How the changing market environment affects trade fairs and how Fair Trade can be part of the response
A transcript of Nicolette Naumann’ address at the WFTO Conference 2017, New Delhi, India
Ladies and gentlemen,
Firstly, I would like to express my sincere gratitude for inviting me here today to talk to you. It also gives me the opportunity of breaking out of my daily routine, to take a look at the big picture, something that is always intrinsic, but often ignored.
What effect do the continuously changing market conditions have on the trade fair situation and how could Fair Trade be an answer? This subject, in the case of the Frankfurt Messe, is a wide open field. After all, we as organisers have hosted 417 events alone in 2016. Of those, 134 were trade fairs in around 50 different locations around the globe. Without doubt, we are active in every geographical market that has a presentational relevance in world trade. Over and above this, we have a very wide portfolio of trade markets – from automotive to textiles, from music to lighting, from cosmetics to consumer goods.
As market leaders, we reflect global trade, which means that every change affects us.
Fortunately, in the first instance, the big picture is limited by the focus on those markets for which trade standards have been developed. Let us narrow down that picture still further to those sectors in which my experience lies as vice-president of the world’s largest consumer goods fair.
Under the umbrella of the Ambiente, we present around 5,700 exhibitors in four locations – in Frankfurt, Tokyo, Shanghai and New Delhi – with products from the sectors of dining culture, kitchen and household goods, gifts, jewellery, fashion as well as decor, home concepts and furnishing accessories. With this range we draw in more than 200,000 specialist visitors annually.
In this endeavour the World Fair Trade Organisation has been an important partner for many years, as exhibitor, as jury member and simply as a partner for strategic exchange.
An intimacy with organisations like yours is, for me, of personal concern. The Fair Trade Standard accords with my ideas of justice, solidarity and human dignity. It addresses my basic values, that all people, independent of their origins, their gender or their beliefs are equal and every child, wherever it is born, should have a fair chance in life.
However, at this juncture I want to impart my first message to you: don’t rely on my sympathy. Don’t rely on sympathy as a matter of principle.
Because, before we can turn to the question of how the global market is changing, we have to recognise the fact that one thing will not change: The global economy, of which all of us, including Fair Trade, are a part, will allow humanitarian parameters only in so far as they do not get in the way of the main goal, which is to make a profit. Any sympathy will only be extended as far as it doesn’t encroach on one’s own living standards.
The only solution to this dilemma and at the same time the only possibility of achieving your great humanitarian goals is to tie it in to your own profitability. That is, if producers are able to buy the products they themselves manufacture. As a result of the insurmountable economic separation of the global south from the north, this scenario lies in the distant future. They won’t simply be handed this privilege; they will have to struggle for it.
The good news is that there are changes happening in the market that are supporting them in seeking independence. And the more you, dear listener, gain relevance at the other end of the market, the more clearly public welfare, democracy and transparency will become key figures for economic success.
But let me start by explaining our work as a trade fair organiser.
By definition, a trade fair is a recurring event, at which the essential products of one or more sectors of the economy are exhibited.
Essential product range. That means a range of crucial importance. But what do we mean exactly by “crucial importance”?
For us at Messe Frankfurt, these are the products that are particularly in demand by consumers. They are products from manufacturers, whose market share is clear. However, there are also goods and companies that are particularly innovative and in this sense forward-looking.
As a trade fair we are more dedicated to the future than the past, not only because our visitors make purchases there that they may perhaps not sell on until the following year – we hope successfully – but also because it is our specific job to envisage future movements in those markets where we are active. Our success depends on that and it is what our exhibitors expect of us. It’s our job to recognise growth markets and to reflect them.
In addition, a trade fair is a platform for exchange and inspiration. Brought together in one location, it shows the trends in the world’s most important consumer spots. Even more than that, it places products and trends in relation to each other. For our exhibitors and visitors, the visit to Ambiente offers an annual market comparison. If visitors see a lot of red products, for example, they will consider the colour red to be the trend colour of the year. If we present them with a greater range of leather goods than in the previous year, they will assume that leather goods are a growth market. If we mark out all the exhibitors who offer Fair Trade goods and if this number takes on a noticeable size, our visitors will go home and consider Fair Trade to be something, they should be thinking about.
