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About Fair Trade

What Is Fair Trade

(and Why Does It Matter)?

 

 

We hear the phrase “Fair Trade” mentioned a lot, but how many of us know what it actually means? Do we need to? Does it affect us?

 

Working Definition of Fair Trade

Fair Trade is different things to different people.

To producers, Fair Trade means

  • working in a safe environment
  • having the right to organize and negotiate with employers
  • receiving fair pay for their work
  • being able to provide food, clothing, and shelter for themselves and their families.

To consumers, Fair Trade means knowing that the products you buy were not produced in a sweat shop or by forced child labor. It means that every purchase contributes to the fight against poverty, climate change, and economic crisis. It means that you are making a difference in the lives of an entire community—just by buying things you want.

 

How Does Fair Trade Fight Climate Change?

The Fair Trade Standards include environmental protection. The Standards promote training farmers in good agricultural practices that encourage environmentally sustainable production. The Standards guide producers in adapting to climate change and mitigating their own impact on the environment. In addition, Fair Trade funds are specifically designated for environmental development projects.

 

How Does Fair Trade Affect the Economy?

By providing minimum pay standards for producers, the economic status of individuals and communities is improved, allowing more participation in local, national, and international commerce. Fair Trade also designates funds for economic development. These funds enable communities to improve their health and education and general quality of life and become more active participants in the world economy.

 

Formal Definition of Fair Trade

Fair Trade is an approach to commerce that is based on a partnership between producers and consumers. It is the exchange of goods based on principles of economic and social justice. The World Fair Trade Organization defines Fair Trade as follows: "Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.

“Fair Trade organisations have a clear commitment to Fair Trade as the principal core of their mission. They, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade."

 

You Can Make a Difference

Fair Trade makes it easy for you to get involved and make a difference. You can help improve the living standards of individuals and communities and contribute to a more equitable and healthy global economy just by purchasing Fair Trade products. In a time when there is so much turmoil in the world, it is difficult to know what we can do to help. Purchasing Fair Trade products contributes in so many ways—but it is not charity. The products you purchase are of the highest quality; many are unique and handcrafted. The next time you are shopping, consider purchasing Fair Trade. You will not be disappointed.

 

 

 

What Is the Difference Between Fair Trade and Free Trade?

 

There’s a lot of talk about trade these days—trade negotiations, trade barriers, trade pacts. Politicians discuss the pros and cons of free trade; human rights groups and environmentalists encourage fair trade. The terms free trade and fair trade are sometimes used interchangeably—perhaps the result of ignorance or perhaps a slip of the tongue. But they are not the same thing, and the differences are important.  

 

What Is Free Trade?

Free trade is an approach to international commerce that focuses on the trade policies between countries. Free trade advocates favor reducing or eliminating the barriers to trade between nations. These barriers include such things as tariffs, quotas, and labor and environmental standards. One goal of free trade is to open up all international markets so that all nations, regardless of their stage of development, are equal competitors. But are they truly equal? The main beneficiaries of free trade are multinational corporations and powerful business interests. Free trade offers little or no protection for small producers and developing nations. To compete in such a market, large corporations from wealthy countries outsource production to developing nations where labor standards are poor and wages are low. The end result is lower prices for goods and, according to some economists, a stronger economy—at least for some. But what about the workers receiving less than a living wage to produce the goods?

 

What Is Fair Trade?

Fair trade focuses on the wages and working conditions of labor in developing markets, ensuring that producers have a safe working environment and receive a living wage so that they can provide food, clothing, and shelter for themselves and their families. The goal of fair trade is to improve the lives of marginalized producers. The primary beneficiaries are farmers, artisans, and workers in less industrialized nations. There is some concern that fair trade will result in higher prices for goods. However, fair trade usually involves fewer parties in the supply chain and more direct trade, so prices are often similar. Some economists also point out that fair trade policies help to add more consumers with disposable income to the marketplace, outweighing any negative economic effect of paying a fair price for labor. The Fair Trade Federation lists the following as their guiding principles:

 

  • Create opportunities for economically and socially marginalized producers
  • Develop transparent and accountable relationships
  • Build capacity
  • Promote fair trade
  • Pay promptly and fairly
  • Support safe and empowering working conditions
  • Ensure the rights of children
  • Cultivate environmental stewardship
  • Respect cultural identity

 

Side-by-Side Comparison

The following table offers a quick review of the differences between free trade and fair trade.

 

Free Trade Versus Fair Trade

 

 

Free trade

Fair trade

 

 

 

Main goal

Increase economic growth

Empower marginalized people and improve their quality of life

 

 

 

Main focus

Trade policies between nations

Commerce among individuals and businesses

 

 

 

Primary beneficiaries

Multinational corporations and powerful business interests

Farmers, artisans, and workers in less industrialized nations

 

 

 

Main criticisms

Punishes marginalized people and the environment; sacrifices long-term relationships

Inefficient, interferes with the free market, too small scale to have an effect

 

 

 

 

 

 

Producer compensation determined by

Market and government policies

Living wage and community improvement costs

 

 

 

Supply chain

Includes many parties between producer and consumer

Includes fewer parties, more direct trade

 

Conclusion

There are pros and cons to both free trade and fair trade. Neither system is perfect. Perhaps in the future, we will be able to combine the two ideologies to create a system that benefits all nations and people.