generalizations are presented here as to the five questions:
• What is our mission? “The Fair Trade Federation (FTF) is an association of fair trade wholesalers, retailers, and producers whose members are committed to providing fair wages and good employment opportunities to economically disadvantaged artisans and farmers worldwide.”  (FTF, 2002h)
• Who is our customer?
primary customer: the person whose life is changed through your work.
supporting customers: volunteers, partners, donors, and others you must satisfy.
• What does the customer value?
Food, Shelter, Education, Opportunity
• What are our results?
 Fragmented pockets of success
• What is our plan?
Develop member organizations, advocate, and facilitate producers

Board Oversight of Nonprofit Enterprise:
R. Herzlinger’s essay “Effective Oversight: A Guide for Nonprofit Directors” shows that the nonprofit board “must assume the role that owners and the market play in business.” (Herzlinger, 1994, p. 5)  To paraphrase: They must develop measurements and controls by asking key questions to develop a framework for their oversight efforts: 1. Are the goals consistent with finances?  2 Is the organization practicing intergenerational equity?  3. Are sources of funds appropriately matched with uses of those funds? 4. Is the organization sustainable?  They must note that a high asset turnover ration (sales$/asset$) indicates high reinvestment into the community.  Liquidity ration (assets/liabilities) must be interpreted in the context of other organizations in the same field.  They must know the average turnover ration for the industry. (Herzlinger, 1994)
If they calculated all the volunteer hours that Fair Trade Organizations put in to develop third world business, such ratios would probably be distressing.  So much time is devoted to carrying the message.  However, since Fair Trade is innately tied to the success of the mission, it is a viable business plan for the nonprofit. 
Herzlinger’s Intergenerational Equity can be determined by use of inflation adjusted balance sheets ((Herzlinger, 1994, p.9) and should be equal year-over-year.  Profits should permit replacement of net assets, as an allowance to depleted capital.  Match fixed expenses with fixed revenue streams, ideally.  Diversify project portfolio.  Background of directors should include management, familiarity with the industry, and a track record of mentoring and developing.  Such directors “are less likely to cross the line from oversight to over-management”.   The board should be 8-12 members regardless of size of the organization.  Board members should be able to serve on four crucial committees: planning (creative visionaries, original thinkers) compensation (HR managers that monitor what the public might think regarding executive salaries), auditing (detail oriented financial executives), and regulatory compliance (those who can explain procedures and review compliance with the audit).   Auditing committee members then explain how financial statements answer the four questions proposed earlier.  The art is to overlap jobs in the board, but still allow checks and balances by including regular staff of the organization to help board members fill the purpose of the committee.  Boards of small or entrepreneurial nonprofits should meet more often than larger ones.  Organizations in a crisis should meet more often than stable ones.  A good starting point is 3-7 meetings per year.  (Herzlinger, 1994)
 
Chapter 5 – Fair Trade Federation Member Organizations:
Sobornost for the World Foundation:
Sobornost is a group that includes Fair Trade in its larger mission.  Their vision statement promotes justice, love and peace, awareness of exploitation in developing countries, extend aid to impoverished orphans and families, beginning in Sub-Saharan Africa.  Their mission is, as a nonprofit tax exempt organization, to increase social awareness of developing nations by establishing programs for orphans, promoting fair trade crafts, fundraising projects, foster dignity, solidarity and subsidiarity toward developing nations through information, advocacy, monetary aid, fair trade, and work for peace, justice and equality for people of developing nations by becoming a bridge for these nations, cultivating projects that enhance communication, trade and friendship.  (Sobornost, 2005d)
Since many Africans do not finish primary school, Sobornost’s Kenya and Zambia missions fund primary and continuing education, directed at developing students’ decision making skills, and other “empowering knowledge”.  They supply books, uniforms, and supportive counseling.  They require community service on the part of the students, commensurate with their ages, in order to continue education.  Additionally, continuing education tries to develop skills to increase economic self-support.  (Sobornost, 2005b, 2005c)
 Additionally, Sobornost funds food rations and purchases used clothing for orphan family relief, a blanket fund, housing fund to assign housing so families can stay together, and a starter loan fund with the goal of creating income generating activity.  The goal is create a stable home environment with enough disposable income left over to meet household needs.  (Sobornost, 2005b, 2005c).
The vision is minimal because the need is so large.  With drought and locust infestations, the problems have grown to the worst in decades.  In their FAQs page, Sobornost points out that with more than 12,000 children under the age of five dying per day, and over 12 million Aids orphans, and no universal primary education, the task is daunting.  (Sobornost, 2005a) Major donors supplement fair trade income to a point where they help 100 orphans in Kenya, but how does this multi-faceted strategy play out in the future?   A teacher training fund helps teachers achieve certification, and in return expects 2 years of service in the Kenyan community.  A major problem is the availability of anti-malarial and HIV drugs.  (Sobornost, 2005b) 

