Fair Trade

Fair trade has been proposed as a variation of the international trade model of development that promotes sustainability. Fair trade is international trade that provides greater equity to workers and small businesses in developing countries. Fair trade products are made and traded according to standards that protect workers, businesses, and consumers.

The fair trade movement focuses primarily on products exported from developing countries to developed countries. Sustainability is promoted by offering better trading and working conditions for producers and workers in developing countries, as discussed in the Sustainability & Our Environment feature. Fair trade organizations, backed by consumers, raise awareness of deficiencies in conventional international production and trade and the role of fair trade in improving economic, social, and environmental conditions for producers and workers.

Three sets of standards distinguish fair trade: One set applies to producers, a second set to workers on farms and in factories, and a third set to consumers, especially those living in developed countries.

Fair Trade Producer Standards

Critics of international trade charge that only a tiny percentage of the price a consumer pays for a good reaches the individual in the developing country who is responsible for making or growing it. Someone in India sewing clothing for the U.S. market, for example, earns less than 1 percent of the retail price of the garment, according to the National Labor Committee. The rest goes to wholesalers, importers, distributors, advertisers, retailers, and others who did not actually make the item. In contrast, fair trade returns on average one-third of the price to the producer in the developing country.

Fair Trade Textile Factory, Tiruppur, India

Fair Trade is a set of business practices designed to advance a number of economic, social, and environmental goals. These include:

• Raising the incomes of small-scale farmers and artisans by eliminating some of the middlemen.

• Distributing the profits and risks associated with production and sale of goods more fairly among producers, distributors, retailers, and financiers.

• Increasing the entrepreneurial and management skills of the producers.

• Promoting safe and sustainable farming methods and working conditions, such as by prohibiting the use of dangerous pesticides and herbicides and promoting the production of certified crops.

International fair trade organizations set standards for implementing these principles, and they monitor, audit, and certify that practices comply with the standards.

Many small-scale farmers and artisans join democratically managed cooperatives. Cooperatives offer several advantages:

• The cooperative can qualify for credit so that funds can be borrowed to buy equipment and invest in improving farms.

• Materials can be purchased at a lower cost.

• The people who grow or make the products democratically manage allocation of resources and assure safe and healthy working conditions.

• Profits are reinvested in the community instead of going to absentee corporate owners.

Fair Trade Worker Standards

Protection of workers’ rights is not a high priority in the international trade development approach, according to its critics. Critics charge that:

• Oversight of workers’ conditions by governments and international lending agencies is minimal.

• Workers allegedly work long hours in poor conditions for low pay.

• Children or forced labor may be in the workforce.

• Health problems may result from poor sanitation and injuries from inadequate safety precautions.

• Injured, ill, or laid-off workers are not compensated.

In contrast fair trade requires that workers be:

• Paid fair wages, at least enough to cover food, shelter, education, health care, and other basic needs.

• Permitted to organize a union and to have the right to collective bargaining.

• Protected by high environmental and safety standards.

Pause & Reflect 10.4.2

As a consumer in a developed country, what information do you need about a product to be confident it meets fair trade standards?

Fair Trade & Customers

Most fair trade sales are in food, including coffee, tea, banana, chocolate, cocoa, juice, sugar, and honey products. In North America, fair trade products have been primarily craft products such as decorative home accessories, jewelry, textiles, and ceramics. Ten Thousand Villages is the largest fair trade organization in North America, specializing in handicrafts.

Buying fair trade products helps consumers connect more directly with the producers of the food, clothing, and household items that they buy. Fair trade products do not necessarily cost the consumer more than conventionally grown or produced alternatives. Because fair trade organizations bypass exploitative intermediaries and work directly with producers, they are able to cut costs and return a greater percentage of the retail price to the producers.

Fair Trade for Local Workers

To design high-priced clothing for international consumption, big fashion houses get much of their inspiration from local traditions. At the same time, local groups struggle to keep alive distinctive traditions through self-sufficiency.

For many generations, women in Bihor, Romania, have practiced economic self-sufficiency in part by making distinctive clothing for their community’s local consumption. Dior, one of the world’s major fashion houses, recently created a copy of a Bihor coat and priced it at $40,000. The Bihor women fought back. With the help of a Romanian magazine, they made a video documenting Dior’s theft and established Bihor Couture to create and sell their locally made clothes (see www.bihorcouture.com).