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For other uses, see Fair trade (disambiguation).

Fair trade is a social movement whose stated goal is to help producers in developing countries achieve better trading conditions and to promote sustainability. Members of the movement advocate the payment of higher prices to exporters, as well as higher social and environmental standards. The movement focuses in particular on commodities, or products which are typically exported from developing countries to developed countries, but also consumed in domestic markets (e.g. Brazil and India) most notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, chocolate, flowers, gold, and 3D printer filament. The movement seeks to promote greater equity in international trading partnerships through dialogue, transparency, and respect. It promotes sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers in developing countries. Fair Trade is grounded in three core beliefs; first, consumers have the power to express unity with producers. Secondly, the world trade practices that currently exist promote the unequal distribution of wealth between nations. Lastly, buying products from producers in developing countries at a fair price is a more efficient way of promoting sustainable development than traditional charity and aid.

Fairtrade labeling organizations most commonly use a definition of fair trade developed by FINE, an informal association of four international fair trade networks — Fairtrade Labelling Organizations International, World Fair Trade Organization (WFTO), Network of European Worldshops and European Fair Trade Association (EFTA) —: fair trade is a trading partnership, based on dialogue, transparency, and respect, that seeks greater equity in international trade. Fair trade organizations, 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.

There are several recognized Fairtrade certifiers, including Fairtrade International (formerly called FLO, Fairtrade Labelling Organizations International), IMO and Eco-Social. Additionally, Fair Trade USA, formerly a licensing agency for the Fairtrade International label, broke from the system and is implementing its own fair trade labelling scheme, which has resulted in controversy due to its inclusion of independent smallholders and estates for all crops. In 2008, Fairtrade International certified approximately (€3.4B) of products. The World Trade Organization publishes annual figures on the world trade of goods and services.

The movement is especially popular in the UK where there are 500 Fairtrade towns, 118 universities, over 6,000 churches, and over 4,000 UK schools registered in the Fairtrade Schools Scheme. In 2011, over 1.2 million farmers and workers in more than 60 countries participated in Fair Trade, and €65 million in Fairtrade premium was paid. According to Fairtrade International, nearly six out of ten consumers have seen the Fairtrade mark and almost nine in ten of them trust it.

The fair trade system

There are a large number of fair trade and ethical marketing organizations often employing different marketing strategies. Most Fair Trade products are sold by those Fair Trade organizations that believe it is necessary to market through supermarkets to get sufficient volume of trade to have any real impact on the developing world.

The Fairtrade brand is by far the biggest of the fair trade coffee brands. Packers in developed countries pay a fee to The Fairtrade Foundation for the right to use the brand and logo, and nearly all the fee goes to marketing. Packers and retailers can charge as much as they want for the coffee. The coffee has to come from a certified Fairtrade cooperative, and there is a minimum price when the world market is oversupplied. Additionally, the cooperatives are paid an additional 10c per lb premium by buyers for community development projects. The cooperatives can, on average, sell only a third of their output as Fairtrade, because of lack of demand, and sell the rest at world prices. The exporting cooperative can spend the money in several ways. Some go to meeting the costs of conformity and certification: as they have to meet Fairtrade standards on all their produce, they have to recover the costs from a small part of their turnover, sometimes as little as 8%, and may not make any profit. Some meet other costs. Some is spent on social projects such as building schools, clinics and baseball pitches. Sometimes there is money left over for the farmers. The cooperatives sometimes pay farmers a higher price than farmers do, sometimes less, but there is no evidence on which is more common.

The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying importers, packers and distributors and advertising agencies to handle their brand, for cost reasons. In the producing country Fairtrade is marketed only by Fairtrade cooperatives, while other coffee is marketed by Fairtrade cooperatives (as uncertified coffee), by other cooperatives and by ordinary traders.

To become certified Fairtrade producers, the primary cooperative and its member farmers must operate to certain political standards, imposed from Europe. FLO-CERT, the for-profit side, handles producer certification, inspecting and certifying producer organizations in more than 50 countries in Africa, Asia, and Latin America. In the Fair trade debate there are many complaints of failure to enforce these standards, with producers, cooperatives, importers and packers profiting by evading them.

There remain many Fair Trade organizations that adhere to a greater or smaller degree to the original objectives of Fair Trade, and that market products through alternative channels where possible, and market through specialist Fair Trade shops, but they have a small proportion of the total market.