In this sense we are including topics like Fair Trade today in the following way.
At the Ambiente in Frankfurt in 2016 we launched the Ethical Style Guide. It’s a directory of all exhibitors who stand out especially in the fields of eco-friendly materials, resource-conserving production methods, fair and social production, recycling and up-cycling design, craftsmanship and sustainable innovations. In the 2017 Ethical Style Guide we presented over 220 sustainably manufacturing exhibitors.
The selection of exhibitors was made with the help of a jury. Which included experts in the field like Rudi Dalvai, President of the World Fair Trade Organization and Kees Bronk as a representative of the CBI (Centre for the Promotion of Imports from Developing Countries).
Our Ethical Fashion Show takes place twice a year, in Berlin. As a leading event for green fashion, it offers sustainably manufacturing vendors an authentic and established presentational platform and covers a very wide spectrum within the sustainable fashion sector. A prerequisite for inclusion is the use of certified organic materials, a socially responsible mode of production – for example in accordance with Fair Trade guidelines – the use of recycled materials, as well as support for outstanding projects and the promotion of traditional textile crafts. There is no comparable green fashion fair with this diversity and of this size in Europe – the Ethical Fashion Show was able to boast 140 exhibitors in 2017. An extensive seminar programme and the Knowledge Lounge with experts in sustainable fashion round off the programme. For example, with the new conference format FashionSustain, where, in 2018, the information on offer in the field of Future of Textiles and Sustainability will be expanded.
With more than 50 events worldwide, including in France, the USA, India and China, the Messe Frankfurt covers the entire textile value-added chain and is the market leader in the organisation of events for the textile industry.
As the leading trade fair, Heimtextil is in the forefront. Here too, sustainability is palpable. In the Green Village eco-certifiers and Fair Trade experts meet interested trade fair visitors. In the “Green Directory”, the directory of all providers of sustainably produced textiles, visitors will find ready and easy access to the corresponding exhibitors.
In this way we establish first contact between the producers and our visitors. In that way they have their proverbial foot in the door. That’s a wonderful starting point for them as exhibitors. But what follows next?
Let us take a brief look at the objectives of the different actors in the market, the product range with you as a representative, and the demand – that is, the retail trade and behind that, the consumer.
Dear listener, your main goal is to raise the quality of life for workers and farmers to a decent and humane level, through fair processes of production and purchasing practices. You do that by offering Fair Trade goods on the world market.
The aim of the retail trade – i.e. department stores, owner-managed retailers, online shops and supermarkets – is to offer products that are desired by the customer. And yes, your story has made it onto the list of consumer thrills. The Fair Trade trend is the gateway onto the retailer’s shelves.
But, as soon as they have made it there, the same demands are made of them as for any other product. Quality, attractiveness and price still remain top of the list. So their success will depend substantially on how competitive your products are in these fields. You need to be an expert for your product.
What is the consumers goal? At the moment the number of critical consumers is growing fast. The customer is interested in the circumstances under which their goods are produced. They are looking for a connection between the origins of the items they acquire and their objects of daily use. Fair Trade shortens the link between consumers and producers, provides transparency and promises an ecological chain of production. This clientele is mostly, perhaps even entirely, on the other side of the world, not only geographically but also socially.
The mere feasibility for the consumer to be able to buy Fair Trade products, marks them out as privileged. There is a certain wealth required in order to be in a position to make that choice. And that choice is necessary in order to understand yourself as a consumer. So the decision to buy Fair Trade is a choice of the lesser evil; from a position of privilege to attempt to introduce a little justice. Economic behaviour thus evolves into social behaviour. However, it remains a trade in indulgences.
Fair Trade is an attempt on the part of the consumer to do the right thing in a wrong situation.
Because you, dear listeners, are, in this way, dependent on a consumer whose wealth is built on the shoulders of poverty. Only when the manufacturer can afford the same products as the consumers at the other end of the world, can we talk of genuine fairness. But we won’t be able to achieve this state of affairs as long as they remain in the role of the invisible poor and thus legitimise the privileged customers to remain in their role.
