Fair Trade is a great alternative because it aims to offer the most disadvantaged producers in developing countries the opportunity to move out of extreme poverty through creating market access under beneficial rather than exploitative terms. With Fair Trade, trade becomes a developmental tool with many positive externalities.
Fair Trade is defined by several key practices:
1 Agreed minimum prices, usually set ahead of market minimums. Fair Trade prices are set taking account of local economic conditions to allow producers a living wage. Farm workers are guaranteed the legal minimum wage set by the International Labor Organization at the least, and producers are guaranteed a price above the cost of production. This allows producers to plan ahead and invest in the future of their business, as well as enables socially just and environmentally sound production
2 Focus on development and technical assistance via the payment to suppliers of an agreed social premium (often 10 % or more of the cost price of goods). This allows them to collectively implement larger development projects, such as building schools, sinking new wells, pension plans, housing, and other social investments. Small scale farmers are usually organized into democratic co-operatives that decide how the fair Trade premia are to be spent. Thus Fair Trade ensures that producers move out of subsistence poverty through trade rather than aid
3 Direct purchasing from producers. Fair Trade lessens the influence of brokers, consolidators and other agents in global supply chains and thereby to increase efficiency, reducing the number of margins within a value chain. This ensures that more of the final price can return to the producer
4 Transparent and long-term trading relationships. Fair Trade certification ensures that importers sign long-term contracts so that producers do not suffer from the effects of the buyers’ short term basis. This allows producers to plan ahead and invest in new technology
5 Co-operative, not competitive dealings. This is also an important element in the ethical positioning of fair Trade products. Fair trade holds mutual respect relationships and is a more efficient way of delivering value to the consumer, leading to higher quality product and consistency of supply
6 Provision of credit when requested. Since importers generally have much easier access to credit than do developing country producers, importers are required to pre-finance up to 60 per cent of the total purchase of seasonal crops. This enables the farmers to receive an advance for their crop even before it is exported
7 Provision of market information to producers. Fair Trade transactions keep producers informed about market movements. Since Fair Trade producers still typically sell the bulk of their produce to non-Fair Trade buyers, this is especially useful in their wider negotiations
8 Farmers and workers are organized democratically. Small scale farmers must belong to a co-operative that is democratically organized and which practices one-farmer, one-vote systems
9 Sustainable production is practiced. Resource management is necessary. Certain pesticides are prohibited and more environmentally just production is promoted. Many farms use Fair Trade premia to invest on organic certification, which decreases environmental impacts and also pays higher wages
10 No labor abuses occurred during the production process. In all cases, child and slave labor abuses are prohibited and workers must be allowed to unionize
These practices are guaranteed by Fair Trade Certification which is governed by the Fair Trade Labelling Organizations (FLO) which is a non-profit, multi-stakeholder association involving 23 member organizations traders and external experts. The organization develops and reviews Fairtrade standards and provides support to Fair Trade Certified Producers by assisting them in gaining and maintaining Fairtrade certification and capitalizing on market opportunities.
More information on Fair Trade organizations can be found on: http://www.fairtrade.net/
More information regarding Fair Trade can be found in: Nicholls A. and Opal C., 2004. Fair Trade. London, SAGE.
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