What is Fair Trade?

Fair trade is a form of trade for goods and services that is focused on being sustainable, productive for people at every level of the supply chain, and beneficial to workers, communities, and the environment. Supporters believe that traditional trading systems are often unfair to producers at the lower levels of the supply chain, such as the people who grow crops like coffee. Opponents suggest that the push for this type of trade sets up artificially high pricing and impedes upon the free market.

The movement is primarily focused on benefiting producers in developing nations. Farmers and craftspeople in the developing world have historically been subject to exploitation, receiving a fraction of the value of the goods they sell, and sometimes contending with environmental and economic problems as the result of trading practices that are focused on creating profits in the developed world. For example, a company would move into South America to grow bananas, paying its workers very low rates for fruit that would sell at high prices in European markets.

Several features characterize fair trade goods. Worker safety and welfare is a primary issue, with manufacturers promising fair wages for workers, safe working conditions, and the absence of child labor. The goods must also usually not harm the environment, must be produced in an environmentally-friendly and sustainable way, and they must contribute to local communities. For example, a cooperative of women in India might make purses from old saris, thereby benefiting women, promoting recycling, and bringing income into their community.

Consumer education is also an important element, as consumers will usually not seek out these goods unless they are given an incentive to do so. Many companies place a heavy emphasis on humanizing their workforces, introducing consumers to the people who actually make the goods they buy, and showing consumers how their purchase confers benefits. The benefits are supposed to outweigh the higher price for the goods.

There are two types of fair trade: integrated supply chain and product certification. In the case of an integrated supply chain, every producer along the supply chain supports fair trade, promoting beneficial practices at every stage of the way, from the production of the good to the final sale. In the case of product certification, a company signs an agreement with a producer, receiving product certification from a third party agency in exchange. Fair trade certification involves a partnership between people who want to sell something, but lack the supply chain access to do so, and people who want to sell goods that are in demand.

The success of and demand for fairly made goods illustrates the many ways in which the free market can work. Although buying such products tends to cost more, some consumers feel that the hidden prices of traditionally-traded goods are too high, and they actively seek out products produced and sold with a fair trade philosophy.