The term "fair trade" applies to a system of trade designed to provide the producers of exports from low-income countries with a livable wage and fair labor practices, while employing sustainable farming and production practices. Fair trade uses consumer demand to create opportunities for producers who have been disadvantaged by the traditional economic model. A number of agencies certify products as fair trade as a way of encouraging consumers to buy fairly produced goods.
The primary function of fair trade practices is putting power in the hands of farmers and producers who make goods for export. Traditionally, under the free trade practices that have developed in recent years, barriers to trade have been heavily broken down allowing for multinational corporations to maximize profit by seeking areas with the lowest costs in production. Human rights activists developed fair trade as an alternative trade method by giving consumers the option of buying ethical products as a way of instilling fair labor and sustainable farming practices around the world.
Under fair trade practices, the "middleman" is cut out between producers and distributors. This gives producers the ability to maintain independence and negotiate sales of their products by protecting them from being monopolized by larger companies. It also gives them a greater profit margin by reducing the costs of the distribution chain. Local producers essentially become their own bosses, rather than being dominated by a multinational corporation.
Wage and Labor
Under fair trade practices, producers are paid a fair price which covers not only the costs of production, but enables them to make living wages rather than the subsistence wages often paid to workers employed by non-fair trade farms and factories. Fair trade also requires healthy working environments for employees and prohibits the use of children for cheap labor. By buying certified fair trade products, consumers can help ensure that the workers that farmed or made the products were treated humanely.
In the absence of adequate ecological protection in many parts of the world, fair trade products are produced with the local environment in mind. Sustainable practices and responsible methods of production are encouraged and sometimes required to be certified by one of the certification agencies. Free trade practices, on the other hand, largely encourage profit maximization at the cost of environmental damage.
Some of the profits taken in by the local producers are also reinvested in the local community for schools and other infrastructure. This economic development helps ensure that the community that is exporting the product further develops and educates their children and does not become dependent on a single source of revenue.
There is no single, regulatory, authoritative body, but four key international organizations, Fairtrade Labeling Organization, International Fair Trade Association (now World Fair Trade Organization), the Network of European Worldshops and the European Fair Trade Association, created a work group known as FINE and established a widely accepted definition of Fair Trade. Fairtrade Labeling Organization and other organizations certify fair trade products.