What is Fair Trade?

Fair trade is market-based approach to alleviating global poverty and promoting sustainability. It aims to educate and empower disadvantaged producers and connect them to a market, so they too can participate in global trade. It encompasses principles such as:

• Anti-slave, anti-child labor
• Environmentally friendly processes
• A respectful relationship between producers and buyers
• A fair wage for the producers
• A healthy working environment for producers
• Gender equality with respects to wages and working conditions
• The development of communities for self-sustainability

With regards to the “formal definition” of fair trade, it is safe to assume that the most widely used one was created by an informal group comprised of the largest fair trade organizations in the world: FINE. FINE members are: Fairtrade Labelling Organizations International, International Fair Trade Association, Network of European Worldshops, European Fair Trade Association. They say:

“Fair trade is a trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. 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.”

Fair Trade Trends

Fair Trade is quickly gaining popularity. Marketers and media around North America are noticing that consumers are now demanding earth and people friendly products. Martha Stewart, Oprah, and even John Oliver from the Daily Show are talking about it. Check out this clip from John Oliver’s stand up debut:

History of Fair Trade

The fair trade concept can be traced back to the beginning of last century, when religious groups and politically-oriented NGOs decided to help poor communities around the world. This concept took a formal shape in Europe in the 1960s, gaining international recognition when the slogan at the time, “Trade not Aid”, was adopted by the UNCTAD (United Nations Conference on Trade and Development)) to promote fair trade relations with the developing world.

In the beginning, fair trade was almost exclusively about handicrafts such as jute bags. During the 1980s, however, these products lost their innovation and appeal, and fair trade organizations decided to move towards agricultural products. This is because many countries depended on the export of three or less key agricultural products, many of which were facing plummeting prices. Although in 1992 80% of the fair traded goods were still handcrafts, by 2002 food products comprised almost 70% of the fair trade market. (Nicholls, A. & Opal,C.(2004).Fair Trade: Market-Driven Ethical Consumption. London: Sage Publications.)

Another challenge that fair trade faced during the 1980s was the reduction in demand of the products within the “World Shops”, where products were usually found. Non-profit organizations and NGOs started an informal labeling process, with the hopes that they could sell fairly traded goods in mainstream shops and retail locations, and still carry the humanitarian appeal with them. This solution proved successful, and in 1997, fifteen European countries, the US, Canada, Japan, Australia and New Zealand decided to converge all of their labeling organizations under one umbrella called FLO International (Fairtrade Labeling Organizations International).

Finally, in 1989 the IFAT (International Fair Trade Association) was created to unite producers, wholesales, retailers and consumers involved in fair trade. This provided a networking organization for the exchange of ideas and for the promotion of fair trade commerce. As of 2004, all members of IFAT could display a new mark to be identified with fair trade worldwide.

Today, this market is still mostly developed in Europe. According to FLO International:

“In 2005, UNCTAD Fairtrade sales amounted to approximately €1.1 billion worldwide, a 37 % year-to-year increase over 2004. As per December 2005, 508 Certified Producer Organizations in 58 developing countries were Fairtrade Certified. That represents more than one million producers and five million people, including dependents, benefiting directly from Fairtrade.”

Controversies and theories

this section is comprised of different opinions found around the web, and don not necessarily represent the opinions of Handmade Expressions

Fair trade was supported by people who believed that there were inherent flaws in the capitalistic system and trading system around the world. This means that people in the geographic North have more resources and access to information, giving them a huge advantage over the people from the “South” of the globe when it comes to commerce. Therefore, the intentions behind fair trade is to give cooperatives and independent producers in the disadvantaged regions of the world a better chance to participate in world trade without losing out.

Some economists believe that, in the long run, fair trade will make producers fail. This is because they believe that by putting a price floor on products will encourage more players to enter the market and existing players to over-produce. This means that advocates of fair trade are replacing an inherent problem with another.

However, various organizations such as FLO International say that, in their experience, the producers don’t increase production. This is because they still depend on the willingness of buyers to purchase their products, regardless of the price, so they know how to manage their production. In addition, the extra money these producers are making is being invested in improving their communities and giving their children a good level of education to break the poverty cycle surrounding them.

On another extreme, the more liberal people believe that not enough is being done to promote fair trade. This is because less than one one-hundredth of the worldwide commerce involves fair trade.

Fair Trade Quick Facts

The Fair Trade Federation and Fairtrade Labeling Organizations International (FLO) have vast resources in their websites regarding fair trade. We have compiled some quick facts that we found in these websites here:

-The global market for fair trade was estimated to be $2.17 billion in 2006

- “As per December 2005, 508 Certified Producer Organizations in 58 developing countries were Fairtrade Certified. That represents more than one million producers and five million people, including dependents, benefiting directly from Fairtrade.” (quoted from: http://www.fairtrade.net/faq_links.html?&no_cache=1)

-In 2004 in North America, fair trade transactions amounted to only $359 million

-Most fair trade consumers at this point are women ages 30-50 and college students

-Fair trade aims to give equal rights as partners in the business to disadvantaged groups such as women and ethnic minorities

-Fair trade takes into account factors such as concerns for people and the planet, not just profit

-Fair trade involves giving credit (in monetary terms) to the producers so they can live off of it and make their products, even before these are sold

-At least 1/4 of the profits go back to fair trade producers

In addition, the following are some really interesting percentages of the distribution of sales of Fair Trade products in the United States, and the distribution of resources spent in promoting Fair Trade.

Want to start a fair trade retail business?

Then take a look at this presentation made by Brian Smucker of Baksheesh and Tony Hall of Hall-Wray Consulting.

In addition, check out this great information from the Fair Trade Federation.

For more resources, please visit the following websites:

Our Blog
FLO Internacional FAQ
European Fair Trade Association
Fair Trade Federation (North America)
TransFair USA
Oxfam International
Fair Trade Resource Network