We live in a world of gross social and economic inequalities which is leaving millions of people without the basic necessities of food, water, housing, education,  health-care etc.  Millions of small farmers are being dramatically affected by the globalization, international trade policies, third world debt and are loosing their farms, livelihoods and are unable to feed their families or provide for other basic necessities of life.    Similarly, landless workers are seeing worsening working conditions, low pay and unsafe working environments as developing countries compete to attract foreign investment by offering the cheapest labor.  

Fair Trade, is a alternative system of trade which counteracts this system of international free trade, corporate control and global policies by giving the farmers and workers a living wage for their work, which can sustain them and also create opportunities for social and economic development.   We examine in some detail the system of fair trade, the different players involved, the different agreements that have to be followed to qualify a product as fair trade and some issues with fair trade.  Please, see the Fair Trade Pricing page, for information on mandated fair trade prices for various products.

Fair Trade Participants (different groups involved)

Fair Trade involve for the most 3 different groups of people and certain agreements between them.

Producers

Producers refers to the farmers, artisans, workers, cooperatives who are producing the products - coffee, tea,  cocoa, honey, handicrafts etc.  The producers have to follow certain agreements to qualify the products they produce as fair trade.

 

Importers

Importers refers to the people who import the fair trade products produced by the producers to their respective countries for further processing and sale either by themselves or by other processors and retailers.  So, for example an importer may just import fair trade "green coffee", which would in turn would be sold to a fair trade roaster who eventually sells it to a retailer.  Importers and subsequent processors of products also have to follow certain agreements and standards to qualify them as fair trade importers and/or processors.

 

Fair Trade Certifiers

Certifiers are organizations/entities which certify producers and importers as fair trade, if they follow the fair trade guidelines.  FairTrade Labeling Organization is the entity which certifies producers from all over the world as fair trade and ensures that  producers are following the producer fair trade standards, while Transfair USA is the organization which certifies importers and processors in the USA as fair trade and ensures that  they follow the fair trade standards for importers/processors.  Similarly, there are other organizations in other countries (Japan, Germany etc..) certifying their importers and processors as fair trade.  There is also Fair Trade Federation, an association of importers, retailers and producers who commit themselves to certain fair trade guidelines,  but these guidelines are neither enforced or the products certified to meet their guidelines.

Fair Trade Agreements

Importers and producers both have to follow certain standards to be certified as fair trade.

Importer Agreements

• Pay a price to producers that covers the costs of sustainable production and living - also referred to as the 'living wage' in the local context.
• Pay a premium that producers can invest social/economic and other development projects.
• Partially pay in advance, when producers ask for it
• Sign contracts that allow for producers to do long-term planning and follow  sustainable production practices, so that they know in advance that  their  produce will be bought by the importer.

Producer Agreements

Small scale farmers/producers can only be certified Fair Trade if they have formed cooperatives, associations or other organizational entities which are democratically controlled and contribute to the social and economic development of its members.  Workers can only be certified Fair Trade, if they are organized, normally in unions, and if the company they work for is prepared to promote workers’ development and to pass on to the workers the additional revenues generated by Fairtrade.

 

To be certified as fair trade, producer organizations (cooperatives, associations, companies relying on hired labor) have to show that:

• Fair Trade revenue will promote social and economic development of its members or workers
• For cooperatives, the majority of members are small producers and produce the products themselves and that the cooperative has democratic structure and is controlled by its members
• There is no discrimination based on sex, gender, religion, color, political views, etc.
• Producers or the company has the ability, logistics,  technical means to bring the products to market.
• They are protecting the environment and make environmental protection part of their production management - minimize use of fertilizers, pesticides and move towards organic fertilizers.  Certain pesticides are not allowed to be used at all.
• There is no forced or child labor.
• Workers/members can join independent associations and/or form unions
• Fair wages are paid to producers/workers in line with minimum and national wages.
• Safe working conditions - workplaces, machinery and equipment are safe and without risk to health.

Issues with Fair Trade

Like any system, there are some criticisms and issues with fair trade.

Producer certification fees

Producers  (coops, associations, unions, etc) have to pay a Euro 2000  fee for initial fair trade certification and then a Euro 500 fee, every year to keep certification.   Given  that most producers in the developing world  are small and poor and often even do not have enough money to feed themselves properly, the fees are extremely  excessive and takes hard earned, much needed  money away from the producers to pay for certification.   The current system also precludes small family farmers and producers who cannot form cooperatives or associations for various reasons and hence cannot be certified as Fair Trade.  

No Importer Certification Differentiation

TransFair has certified Starbuck's, Green Mountain, Proctor & Gamble as fair trade importers, though they only import a very small percentage of their coffee as fair trade and the amount they import and  the prices paid are not public information.  This serves as "green/social washing" by big corporations, who can claim that they are fair traders, while importing only a fraction of their total products as fair trade and unfairly disadvantages the small importers, many of whom, import 100% of their products as fair trade.  Both 100% importers  and 1% importers are deemed as fair trade importers.  As a  result many small importers have pulled out of the TransFair certification process and chosen to make all their contracts, purchases totally public information.

One Fair Trade Price Fits All

FLO mandated fair trade pricing does not take into account for the most part the wage and living disparities which may exist in different parts of the world, or even in countries which are in the same geographical region.  The fair trade pricing set by FLO, therefore could be too low for certain producers and farmers and not enough to meet their basic needs.

Lack  of Transparency

Lack of transparency applies more to goods which are being sold as "fairly traded", but where the producers have not been certified as "fair trade" producers.  Handicrafts, clothing, paper and many other items are currently being sold as "fair trade", but the businesses importing and selling them have almost no transparency as to what they are paying to the producer for a particular item.   For fair trade certified products, the prices are set by FLO, but for others goods, there is no set price and hence it is easy for businesses to claim that they are "fair trade".