Rise of labeling initiatives

Early Fairtrade Certifications Marks

Sales of fair trade products only really took off with the arrival of the first Fairtrade certification initiatives. Although buoyed by ever growing sales, fair trade had been generally contained to relatively small worldshops scattered across Europe and to a lesser extent, North America. Some felt that these shops were too disconnected from the rhythm and the lifestyle of contemporary developed societies. The inconvenience of going to them to buy only a product or two was too high even for the most dedicated customers. The only way to increase sale opportunities was to start offering fair trade products where consumers normally shop, in large distribution channels. The problem was to find a way to expand distribution without compromising consumer trust in fair trade products and in their origins.

A solution was found in 1988, when the first Fairtrade certification initiative, Max Havelaar, was created in the Netherlands under the initiative of Nico Roozen, Frans Van Der Hoff, and Dutch development NGO Solidaridad. The independent certification allowed the goods to be sold outside the worldshops and into the mainstream, reaching a larger consumer segment and boosting fair trade sales significantly. The labeling initiative also allowed customers and distributors alike to track the origin of the goods to confirm that the products were really benefiting the producers at the end of the supply chain.

The concept caught on: in the ensuing years, similar non-profit Fairtrade labelling organizations were set up in other European countries and North America. In 1997, a process of convergence among labelling organizations – or "LIs" (for "Labeling Initiatives") – led to the creation of Fairtrade Labelling Organizations International (FLO). FLO is an umbrella organization whose mission is to set the Fairtrade standards, support, inspect and certify disadvantaged producers, and harmonize the Fairtrade message across the movement.

In 2002, FLO launched for the first time an International Fairtrade Certification Mark. The goals of the launch were to improve the visibility of the Mark on supermarket shelves, facilitate cross border trade, and simplify procedures for both producers and importers. At present, the certification mark is used in over 50 countries and on dozens of different products, based on FLO’s certification for coffee, tea, rice, bananas, mangoes, cocoa, cotton, sugar, honey, fruit juices, nuts, fresh fruit, quinoa, herbs and spices, wine, footballs, etc.

With the rise of ethical labeling, consumers are able to take moral responsibility for their economic decisions and actions. This supports the notion of fair trade practices as "moral economies." The presence of labeling give consumers the feeling of "doing the right thing" with a simple purchase.

These labeling practices place the burden of getting certification on the producers in the Global South, furthering inequality between the Global North and the Global South. The process of securing certification is excessively burdensome and expensive. Northern consumers are able to just make a simple choice without these burdens and expenses.

Coffee

Main article: Fair trade coffee

Coffee is the most well-established fair trade commodity. Most Fair Trade coffee is Coffea arabica, a type of coffee known to be grown at high altitudes. A lot of emphasis is put on the quality of the coffee when dealing in Fair Trade markets because Fair Trade markets are usually specialized markets that appeal to customers who are motivated by taste rather than price. The Fair Trade movement fixated on coffee first because it is a highly traded commodity for most producing countries and almost half the world's coffee is produced by smallholder farmers. While initially sold at small scale, currently multinationals like Starbucks and Nestle use fair trade coffee.

Internationally recognized Fair Trade coffee standards have been outlined by FLO and are as follows: small producers are grouped in democratic cooperatives or groups, buyers and sellers establish long-term, stable relationships, buyers must pay the producers at least the minimum Fair Trade price or when the market price is higher, they must pay the market price, and finally, buyers must also pay a social premium of 20 cents per pound of coffee to the producers. The current minimum Fair Trade price for high-grade, washed Arabica coffee $1.40 per pound; the price increases to $1.70 per pound if the coffee is also organic.

Solidarity trade

Fair trade goods sold in worldshops

The current fair trade movement was shaped in Europe in the 1960s. Fair trade during that period was often seen as a political gesture against neo-imperialism: radical student movements began targeting multinational corporations and concerns that traditional business models were fundamentally flawed started to emerge. The slogan at the time, "Trade not Aid", gained international recognition in 1968 when it was adopted by the United Nations Conference on Trade and Development (UNCTAD) to put the emphasis on the establishment of fair trade relations with the developing world.

The year 1965 saw the creation of the first Alternative Trading Organization (ATO): that year, British NGO Oxfam launched "Helping-by-Selling", a program which sold imported handicrafts in Oxfam stores in the UK and from mail-order catalogues.

