Skip to content →

What is fair trade?

Over the past decade, a growing number of shoppers have elected to spend a premium for items labelled as fair trade.

They do so in the expectation that the premium they have paid will help to alleviate poverty brought on by inequitable trade practices between the developing and developed worlds, as there are numerous examples of organisations sourcing materials cheaply in order to maintain and increase profit margins.

There is absolutely nothing wrong with this practise, i.e making healthy profit margins, as that is what business is about. The issue arises when the amount paid for the materials sourced is much lower than it should be because the suppliers of the materials are being taken advantage of.

Definition of fair trade

Fair trade is the practise of paying a fair price to the producers of a product. It is practised between companies in developed and producers in developing countries.

A fair trade certification tells the customer that a product has been made in ways that adhere to fair trade requirements and the producers have been compensated at a fair price.

Customers depend on third-party organisations to evaluate how a product is brought to the marketplace and give it the fair trade stamp of approval.

Certification

Fair trade certification is used to by companies to claim a product has meet the required labour, environmental and developmental standards.

Here are some of the standards looked at in determining the approval of a fair trade certificate

  • Payment of fair rates and credit terms
  • Good working conditions
  • Assistance for community development
  • Non-discrimination policies
  • Environmental sustainability

Pricing

An essential component of fair trade arrangements is a system where a buying organisation will set a guaranteed minimum price for a product. If the market price is greater, the producer will be paid at the market price. An extra premium will also be offered for normal products.

In several cases, the definition of the fair price is defined through the producers themselves from the context of their particular local communities.

Producers will also be offered credit on favourable terms for instance pre-payment for a portion of expected sales of the items.

Emphasis is placed on generating self-sufficiency throughout regions where towns have traditionally already been marginalised.

Producers really should invest their earnings in initiatives that will benefit their local communities for instance schools, health centres and scholarships.

Producers often form cooperatives or other democratically structured corporations to pool resources and figure out ways to invest the rewards from your additional sales and premiums which they earn.

Labour

Providers of items are prohibited from discriminating in hiring according to gender, race, religious beliefs, union affiliation, political views, health rank, or age.

It really is understood that many cultures might recognise attitudes that potential buyers in developed places consider discriminatory.

The challenge for fair trade advocates is to find ways in order to overcome discrimination without becoming perceived as paternalistic toward the area culture.

By us buying fair trade products we are guaranteed that the disadvantaged farmers and workers who would ordinarily be trapped in a cycle of poverty since they would not get sufficient payment for the goods they make, now not only get paid a fair price, but can also get themselves out of poverty.

Companies like The Body Shop believe in fair trade and you can often see the fair trade logo displayed in the shop and on products.

There are other companies such as those who provide supplements like a top whey protein isolate who may not participate in fair trade as the label is not on their products.

Having said this, there may also be some organisations that like to quietly participate in fair trade without making it part of their marketing campaign.

Published in Uncategorized