What Is Fair Trade?

The fair trade movement originated as people recognized that small scale farmers and producers from poor countries are at a disadvantage in a free market system. If the farmer's government is weak or corrupt, they are even more disadvantaged in the face of globalization and free trade agreements.  Fair trade is a way that farmers can receive a fairer share of the profits from their goods and labor.


 What is a fairly traded product?  When a retailer or manufacturer says their product is fairly or ethically traded, they are telling you the farmer is being paid a fair premium, a liveable income for that region.  Fair trade enthusiasts believe that by improving family incomes, they are addressing poverty and some of the social problems that result from poverty, such as forced labor. Therefore the retailer or manufacturer is often implying that by buying that product you are helping to alleviate those problems also. 


When a product carries a fairly traded seal from one of several third party certification systems, then a consumer can be reasonably sure that the producer and manufacturer have met that third party system's standards.  Those standards would include fair wages, prohibition of child trafficking, sustainable farming practices, education for children, etc.  A fair trade seal can give you some assurance that farmers in struggling regions are not being exploited.


In the column to the left, you will find marks or seals used by the four common third party certification systems in our area for food products.  By clicking on the images, you can find out more about each system including its standards.


In the food industry, fair trade is a system in which buyers voluntarily pay a higher, fairer premium for goods sold by disadvantaged farmers of primarily tropical produce.  These goods cannot be grown in the US or are not grown in sufficient quantities here to meet our demand.  For example, cocoa used to make chocolate only grows near the equator.  Coffee, tea, cocoa, some spices, tropical fruit, nuts, oils, etc. were for many decades produced by slaves which enabled corporations to reduce costs and enabled consumers to obtain goods at unrealistically low prices.  Although on an official level, slavery has been abolished, most food corporations never abandoned the practice of taking advantage of cheap farm labor in developing countries which is part of the legacy of colonialism in the global south.  Fair trade systems involve paying a premium that reflects the value of the food and labor rather than a price that reflects the power imbalance.


Consumers who are committed to buying fair trade products are willing to pay a bit more for their coffee, tea, chocolate, fruit, etc because they don't want to benefit unfairly from laborers who, out of desperation, are forced to accept low compensation. Fair trade consumers want to participate in fair exchange.  Fair trade consumers also believe that by selecting fair trade products they are encouraging more companies to buy fair trade ingredients.  As the fair trade movement grows, more farmers are able to lift their communities out of poverty.


Why are we hearing so much about fair trade now?  Publicity regarding the prevalence of forced child labor on cocoa farms has contributed to a surge in interest in fair trade certification. West Africa has produced 70% of the cocoa beans used to make the world's chocolate..  As people become more knowledgeable, they realize that the legacy of colonialism and poverty has led to choices that we can barely comprehend.  Parents indenturing their children to traffickers.  Farmers who must put their own children to work under dangerous and harsh conditions in order to survive.  When farmers are paid appropriately for their cocoa, they can afford to hire adult workers and the dependence on forced child labor disappears.  When families earn enough to support their children, the practice of indenturing one child to feed the others becomes unnecessary.


To simply boycott cocoa from the region would create more poverty and more child trafficking for other purposes.  Therefore, many who are concerned about forced child labor see raising family incomes through fair trade as an effective tool for addressing unethical child labor.  Of course, local government interventions, aid from international groups, as well as contributions from the chocolate industry will also be necessary.


Another factor in the increased interest in fairly traded products is the growth of the health food industry.  As customers expect companies to respect their right to health and well being, it dawns on them that the same respect should extend to the farmers who produce our health food.  A truly ethical company is one that protects consumers, the environment, and the people who produce food.  It is natural to question the sincerity and ethics of a company who provides healthy products for one group of people at the expense of the health and well being of another group.


Why is fair trade necessary?  In our current global economy there is no level playing field.  Wealthy and powerful entities are at an advantage.  When that advantage is coupled with lack of concern or lack of responsibility for business practices which cause or deepen poverty, the impact on impoverished people can be devastating.