By 1968, the oversized newsprint publication, the Whole Earth Catalog, was connecting thousands of specialized merchants, artisans, and scientists directly with consumers who were interested in supporting independent producers, with the goal of bypassing corporate retail and department stores. The Whole Earth Catalog sought to balance the international free market by allowing direct purchasing of goods produced primarily in the United States and Canada, but also in Central and South America.

In 1969, the first worldshop opened its doors in the Netherlands. The initiative aimed at bringing the principles of fair trade to the retail sector by selling almost exclusively goods produced under fair trade terms in "underdeveloped regions". The first shop was run by volunteers and was so successful that dozens of similar shops soon went into business in the Benelux countries, Germany, and other Western European countries.

Throughout the 1960s and 1970s, important segments of the fair trade movement worked to find markets for products from countries that were excluded from the mainstream trading channels for political reasons. Thousands of volunteers sold coffee from Angola and Nicaragua in worldshops, in the back of churches, from their homes, and from stands in public places, using the products as a vehicle to deliver their message: give disadvantaged producers in developing countries a fair chance on the world’s market.

In 1985, the owner of Thanksgiving Coffee Company in Fort Bragg, California traveled to Nicaragua and became educated about the relationship between coffee and revolution. This education led to Thanksgiving Coffee Company donating 50 cents per pound of coffee sold to the Nicaraguan Sandinstas fighting the Contras. A year after, the organization Equal Exchange was formed to re-connect consumers with the growers of their food. Equal Exchange's first product was Nicaraguan coffee. These companies, along with others and some Alternative Trade Organizations (ATOs), created a small group of consumers who seek to purchase socially conscious coffee in the United States.

Fair Trade Universities

The concept of a Fair Trade School or Fair Trade University emerged from the United Kingdom, where the Fairtrade Foundation now maintains a list of colleges and schools that comply with the following requirements. A school or university must have established a Fairtrade School Steering Group. They must have a written and implemented a school-wide Fair Trade Policy. The school or university must be dedicated to selling and using Fair Trade products. They have to learn and educate about Fair Trade issues. Finally, the Fairtrade Foundation requires that schools promote Fair Trade not only within the school, but throughout the wider community.

A Fair Trade University is one that develops all aspects of fair trade practices in their coursework. In 2007, the Director of the Environmental Studies program at the University of Wisconsin-Oshkosh, David Barnhill, started a push to become the first Fair Trade University. This push received positive reactions from faculty and students. To begin the process, the University as a whole agreed that it would need support from four institutional groups-- faculty, staff, support staff, and students-- would maximize support and educational efforts. The University officially endorsed the Earth Charter and created a Campus Sustainability Plan to align with the efforts of becoming a Fair Trade University.

In the spring of 2010, the University of California San Diego became the second Fair Trade University in the United States. The University of California at San Diego understood the efforts of the Fairtrade Foundation in the UK, but they recognized they wanted to be more detailed about how their declaration as a Fair Trade University would make actual change in the way on-campus franchises do business with the university. They also required constant assessment and improvement. The main premise of being a Fair Trade University for the University of California at San Diego is the promise between the university and the students about the continual effort by the university to increase the accessibility of Fair Trade Certified food and drinks and to encourage sustainability in other ways, such as buying from local, organic farmers and decreasing waste.

For example, the University of Wisconsin- Oshkosh offers many courses in many different disciplines that implement fair trade learning. They offer a business course with a trip to Peru to visit coffee farmers, an environmental science class that discusses fair trade as a way for cleaner food systems, an English course that focuses on the Earth Charter and the application of fair trade principles, and several upper-level anthropology courses make fair trade the center of the class.

Fair Trade Universities have been successful because they are a "feel good" movement. The movement also has an established history, making it a true movement rather just a fad. Thirdly, Fair Trade Universities are effective because they raise awareness about an issue and offer a solution. The solution is an easy one for college students to handle, just paying about five cents more for a cup of coffee or tea can make a real difference.

These three young Nicaraguan women are trained in organic soil testing and are showing some American buyers and consumers how they test the soil for minerals.

Psychology of Fair Trade

Consumers of fair trade usually make the intentional choice to purchase fair trade goods based on attitude, moral norms, perceived behavioral control, and social norms. It is useful to include of measure of moral norms to improve the predictive power of intentions to buy Fair Trade over the basic predictors, like attitude and perceived behavioral control.

University student have significantly increased their consumption of fair trade products over the last several decades. Women college students have a more favorable attitude than men toward buying fair trade products and they feel more moral obligation to do so. Women are also reported to have stronger intentions to buy fair trade products. When it comes to the intentions to buy fair trade, gender had no direct effect, though.