SERRV International:
Other organizations, such as SERRV International, indicate similar findings.  According to SERRV International, 33% of all Africans suffer from malnutrition, while 50% in the Sub-Sahara region live on less than $1 a day.  Less than 50% have access to medical care, and the average lifespan is 41 years.  1 in 6 die before the age of 5.  24.5 million Sub-Saharans have HIV or Aids.  SERRV provides development assistance through community based organizations, and was an early starter in the Fair Trade movement with a history going back to 1949.  (SERRV, 2005)

Catholic relief services Coffee Project
Perhaps one goal could be to have membership from many religions help develop multi-faceted fund development approaches in such organizations.
Catholic Relief Services’ Coffee Project partners with other religions through interfaith liaisons from an organization called Equal Exchange to “cultivate market linkages to Fair Trade importers in the United States.  (Catholic Relief Services, 2005)

Organic Consumers Association (OCA)
The Organic Consumers Association (OCA) is a major advocate for Fair Trade.  Their mission, on every web page banner is “Campaigning for Food Safety, Organic Agriculture, Fair Trade, and Sustainability.”  Certified Fair Trade Products are promoted because of their quality - as a result of farmers not being able to afford pesticides, their foods are organic.  OCA’s advocacy caused Starbucks 2003 Fair Trade turnaround (Organic Consumers Association, 2005a).  (See discussion on this in the following section of this report).

For Profit Corporations Selling Fair Trade Products:
The bottom line goal of FTF organizations is to benefit artisans, not shareholders.  They limit trade to democratic co-ops, encouraging employee health benefits, child care, access to loans, etc.  Encourage reinvestment in the producer communities, by the producers themselves, often by example (such as with nonprofit Sobornost).  Shift/push down processing and packaging to the developing world, in effect helping them move upstream in the production chain (Fair Trade Federation, 2005).  This is diametrically opposite to the thesis in Guns, Germs and Steel.
However, some “for-profit” chains have apparently included Fair Trade items in the lines of goods:
o Target stores has launched four fair trade coffee blends in 1,350 stores. (Organic Consumers Association, 2005c)
o In one OCA article, the Starbucks shareholders meeting in Seattle held in March of 2003 had activists protesting outside and was deluged with emails, faxes and phone calls, urging CEO Orin Smith and Starbucks shareholders to stop using cattle with bovine growth hormones to provide dairy, and also claimed the use of slave labor, although a country was not specifically named in the article.  (Organic Consumers Association, 2005a)

Other Fair Trade Promoters:
Trade justice is just one part of the “Global Call to Action against Poverty”.  The “One” campaign includes debt cancellation, major increases in the quantity and quality of aid, and national efforts to eliminate poverty and achieve the millennium development goals.   “One: The Campaign to Make Poverty History” promotes clean government and democracy. (ONE, 2005)  For example, they promote the work of other organizations such as Oxfam International (a conglomeration of aid organizations).  In Malawi, Oxfam aids parents inspecting schools to ensure textbooks paid for by international assistance actually arrive in the hands of students. (Oxfam International Press Release, 2005)
 Mothers Creation’s charity chic beads are being considered accessories by celebrity clothing lines and other businesses. (Cooper, 2005) There is also a “Made in Africa” (MIA) label for undergarment manufacturer Butta.  (MIA, 2005)
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Conclusion:
In 1986 the US Catholic Bishops put out a statement to say that corporations do not have a moral right to horde excess goods. (U.S. Catholic Bishops, 1986)   Humanity must be just.  Fair Trade addresses this as a union that fills the void traditional unions, governments and global business have created. 
There is unnecessary prejudice and ignorance about the root causes of the imbalance in trade with third world countries, and the suffering of their impoverished producers.  Education is paramount.
There are non-governmental organizations (NGOs) that are trying a “leaner” approach.   Member organizations like Sobornost are making a difference by requiring an organic approach that incorporates local skilled labor.  The long term impact should be a sense of community “ownership” and the growth of healthy economic competition in services and Fair Trade goods.  This could be called “Fair Trade Competition”. 
The Fair Trade Federation’s past and future involve progressively increasing influence and outreach.  Over seven years they have achieved a tremendous grass roots movement.  Fair Trade now advocates, helps develop producers via loans and information services, educates buyers as to the value and availability of goods, and helps develop members’ marketing and other support. 
Over the next seven years this trend will likely continue, but our friends in the mission community point out that there are possible roadblocks with regard to Free Trade movements.  The Central American Free Trade Agreement (CAFTA) may present a major challenge to Fair Trade.  It is important that Fair Traders deal with “Free Trade” groups in as businesslike a way possible without betraying their mission.  The challenge is to encourage freedom of consumer choice in the free market while at the same time advocating debt forgiveness and advertising “humanity’s selling points” as a competitive advantage over labels that promote “unfair trade”.  Hopefully, separating the debt-forgiveness aspect of Fair Trade advocacy will not need to be done in order to save the movement from Free Trade pressures.
As for producer benefits, the organization seems to be on track to outpace decreasing external government aid in a “coming of age” by 2012.   New goals can then be set to match the developed world in internal competition, employee benefits, communications infrastructure, employer health care and retirement in producer communities.  It would be worth checking in on this movement in seven years, to estimate how long that will take.  In my opinion, it will likely be in our lifetime.