In developing countries farmers are forced  to accept extremely low premiums for the goods they sell.  They don't have the means to seek out and engage competing buyers.  They can't hedge, buy futures, or even weather a bad year.  Large corporations are able to organize and suppress world wide commodity prices.  They often benefit from weak governments who may not be able or willing to regulate, monitor, and enforce protections for their farmers.  Forced to borrow, farmers often become indebted to buyers who then set prices below the cost of production.  In addition, consumers in wealthier nations have been encouraged to develop expectations of cheap food.   They are unaware of the extent to which the food industry's profits have historically been dependent on cheap labor (less than $2 per day).  In pursuit of the lowest cost, the average shopper inadvertently supports the biggest, most powerful and ruthless companies who are simultaneously able to profit from massive food sales at the store and the lowest possible premiums paid to farmers.  This has created a competitive race to the bottom - more misuse of land, poorer quality food, and increasingly low incomes for the poor.


All of this means that there is a long standing and firmly entrenched system of exploiting producers in the global south and regarding their poverty as inevitable.  Most corporations have chosen to resist change.  Among some of the noteworthy exceptions are Ben & Jerry's, Green & Black's, and Honest Tea.  These companies have committed themselves to paying fair premiums so that the farmers who supply ingredients can escape the cycle of debt and poverty.


The fair trade movement began out of a recognition that one way to address poverty is to pay fair wages and fair premiums for goods.  


Cooperatives and fair trade organizations developed to connect fair-minded consumers with disadvantaged producers and farmers.  Currently among these organizations there is an awareness that producers and farmers also need to be empowered to address social and environmental sustainability as well as economic self sufficiency.


As it has evolved, in order to become part of a fair trade market, a producer must agree to comply with certain standards such as no child trafficking, no forced labor, sustainable farming practices, etc. In exchange farmers receive higher premiums which enhance their family income.  In addition, each certification system also creates opportunities for community benefits, such as health centers, schools, opportunities to learn new farming techniques, etc.


How are the various fair trade systems different? There are third party certified systems, "in house" certified systems (created and run by the manufacturer), and non certified fair trade.

Third Party Certification Systems
Some work with cooperatives but not large companies.  Others have developed mechanisms to invite large companies and plantations to join the movement.  Some guarantee a floor price. Others rely on helping the farmer to increase yield and quality to improve overall income.  Some require 100% compliance before the seal can be used. Others allow a percentage of compliance.  Some display the percentage level of compliance on the seal.  Some focus on marketing while others focus on sustainable farm management.  For details, please go to each systems websites by clicking on their logo.


One can argue that the fair trade movement benefits from the very high standards and strict compliance that Fairtrade International sets;  and simultaneously the movement benefits from a wider, more inclusive net that Rainforest Alliance offers.  Likewise Fair Trade USA and Fair for Life fill a need.  None of them is perfect and there are valid criticisms of each.  They squabble amongst themselves and they compete for backers. 

It is my personal opinion that all of the above mentioned certification systems are making contributions to the fair trade movement and I endorse all of them.  I view them as living, growing entities and the competition between them has the potential to help refine the movement.


In House Certification Systems
Some food companies have not been eligible to participate in third party fair trade systems and have developed their own "ethically traded standards". They are not third party certified at this time.  It is possible that some of these efforts represent an important step in the right direction and may be an effective way for a manufacturer to position their suppliers and products to be eligible for one of the recognized third party certification systems.  On the other hand there will inevitably be some companies who are inventing their own seal in order to deceive consumers.


Non Certified Fair Trade
In addition, there are small companies who buy directly from farmers, pay higher premiums, and personally monitor all the players for ethical labor standards and sustainability issues.  They eliminate the costs involved in participating with a fair trade certification system and in theory the farmer benefits from that cost saving.  This is referred to as Farm Gate trade.  If all parties involved are honorable and share the same goals and concerns, this can be an very effective way to alleviate poverty.
There will be some Farm Gate buyers who say they are giving a high premium to producers but are not.  And for the consumer who is concerned about child trafficking, it may be difficult to determine the practices of a particular farm.


The third party certifications are not perfect, but they do offer the consumer a simple tool for determining if corporations are addressing exploitation in their supply chains.  Standards are defined.  Systems are in place for monitoring and taking action when violations are discovered.

Trust is Personal.  Whether it is a certification system or a retailer; trust is based on the information we have as an individual, our gut feeling, and our assessment of risk and consequence.  Which fair trade system we choose to support may not be as important as it is that we are taking steps to promote fair exchange and making course corrections when needed.


For additional reading:


World Centric


Guardian - "Who's The Fairest?"