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What is Fair Trade?

In simple terms, Fair Trade is trade in which fair payment is made to the producers of the goods. Consumers pay a little extra bit to get a product that they know has been ethically produced. However, the concept of fair trade is a more complex issue which raises many questions. These include:

• Who gets fair trade?
  
• Who decides what is fair payment?
  
• Why is fair trade needed?
  
• Shouldn't all trade be fair?
  
• Is fair trade good for anyone?
  
• How do I know something is genuinely fair trade?
  

A little more detail

Fair Trade is a social movement which aims too improve environmental and labour standards. It is concerned with the exports of raw material and goods from developing countries to developed countries. There are a number of organizations around the world that are involved with fair trade. FINE is an umbrella organization of fair trade networks. It has provided the following definition:

Fair trade is a trading partnership, based on dialogue, transparency and respect, which seeks greater equity (fairness) 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, in awareness raising, and in campaigning for changes in the rules and practice of conventional international trade.

What are fair trade products?

Fair trade supports producers in developing countries. Fair-trade products are often raw materials such as coffee, cocoas and bananas, or products made from these raw materials, grown in the developing countries.

Why fair trade?

The farmers and producers involved with the fair-trade system come from some of the poorest countries in the world. For them, debt can be a big problem. Fair trade can help them by offering a fair, stable price which will cover the cost of producing the goods. Fair trade can also help by improving access to no- or low-interest loans. This can make a big difference to a poor farmer. Other fair trade can help improve lives includes:

• No enforced child labour
  
• Safe, decent working conditions
  
• Fair prices - farm groups receive a guaranteed minimum price and an additional premium for certified organic products
  
• Helping people gain skills and knowledge to develop their businesses
  
• More protection from the price decreases of the international commodity (raw material) market
  
• Conservation of natural resources
  

History of Fair Trade

The first fair-trade label was launched in 1988. The label was called "Max Havelaar" after a character from a novel about the exploitation of coffee pickers in the Dutch colonies. The fair-trade label was set up by a Dutch development agency called Solidaridad because the price of coffee worldwidw had begun to fall quickly. The label gave the mainstream coffee industry the chance to work in a way that had not existed before.

Before this first fair-trade label was set up, there were other initiatives called alternative trade organization (ATOs). These were often started up by churches in North America and Europe to help refugees and other poverty-stricken countries after World War II by selling their handicrafts. The ATOs would buy the products from poor producers at an above-market price and sell them directly to consumers.

ATOs continue to operate today and some are linked in with fair trade organizations. There are also companies who practice ethical trading. These companies try to ensure that the basic labour rights of employees of suppliers in developing countries are respected. The Ethical Trading Initiative is an alliance of companies, trade unions and voluntary organizations whose aim is to protect and improve the working lives of people across the world in all stages of the supply chain.

Fair Prices and Wages

Debt and credit are big issues for those struggling to get out of poverty. Debt is one of the biggest problems for farmers in developing countries. Often, the harvest does not bring enough money in to pay back the pre-harvest loans. The fair-trade system can help farmer organizations by offering improved access to low- or no-interest loans. They also provide pre-harvest credit through buyers with whom they have long-term, stable contracts. Fair trade also helps producers and workers to form their own democratic groups via cooperatives and workers' unions. As a cooperative, they are able to take advatange of the economies of scale. These bigger groups can negotiate better prices because they can supply larger quantitues of the product. It also means that cooperatives can deal directly with the main buyer and do not have to go through agents who take a cut of the money.

Changing Lives

Fair-trade sales and premiums hace changed women's lives. It has provided opportunities for women to earn their own income and gain some independence. it has also provided funds to help with health care, alternative income opportunities, small loans, education and leadership training. For example, the Cecocafeen cooperative in Nicaragua used its fair-trade premiums to offer small business loans for women, build a health center and provide financial assistance for health services.

In Burkina Faso, the Union of Women Producers of Shea Products of Sissili and Ziro is using premium funds to extend the literacy program and to continue long-term funding of a children's day care and playground project. Most of the women involved in shea butter production are illiterate, so being able to continue with the literacy program will benefit many. The day care center will help give women the time to work.

Fair trade also provides opportunities for women to take a leadership role in the cooperatives. The premiums can be used to give women income in other ways. For example, women can gain an additional income using sewing machines bought using fair-trade premiums.