What is fair trade? Definition and meaning

The definition and meaning of fair trade can mean a social movement which aims to get developed nations to pay a ‘fair price’ for goods produced in developing countries, it also refers to only purchasing imports from places where employees are working in a safe and comfortable environment, and get paid reasonable wages.

Others define the term as a business environment where there is a level playing field – nobody subsidizes their goods, places unfair taxes on imported products, or does anything to tip the balance in favor of one producer or country.

According to the Cambridge Dictionary, fair trade is:

“A way of buying and selling products that makes certain that the people who produce the goods receive a fair price.”

Principles of Fair TradeThe aim of fair trade is to get consumers in developed countries pay a reasonable price for goods produced in developing nations, so that farmers and workers can earn a decent wage. The movement also pushes for better working conditions. (Image: adapted from wfto.com)

Fair trade in eye of beholder

What may seem as ‘fair’ for one person could be a disaster for another.

Imagine an extreme situation before the days of electricity and gas lights, when the only way we could light our homes was with candles.

The candle makers’ biggest competitor is the sun. For the candle maker, fair trade would be everybody being forced to board up their windows so that their homes were in continuous darkness. Would the rest of the population think this was fair? It is doubtful.

In the United States today, blue collar workers complain that their counterparts in Mexico earn much less, and because of this are the cause of unemployment in the US, because American factories close down and open up south of the border.

American blue collar workers would like the government to impose an import tax on manufactured goods that came from Mexico and other low-wage countries. For them, fair trade would be an import tax.

Fair Trade CoffeeFair Trade Fact:The average coffee grower earns no more than $2 per day.

Mexican farmers say that it is unfair that the US government subsidizes its farmers. They claim this is partly the reason why they have to abandon their farms, because they are unable to compete effectively against US’ artificial prices, and emigrate the USA looking for work.

Their definition of fair trade would be for the US government to stop subsidizing agricultural goods.

World Fair Trade Organization

According to the World Fair Trade Organization (WFTO):

“Fair Trade is a trading partnership, based on dialogue, transparency and respect, that 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.”

The principle core of the WFTO, with the help of consumers across the world, is to engage actively in supporting producers, raise awareness, and campaign for changes in the rules and practices on how trade is currently conducted.

World Fair Trade Organization LogoWFTO logo (Image: wfto-europe.org)

Producers, wholesalers and retailers who participate in the fair trade movement can be recognized by the WFTO logo.

WFTO says there is more to fair trade than just trading. It also:

– proves that in global trade justice is possible,

– highlights the need for changes in the practice and rules of conventional trade, and also shows how a successful business can put people first,

– a tangible contribution in the fight to eradicate poverty, combat climate change, and prevent economic crises.

Fair trade productsThe range of fair trade products in the shops is increasing every year. Look out for the logo, which could be one of several different organizations.

Fair trade effect on growers

Several studies have shown that fair trade is having a beneficial effect on a significant number of farmers in the Global South. Global South means developing countries.

A study in Guatemala involving 34 coffee growers found that 22 of them had a fair understanding of fair trade based on internationally-recognized definitions. Three of them had a deep understanding of it, and showed a knowledge of both fair market principles and how fair trade benefits them socially.

Three of the interviewees said they joined the Fair Trade movement – other than to receive a reasonable price for their coffee – because they wanted to raise money for social projects, and were keen to take advantage of the specialized training offered by the cooperative.

Unfortunately, most farmers across the world have never heard of the Fair Trade movement and have no idea that there is an organization out there that could give them a better price for their products or help them earn a decent wage.

Fair trade claimsLarge supermarket chains and multinational companies are aware of the ‘fair trade claim’.  Apart from being good for sales, it also helps enhance the quality of their brand name.

Also sadly, a significant proportion of consumers in the advanced economies do not know how little the farmers and workers in developing countries earn – specifically those who produce the goods that they purchase at their local supermarket.

Virtually everybody drinks coffee. What most people do not know is that coffee growers typically earn less than two dollars per day. Imagine trying to live on $60 per month – that is approximately six to seven hours’ work in the US, UK, Canada, Ireland, or Australasia on the minimum wage.

Every single study so far reported that when asked, farmers claimed that fair trade was having a beneficial effect on both their personal lives and their communities. They wanted to convey the message to consumers that this type of trade is important for supporting their cooperatives and their families.

Fair Trade Some FactsThere are many benefits related to fair trade. If we all took it more seriously, the ultimate aim of eradicating poverty globally would be achievable.

On its homepage, FairTrade writes:

“With Fairtrade you have the power to change the world every day. With simple shopping choices you can get farmers a better deal. And that means they can make their own decisions, control their futures and lead the dignified life everyone deserves.”

Video – What is Fairtrade? – Definition and Meaning

This Co-op video explains what the cooperative Fairtrade is and what it aims to achieve.