Fair Trade is an alternative approach to conventional trade and is based on a partnership between producers and consumers.
With the advent of the globalisation of trade and the concentrated power of corporations with large market share, the various benefits of trade have not been equitably shared. In recent decades, the benefits of trade have tended to become skewed in favour of the rich and powerful, and to the detriment of farmers and workers at the start of supply chains, especially those located in the global south.
When a product carries a Fair Trade certified mark it means the producers and traders have met Fair Trade standards as stipulated by the certifying body. While the handful of leading certifying organisations all set different standards, they all ensure that when farmers sell on Fair Trade terms, they receive a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. By buying Fair Trade certified products in the course of their day to day shopping, consumers support a system designed to pay producers a fair price.
There are five core principles of fair trade, as set out by the World Fair Trade Organization and Fairtrade Labelling Organizations International. These principles are key to Fair Trade’s developmental objectives. They are as follows:
- Market access for marginalised producers - ensuring no producers are excluded from the mainstream
- Sustainable and equitable trading relationships - The economic basis of transactions within Fair Trade relationships takes account of all costs of production, both direct and indirect, including the safeguarding of natural resources and meeting future investment needs
- Capacity building & empowerment - assisting producer organisations to understand more about market conditions and trends and to develop knowledge, skills and resources
- Consumer awareness raising & advocacy - connecting producers with consumers and for informing consumers of the need for social justice and the opportunities for change
- Fair Trade as a “social contract” - commitment to a long-term trading partnership with producers based on dialogue, transparency and respect
More information on these principles, and about Fair Trade can be found in the Charter of Fair Trade Principles.
In 1988, the first Fair Trade label, Max Havelaar, was launched by Dutch development agency Solidaridad and saw Fair Trade coffee from Mexico sold into Dutch supermarkets. Ever since, Fair Trade standards have evolved and been developed to address the imbalance of power in trading relationships. It also has come gradually to include some broader ethical concepts, such as fair remuneration, fair working conditions and adherence to basic sanitary and safety norms.
Traidcraft has suggested that Fair Trade differs from standard trade because it:
- focuses on trading with poor and marginalised producer groups, generally in the developing world, helping them to develop skills and sustainable livelihoods through a trading relationship
- pays fair prices that cover the full cost of production and facilitates a living wage, allowing producers to move beyond sustenance farming and enabling farmers the possibility of investing into their businesses
- provides financial benefits such as prepayment or credit when needed to allow orders to be fulfilled and payment of premiums to be used to provide further benefits to producer communities
- encourages the fair treatment of all workers, ensuring good conditions in the workplace and throughout the supply chain
- aims to build up long-term relationships, rather than looking for short-term commercial advantage
Fair Trade certification is available for a range of products. The Fairtrade International website now lists 17: bananas, cocoa, coffee, cotton, flowers, sugar, tea, composite products (e.g. products made from more than one ingredient such as a chocolate bar made from cocoa, cocoa butter, sugar, etc.), carbon credits, fresh fruit, gold, honey, juices, rice, spices and herbs, sports balls, and wine.
This question seeks to ascertain business support for these goods and, in addition, how Fair Trade principles may be promoted in general, beyond markets for these 17 product types alone.
Fair Trade is not without its critiques. Some argue, for example:
- the smallest producers are unable to benefit from Fair Trade as only larger organisations can bear the costs of certification and carrying the label
- Fair Trade certification bodies are unable to always ensure full compliance with their standards
- retailers may mark up prices on Fair Trade certified products beyond any genuine additional costs without sharing the proceeds of such 'premium' prices with producers
- using Fair Trade products from developing nations may conflict with other beneficial practices such as sourcing locally or taking environmental performance into consideration
- some companies continue with “business as usual” while dipping their toe in the Fair Trade water, i.e. they cloak themselves with the ethical mantle of “being a Fair Trade business” despite the Fair Trade certified options they offer only constituting a tiny fraction of their entire product ranges
Despite such criticisms, the Fair Trade movement has gained wide acceptance, encompassing many NGOs and development agencies, and high levels of consumer recognition, in many countries around the world.
The success of the Fairtrade Mark and other Fair Trade certifications has led to a wider acceptance of the value and importance of Fair Trade in business. Arguably, Fair Trade is much more than an alternative form of trade given, e.g., the principles and standards of international certification marks are increasingly recognised to be a useful way to deal with many operational risks, particularly down the supply chain. As a result, by initiating an open dialogue with suppliers and working more closely with producers, possibly in collaboration with NGOs and civil society organisations, businesses can align the promotion of Fair Trade principles with their pursuit of sustainability goals and compliance targets.