Producers organize and strive for Fair Trade certification for several reasons, either through religious ties, wants for social justice, wants for autonomy, political liberalization, or simply because they want to be paid more for their labor efforts and products. Farmers are more likely to identify with organic farming than Fair Trade farming practices because organic farming is a very visible way that these farmers are different than their neighbors and actually influences the way they farm. They place a significant importance natural growing methods. Fair Trade farmers are also more likely to attribute their higher paid prices to the quality of their products rather than fair market prices.

Effect of Fair Trade on Growers

Fair Trade is benefiting farmers in the Global South, whether that be considerably or just a little. The nature of Fair Trade makes it a global phenomenon, therefore, there are diverse motives for and understandings of group formation related to Fair Trade. The social transformation caused by the Fair Trade Movement also varies around the world.

In a study of coffee growers in Guatemala, thirty-four farmers were interviewed. Of those thirty-four growers, twenty-two had an understanding of Fair Trade based in internationally recognized definitions, like describing Fair Trade is market and economical terms or they knew what the social premium was and how their cooperative has used it. Three growers explained a deep understanding of Fair Trade, showing a knowledge of both fair market principles and social justice. Nine growers has erroneous or no knowledge of Fair Trade. The three growers who had a deeper knowledge of the social justice implications of Fair Trade all have responsibilities within their cooperatives. One is a manager, one is in charge of the wet mill, and one is his group's treasurer. These farmers did not have a pattern in terms of years of education, age, or years of membership in the cooperative; their answers to the questions, "Why did you join?" differentiate them from other members and explain why they have such an extensive knowledge of Fair Trade. These farmers cited switching to organic farming, wanting to raise money for social projects, and more training offered as reasons for joining the cooperative other than receiving a better price for their coffee.

Many farmers around the world are unaware of fair trade practices that they could be implementing to earn a higher wage. Coffee is one of the most highly traded commodities in the world, yet the farmers who grow it typically earn less than $2 a day. When surveyed, farmers could answer positively that they have heard about fair trade, but were not able to give a detailed description about what fair trade is. They could, however, identify fair trade based on some of its possible benefits to their community. When asked, overall, farmers cited that fair trade has had a positive impact on their lives and communities. They also wanted consumers to know that fair trade is important for supporting their families and their cooperatives.

Some producers also profit from the indirect benefits of Fair Trade practices. Fair Trade cooperatives create a space of solidarity and promote an entrepreneurial spirit among growers. When growers feel like they have control over their own lives within the network of their cooperative, it can be very empowering. Operating a profitable business allows growers to think about their future, rather than worrying about how they are going to survive in poverty.

As far as farmers' satisfaction with the Fair Trade system, the growers want consumers to know that Fair Trade has provided important support to their families and their cooperative. Overall, farmers are satisfied with the current Fair Trade system, but some farmers, such as the Mazaronquiari group, desire yet a higher price for their products in order to live a higher quality of life.

The Social Premium of Fair Trade

A component of Fair Trade is the social premium that buyers of Fair Trade goods pay to the producers or producer-groups of such goods. An important factor of the Fair Trade social premium is that the producers or producer-groups decide where and how it is spent. These premiums usually go towards socioeconomic development, however the producers or producer-groups see fit. Within producer-groups, the decisions to decide how the social premium will be spent is handled democratically, with transparency and participation.

Producers and producer-groups spend this social premium to support socioeconomic development in a variety of ways. One common way to spend the social premium of Fair Trade is to privately invest in public goods that infrastructure and the government are lacking in. These public goods include environment initiatives, public schools, and water projects. At some point, all producer-groups re-invest their social premium back into their farms and businesses. They buy capital, like trucks and machinery, and education for their members, like organic farming education. Thirty-eight percent of producer-groups spend the social premium in its entirety on themselves, but the rest invest in public goods, like paying for teachers' salaries, providing a community health care clinic, and improving infrastructure, such as bringing in electricity and bettering roads.

Farmers’ organisations that use their social premium for public goods often finance educational scholarships. For example, Costa Rican coffee co-operative, Coocafé, has supported hundreds of children and youth at school and university through the financing of scholarships from funding from their Fair Trade social premium. In terms of education, the social premium can be used to build and furnish schools too.

This woman owns and farms this land for coffee in Northern Nicaragua