It is about breaking down this moralistic trickle-down effect, whereby the Western consumer passes on a piece of his wealth, in the form of consumption. The aim must be that they prefer your goods, because they are – in every respect – the better offer. Here too we are moving closer to the requirements of classical trade. Quality, appearance and price. By the way, marketing experts say that you need to be competitive in at least two of these three criteria for a product to become successful. Many Fair Trade products that I know of, meet these criteria more than fully, since they are exquisitely handcrafted and made from carefully selected materials. But unfortunately I sometimes feel that these qualities get lost because the Fair Trade message outshines them.
Let me put it like this:
Do not rely on the compassion of the consumers. Rely on your skills. The social aspect may be the reason why customers all over the world are buying your product. Your skills, your knowledge, as a result of your intensive everyday work with your raw materials, their originality, as a result of the connection between your work and your culture are the reasons why they buy them time and again.
Producers, retailers and consumers: Trade fairs not only reflect the markets, but also actively look for them. Of our annual 134 trade fairs worldwide, only 50 are held in our home market of Germany. A focus of our overseas business focuses on Asia with 45 events a year, of which 26 take place in China alone. We have eight subsidiaries there with 488 employees. By the way, we employ more than 2,300 employees all in all. Another attractive region for us as a trade fair is the economic market of India and Africa. Only recently, Messe Frankfurt acquired South Africa’s largest trade fair for textiles, shoes and clothing: the ATF and the Source Africa. South America is also an important and growing market for us. For example, we are the market leader in Argentina, with eight events.
From Europe to the United States, Japan and China, South America and India and most recently on the African continent – as a mirror of world trade, we are active in those geographical markets where we assume the largest growth will come. With China, India and South Africa we are moving to countries and continents, which for decades served as an extended workbench for the West. Today, we are turning them into the best new hope for sales and export markets. In the case of China, you can see how quickly such hopes can turn into relevant global entities.
It is interesting to note that our trade fairs abroad are clearly domestic trade fairs. Whereas in Frankfurt more than half of our visitors come from abroad – from 150 countries, our consumer goods fairs in China, India and Japan have their main relevance for the internal market. We see a mere 3 percent coming from abroad. Why is that interesting?
With a growth of the internal market the profitable end of the value chain for a product remains within the country. This leads to a higher gross domestic product, a growing independence and in the end a new self-confidence. Today, we can observe this process superbly in China.
In India, however, you can see the discrepancy between the potential that without a doubt is slumbering within the economy, and the current situation in the country. The vast majority of India’s population lives in rural farming structures and remains economically disadvantaged. 50 percent of the population is employed in agriculture, which doesn’t even account for 20 percent of the overall economy. Nine out of ten workers are in the informal sector, protected neither against illness or accidents at work, nor are they entitled to social benefits or pensions. According to government figures, a mere 5 percent of all the people available to the labour market have professional qualifications. On the other hand the country has, globally, the largest number of millionaires and billionaires living there.
At the latest, since a study was undertaken by the International Monetary Fund in 2015, we know that the growing wealth of top earners slows economic growth, while higher wages for the low earners has positive effects on the whole of society.
The fight against poverty, as well as development of education and infrastructure are three major tasks that the Indian government must tackle, in order to do justice to the potential of the country. Labour-intensive industries, particularly, need to be the focus, in order to be able to create many jobs quickly.
There is a hope that opportunities will come through public-private partnerships, the connection between state welfare contracts and a private-sector commitment on the basis of the principle of maximisation. The interconnectedness between market economic forces and social policy regulation is a thoroughly acceptable practice that is used in situations where it is deemed that the state alone is not able to accomplish its task. There is, of course, a risk of treating the market preferentially vis a vis the state. The Fair Trade movement also interlinks two dominant regulatory structures: that of the common good and that of world trade. It demonstrates at a micro-level how something like that can be positive, by integrating marginalised populations, the linking of work-intensive industries with the building of infrastructures in rural areas, as well as educational programmes and, finally, to the introduction of new technologies and models of thinking. Fair Trade has, in many ways, anticipated the exploration of economic deficiencies, that have now come to the fore as economic and political shortcomings in India, to give just one example.
