What Is Fair Trade and What Does It Mean? Definition Products amp Facts
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Motley Fool Stock Advisor recommendations have an average return of 397%. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now Organizations involved in Fair Trade, including Fair Trade USA and the Fair Trade Federation, have outlined several basic principles for both buyers and sellers to follow: 1. Direct Trade
Fair Trade importers work with producers as directly as possible. Cutting out the middleman enables the importers to pay the farmers a larger share of the money their products will eventually fetch on store shelves. Fair Trade importers often deal with collectives – groups of small-scale growers who run their own farms with little or no hired labor. To meet Fair Trade standards, the collectives must be democratically run, with each farmer getting a vote, and must split their profits equally among all the members. 2. Fair Price
Fair Trade guarantees farmers a reasonable minimum price for their crops, no matter how low the market price falls. Buyers promise to pay producers promptly for their goods, and producers promise in turn to pay a fair wage to all their workers. Buyers also extend credit to their producers – for instance, paying them in advance of the harvest – to make sure the producers have all the resources they need to turn over their goods on time. 3. Decent Conditions
Fair Trade requires that farmers provide safe and healthy conditions for their workers. It also bans all use of child labor and forced labor, which are widespread in many parts of the world – particularly on cocoa plantations, as CNN reported in 2012. Fair Trade rules ban all forms of worker abuse, harassment, and discrimination, including discrimination based on political affiliation or union membership. 4. Respectful Relationships
Fair Trade promotes open, honest communication among producers, buyers, and consumers. Fair Trade dealers do their best to give growers the information they need about market conditions, share what they know about the best growing practices, and provide technical assistance when needed. Importers seek to build long-term relationships with growers and work with them to solve any problems that come up. 5. Community Development
On top of the regular price for their goods, growers earn a Fair Trade Premium to invest in their communities. For coffee, for instance, they get paid an extra $0.20 per pound, plus an extra $0.30 if it’s grown organically. These funds go toward projects like building new schools, providing scholarships, improving nutrition and healthcare, and digging wells. Farmers can also invest the money into their businesses, spending it on irrigation for fields or on organic certification, which can enable them to earn higher prices for their crops in the future. 6. Environmental Sustainability
Although not all Fair Trade products are organic, farmers are required to use sustainable growing practices that protect natural resources, including water, soil, and natural vegetation. The use of pesticides and fertilizers – particularly the most harmful ones – is restricted. Farmers also pledge to use energy efficiently and manage waste properly, reducing, reusing, and recycling whenever possible. The use of genetically modified organisms (GMOs) is specifically banned for all Fair Trade products. 7. Respect for Local Culture
Fair Trade dealers promise to respect the cultural heritage of the growers they work with. Instead of forcing them to adopt the latest, most efficient methods for growing or producing goods, they allow them to follow their traditional practices, while also teaching them about new techniques. In this way, growers can keep their traditions alive while still increasing their production to keep up with the market’s demands.
The largest worldwide Fair Trade organization is Fairtrade International. It works with more than 1,200 different producers in 74 countries, which employ more than 1.5 million farmers and workers. Fairtrade International employs an organization called FLOCERT to certify all its members and enforce its standards. Its label, known as the FAIRTRADE Mark, appears on over 27,000 products worldwide, including food, drinks, cotton, clothing, and jewelry. Fair Trade Certified
The Fair Trade Certified label represents Fair Trade USA, the leading certifier of Fair Trade products in the United States. This organization, formerly known as Transfair USA, was once a part of Fairtrade International, but it split off in 2011, adopting a new name and its own set of standards. For instance, Fairtrade International requires all its coffee to come from collectives of small farmers, while Fair Trade USA also accepts coffee from large plantations run by a single company. Fair Trade USA certifies a wide variety of products, including coffee and tea, fresh fruits and vegetables, spices, wine, and clothing. Inspections for these goods are performed by a third-party certifier called SCS Global Services. Fair for Life
Most Fair Trade programs apply to specific products and aren’t concerned with anything else the company produces (companies may produce multiple products – some Fair Trade, some not). Fair for Life, by contrast, only works with companies that provide fair wages and working conditions for all their staff, as well as their suppliers – not just the producers of certain specific products. The Fair for Life label can be used for nearly any type of goods – food or non-food, raw material or finished product – and certain types of services as well. Currently, there are about 500 different products certified as Fair for Life, all made by companies that meet the Fair for Life standards. The certification process is administered by the Institute for Marketecology. Fair Trade Federation Member
The Fair Trade Federation (FTF) is not a certification program; rather, it’s a membership organization for U.S. and Canadian companies that follow Fair Trade principles. Individual companies pay dues to the Federation and get the right to display its label, showing that they’re committed to the principles of Fair Trade. Companies don’t need to have Fair Trade certification to join the FTF, which means they don’t need to pay the fees both FLOCERT and Fair Trade USA charge for their programs. However, they must show that they meet the group’s strict code of practice for all their products – a strict standard that only 50% to 60% of all the companies that apply are able to meet. World Fair Trade Organization
