What is Fair Trade?
Consuming with a conscience.
A better deal for small-scale producers in poor countries.
The Fair Trade Mark guarantees:
• Farmers’ organisations a fair and stable price for their product
• Extra income for farmers and plantation workers to improve their lives
• Greater respect for the environment
• Small-scale farmers a stronger position in world markets
• A closer link between consumers and producers
Fair Price?
People often ask how much money ‘goes back to the producer.’ It would be nice to say 90% but that is not possible. Trade does not work like that and even fair trade organisations have to operate in the real world and attempt to make a sustainable profit.
International trade involves many steps – all of which have to be paid for in the final price – whether the product is a fair trade one or not. To get a product to the customer means paying for raw materials, transport and all the other costs associated with export, on top of the wage to the producer. And that only gets it to the port. Then there is the cost of international shipping, and transport, etc within the importing country. Once a product is in a warehouse, it has to be marketed and got out to customers, all of which involves considerable costs. Fair trade has to work within this system. And it does not often have the benefits of the savings that can come when large volumes of a single product are involved.
So how, within the constraints of trade, does fair trade ensure a better deal for the producer? Well part of it is about ensuring a better price/wage for the producer. Even if this is not large in terms of the percentage of the final price, it can make a real difference. However, a lot of it is about how the trade relationship is conducted. Other benefits include advance payments, design advice, market information, building the capacity of producers to understand the export market, a long-term commitment to a trading relationship and helping producers to increase their export markets (see Note below). These may all, in the end, be more important o the producers than the price.
So, What is a Fair Price?
This will depend on the circumstances, but broadly it is one which ensures that the producer not only covers the cost of production, but also makes a profit in order to have a reasonable life. Sometimes it might simply be a better wage. For example, Sheraj Gagi is a weaver in Bangladesh whose wages increased by over 40% when he moved from a purely commercial employer to Aarong, a Traidcraft supplier. In other situations, a fair trade premium may fund developments for the producers or their community. It is always critical that Traidcraft and Tearcraft buy from organisations which ensure that benefits reach the original producers. These can be co-ops, women’s organisations, development projects or simply businesses, of various sizes – as long as there is a clear benefit to the producer.
What are the Benefits of Fair Trade?
Wherever possible, products come from groups which:
• Are organised primarily for the benefit of their members and the community
• Pay fair wages and provide working conditions that are better than average for the locality
• Encourage and enable workers’ participation in ownership and decision-making
Fair trade makes a real difference to the lives of the producers. Improvements in health care, housing and education, along with safer water supplies and a better diet, are among the tangible benefits that fair trade can bring.
Note:
Advance Payments: Producers may need money ‘up front’ eg to buy raw materials. Money-lenders may charge extortionate levels of interest. Fair trade offers advances at low/no interest.
Design Advice/Market Information: Being far from the market means producers may not know how products will sell. Appropriate advice can help them to make products that will sell well.
Capacity Building: Producers with litter experience of exporting may need help to understand how international trade works.
Trade Facilitation: There are limits to how much Traidcraft or Tearcraft can sell. One way to help producers is to introduce them to other suitable buyers, in the fair trade movement or mainstream.