Companies and governments alike must learn that economic success in the future will only be quantifiable by using key performance indicators like public welfare and innovation. Fair Trade shows that this is not only possible but that it is also desired by citizens as well as consumers. It takes on the role of a beacon. It shows in practice that social and ecological exploitation are not “natural” or inevitable side effects of globalisation and that companies can take responsibility for this, and expose as a poor excuse the default reaction of many companies.
The question however is a different one:
How much can Fair Trade spread, before it reaches the limits of its standards? How many concessions can be made to industry and trade in this respect? Will Fair Trade ever be in a position to play a greater role on the stage of world trade than as a best practice example?
At what point can the struggle for better living conditions for producers no longer legitimise a growing dependence on mainstream markets? And at what moment does the challenger of unjust global trade relations join the ranks of its opponents?
I recognise a trend among my exhibitors and those of my colleagues. Many brands use the stories of their suppliers for promotional purposes. They show films about their manufacturing processes, promote the uniqueness of their materials and their procurement or simply refer to certain manufacturers or regions. They do that, because they represent good quality. They also do that to fulfil the wishes of the consumer, to peek behind the scenes of the manufacturing of their goods. But above all, they do this to breathe new soul into their increasingly interchangeable products.
That’s not really new. The reputation of producers has always been used for promotional purposes: Scottish wool, Venetian glass and Carrara marble. What is new is that after more than 30 years, in which the value-creating chains became spread all around the globe and the supplier lists were kept secret to prevent counterfeiting and supply problems, that tradition is now being rediscovered. Now, no longer simply regional, but global. Embroidery from India, dyeing techniques from Tanzania, wood from Eastern European forests, wool from Peru and the manufacturing plant in China. More than that, the good reputations of large factories ensures a new distribution of power within which the Western contractor needs to secure capacity, especially when the export portion of the output is reduced in favour of the rising domestic market. Even worse, when that in itself becomes a brand.
This trend has not only external impact, but also internally, because it requires the commitment to a manufacturer and a negotiating on equal footing between the two. The supplier becomes a partner and dependencies arise in both directions. Additionally, neo-liberal assertions of knowledge and the dominance of know-how in the global North are destabilised.
As a global trade initiative, Fair Trade has become a beacon of hope in terms of strengthening domestic markets and in the fight against poverty and the creation of infrastructures, especially in emerging markets. It serves as best practice and as a counterweight to the global connectedness as expressed by western leaders and serves as an empowerment of the silent majority of wage workers and peasants. Due to the changing situation on the world market it will, in future, have to grow beyond this role, and ensure that it is not exploited as a mere extension of the European workbench. Fair Trade cooperatives have the opportunity, and are seizing it, to be perceived as equal partners.
The regulations, power relations and speed of the global market is a great challenge for the individual, even for those in privileged positions. Undoubtedly, for those without privileges, it is insurmountable if they have no strong partner. Fair Trade creates a protected space. As does a trade fair. In terms of its historical significance alone.
To explain this, let me delve briefly into the history of Messe Frankfurt.
The history of Messe Frankfurt is almost as old as the trade fair business itself. Already during the 11th century the first trade fair would take place in the autumn in Frankfurt, where peasants sold their harvest surpluses, while in the spring, crafted products that had been made during the winter were sold.
To this day, these two dates are engraved on the international trade fair calendar. The first multilateral trade relations emerged with the discovery of America and of the passage to India during the 16th century, with the subsequent internationalisation of these events.
Today every trade fair exudes a unique atmosphere, because countless cultures meet each other there, large corporations exhibit next to small cooperatives, all of them have taken a more or less arduous journey upon themselves in order to spend these days together. And regardless of how great the distance between their home towns may be, what connects them is this place, the same objective: trade. And with the goal of encouraging the greatest possible freedom of trade, the 14th century saw the establishment of an extraordinary legal framework. The trade fair jurisdiction regulations allowed any citizens, non-citizens and foreign guests to trade, and local residents to accommodate guests. Additionally all trade fair visitors enjoyed legal protection, and thus could not be taken to court for ongoing proceedings during the trade fair.