The World Fair Trade Organization (WFTO) is a global network of smaller Fair Trade organizations, as well as individual companies. The WFTO has a five-stage guarantee system to monitor all its members and make sure they conform to the principles of Fair Trade and to the group’s own Fair Trade standard. Run from a central office in the Netherlands, the WFTO represents over 370 member organizations and 40 individual associates, spanning 70 countries and 5 continents. UTZ Certified
The UTZ Certified program is not a Fair Trade certifier, but it stands for many of same principles: sustainable farming, safe working conditions, and better opportunities for farmers and their families. Unlike Fair Trade, UTZ doesn’t guarantee farmers a baseline price for their crops, but it does pay them a premium over the market rate, as well as helping them improve quality and yield so their crops are worth more. UTZ monitors the farms it works with to make sure they follow its codes of conduct, which cover farming methods, working conditions, and the environment. UTZ is the largest program for sustainably grown coffee and cocoa in the world, accounting for nearly 50% of all sustainably labeled coffee – its clients include such major companies as Mars, Nestlé, and IKEA.
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By Amy Livingston Date October 13, 2022FEATURED PROMOTION
Take a stroll down the coffee aisle of any large supermarket, and there’s a good chance you’ll see at least one or two bags of beans sporting a little label that says “Fair Trade.” These bags don’t look obviously different from the others on the shelf, but their price is definitely on the high end – at least $7 per pound, and as high as $15 per pound. What, you might wonder, makes them worth that extra money? The answer is that when you pay extra for Fair Trade coffee, the money goes directly to the farmers who grow it. Fair Trade coffee dealers guarantee the growers a fair wage for their products, and in return, the farmers promise to provide decent conditions for their workers and to grow their coffee in an eco-friendly way. The same guarantees apply to other products bearing the Fair Trade label, such as chocolate, sugar, bananas, and cotton. Fair Trade products are a hot commodity. The British newspaper The Guardian reports that global sales of Fair Trade products rose by 15% in 2013, reaching a total of £4.4 billion ($6.55 billion). Worldwide, the Fair Trade movement that year supported more than 1.4 million farmers and workers in 74 countries.Principles of Fair Trade
The goal of Fair Trade is to reduce poverty for farmers and workers in developing countries. This means not just paying them more in the short term, but also helping them improve their skills, build up their communities, and protect the local environment so its resources will be there for future generations.Motley Fool Stock Advisor recommendations have an average return of 397%. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now Organizations involved in Fair Trade, including Fair Trade USA and the Fair Trade Federation, have outlined several basic principles for both buyers and sellers to follow: 1. Direct Trade
Fair Trade importers work with producers as directly as possible. Cutting out the middleman enables the importers to pay the farmers a larger share of the money their products will eventually fetch on store shelves. Fair Trade importers often deal with collectives – groups of small-scale growers who run their own farms with little or no hired labor. To meet Fair Trade standards, the collectives must be democratically run, with each farmer getting a vote, and must split their profits equally among all the members. 2. Fair Price
Fair Trade guarantees farmers a reasonable minimum price for their crops, no matter how low the market price falls. Buyers promise to pay producers promptly for their goods, and producers promise in turn to pay a fair wage to all their workers. Buyers also extend credit to their producers – for instance, paying them in advance of the harvest – to make sure the producers have all the resources they need to turn over their goods on time. 3. Decent Conditions
Fair Trade requires that farmers provide safe and healthy conditions for their workers. It also bans all use of child labor and forced labor, which are widespread in many parts of the world – particularly on cocoa plantations, as CNN reported in 2012. Fair Trade rules ban all forms of worker abuse, harassment, and discrimination, including discrimination based on political affiliation or union membership. 4. Respectful Relationships
Fair Trade promotes open, honest communication among producers, buyers, and consumers. Fair Trade dealers do their best to give growers the information they need about market conditions, share what they know about the best growing practices, and provide technical assistance when needed. Importers seek to build long-term relationships with growers and work with them to solve any problems that come up. 5. Community Development
On top of the regular price for their goods, growers earn a Fair Trade Premium to invest in their communities. For coffee, for instance, they get paid an extra $0.20 per pound, plus an extra $0.30 if it’s grown organically. These funds go toward projects like building new schools, providing scholarships, improving nutrition and healthcare, and digging wells. Farmers can also invest the money into their businesses, spending it on irrigation for fields or on organic certification, which can enable them to earn higher prices for their crops in the future. 6. Environmental Sustainability
Although not all Fair Trade products are organic, farmers are required to use sustainable growing practices that protect natural resources, including water, soil, and natural vegetation. The use of pesticides and fertilizers – particularly the most harmful ones – is restricted. Farmers also pledge to use energy efficiently and manage waste properly, reducing, reusing, and recycling whenever possible. The use of genetically modified organisms (GMOs) is specifically banned for all Fair Trade products. 7. Respect for Local Culture
Fair Trade dealers promise to respect the cultural heritage of the growers they work with. Instead of forcing them to adopt the latest, most efficient methods for growing or producing goods, they allow them to follow their traditional practices, while also teaching them about new techniques. In this way, growers can keep their traditions alive while still increasing their production to keep up with the market’s demands.