We no longer have this jurisdiction, but more than ever, our trade fairs are a reflection of all cultures of this earth. Two-thirds of our visitors in Frankfurt come from abroad, as well as at least half of our exhibitors. We offer facilities for the practice of any religion and, yes indeed, our fairs have even brought forth marriages and children.
In short, the fair is in many respects a closed cosmos, in which everyone is equal, regardless of skin colour, religion or origin and many cultures and nations which in the outside world may be at war with one another, peacefully coexist here, sharing the same power supply.
Trade fairs break boundaries, create networks and partnerships and create their own form of common understanding. Trade fairs connect. The fact that a company exhibits here, implies professionalism, reliability and resilience. We have become a trademark.
The same can be said for Fair Trade, for its producers and cooperatives on the one hand, and for the certified companies on the other. It has a reputation for social justice, but also for the strength of community, for quality and professionalism in sectors which are still often disorganised, such as agriculture and handicraft in the countries of the global South.
However, a platform is only ever as strong as its community. And this makes demands on its participants and members.
Of course anyone is allowed to hire a stand at our trade fairs. But they must also pay the corresponding price. That buys them a presence at the fair, but their visibility stands or falls with the attractiveness of the stand. Success, however, rarely comes overnight: continuity and endurance are needed, sometimes over several years. The trade fair is a platform for entrepreneurial success, not the event itself. A desire to be stronger!
Fair Trade, over the past years has had to put in a massive amount of work in order to build up its standards, its networks and its structures, as, for example, the auditing.
Still more countries and regions are joining, we can build on ever more experiences with the trade fair ….and thus achieve better results for the peasants and workers, as well as the buyers. Fair Trade organisations have in this way also been able to create an inner sanctum within the world trade set-up to the benefit of disadvantaged members of the value-creating chains. This inner sanctum gives leverage to certain market mechanisms, while it retains others. So that we, at the fair, can seemingly stop time for several days for our exhibitors. But as soon as the trade fair days are over, the clock carries on ticking. Fair Trade, too, makes demands of its members. Fair Trade, too, cannot guarantee you success, as long as you don’t take on the lion’s share of the work. Fair Trade is a means, not the end in itself. Just as Fair Trade does not mean that these outdated mechanisms are no longer being used.
Fair Trade is the beginning of a road to more justice and success, and in this protected space it has, in all probability, achieved one of the greatest humanitarian steps of recent decades, and rescued millions of people from poverty.
Ladies and gentlemen, you have reached the moment in which people and consumers in the whole world are asking for fairly traded goods. They want fair chocolate, fair coffee, fair fashion and fair telephones. Fair itself has become a brand. My congratulations, that is your effort and your achievement!
With this visibility your statement will be heard ever more clearly. You define what Fair Trade means.
Fair means paying producers a fair price for their products and their work, from which they can lead a dignified life and on which they can build a future perspective for themselves and their children. I ask you, perhaps somewhat provocatively: is that it then? Hasn’t fair today moved on?
Surely your price is fair on the basis of its above-average quality and the raw materials produced according to your standards? And don’t we pay this price because we also know that such quality will be increasingly more difficult to find in the conventional sphere? Won’t Fair Trade at the same time rescue the quality of all labour-intensive manufacturing sectors from a quality decline? And doesn’t Fair Trade ensure the maintenance of culturally important craftsmanship in almost all regions of the world and ensure its continuation? Is Fair Trade itself not a celebration of craftsmanship? Is it not therefore about time that Fair Trade products are no longer bought out of a blind sympathy with an otherwise invisible group of marginalised people, as an indulgence, as penance for the otherwise strict global demarcation between classes? Isn’t it also about time that a real coexistence between cultures was established in which independence is accepted by everyone and its relevance in the world is recognised; with all the accompanying rights and duties? As a counter move it is also the duty of all marginalised cultures to no longer submit to oppression, to develop a self-confidence and to fully enjoy the full scope of their own trade. Don’t accept alms anymore, don’t let things be taken from you. Make sure your brilliance and quality is paid fairly.
Craftsmen and women, workers and farmers can be proud of what they are, regardless of their financial situation. They account for the largest proportion of humanity. The world economy would collapse without their work, and the wealth of the Western world itself would collapse like a house of cards.