Fair Trade Certification
Fair Trade certification is a way of guaranteeing that both buyers and sellers stick to the principles of Fair Trade. There are several different organizations that certify Fair Trade products, each with its own label and its own set of standards. To bear the Fair Trade label, a product must meet all the standards of the certifying organization, which inspects farms regularly to make sure they’re following the rules.Fair Trade Labels
There are several different Fair Trade labels you might spot as you cruise the supermarket aisles. They include: The FAIRTRADE MarkThe largest worldwide Fair Trade organization is Fairtrade International. It works with more than 1,200 different producers in 74 countries, which employ more than 1.5 million farmers and workers. Fairtrade International employs an organization called FLOCERT to certify all its members and enforce its standards. Its label, known as the FAIRTRADE Mark, appears on over 27,000 products worldwide, including food, drinks, cotton, clothing, and jewelry. Fair Trade Certified
The Fair Trade Certified label represents Fair Trade USA, the leading certifier of Fair Trade products in the United States. This organization, formerly known as Transfair USA, was once a part of Fairtrade International, but it split off in 2011, adopting a new name and its own set of standards. For instance, Fairtrade International requires all its coffee to come from collectives of small farmers, while Fair Trade USA also accepts coffee from large plantations run by a single company. Fair Trade USA certifies a wide variety of products, including coffee and tea, fresh fruits and vegetables, spices, wine, and clothing. Inspections for these goods are performed by a third-party certifier called SCS Global Services. Fair for Life
Most Fair Trade programs apply to specific products and aren’t concerned with anything else the company produces (companies may produce multiple products – some Fair Trade, some not). Fair for Life, by contrast, only works with companies that provide fair wages and working conditions for all their staff, as well as their suppliers – not just the producers of certain specific products. The Fair for Life label can be used for nearly any type of goods – food or non-food, raw material or finished product – and certain types of services as well. Currently, there are about 500 different products certified as Fair for Life, all made by companies that meet the Fair for Life standards. The certification process is administered by the Institute for Marketecology. Fair Trade Federation Member
The Fair Trade Federation (FTF) is not a certification program; rather, it’s a membership organization for U.S. and Canadian companies that follow Fair Trade principles. Individual companies pay dues to the Federation and get the right to display its label, showing that they’re committed to the principles of Fair Trade. Companies don’t need to have Fair Trade certification to join the FTF, which means they don’t need to pay the fees both FLOCERT and Fair Trade USA charge for their programs. However, they must show that they meet the group’s strict code of practice for all their products – a strict standard that only 50% to 60% of all the companies that apply are able to meet. World Fair Trade Organization
The World Fair Trade Organization (WFTO) is a global network of smaller Fair Trade organizations, as well as individual companies. The WFTO has a five-stage guarantee system to monitor all its members and make sure they conform to the principles of Fair Trade and to the group’s own Fair Trade standard. Run from a central office in the Netherlands, the WFTO represents over 370 member organizations and 40 individual associates, spanning 70 countries and 5 continents. UTZ Certified
The UTZ Certified program is not a Fair Trade certifier, but it stands for many of same principles: sustainable farming, safe working conditions, and better opportunities for farmers and their families. Unlike Fair Trade, UTZ doesn’t guarantee farmers a baseline price for their crops, but it does pay them a premium over the market rate, as well as helping them improve quality and yield so their crops are worth more. UTZ monitors the farms it works with to make sure they follow its codes of conduct, which cover farming methods, working conditions, and the environment. UTZ is the largest program for sustainably grown coffee and cocoa in the world, accounting for nearly 50% of all sustainably labeled coffee – its clients include such major companies as Mars, Nestlé, and IKEA.