Fair Trade 101

I’ve been interning at Ten Thousand Villages for about a month now. When I first started, my main question was “What is Fair Trade?”.
Through researching fair trade for social media, I have been bombarded with information. Questions such as “should I be purchasing fair trade?” or “what does this do in the long run?” can be confusing! While valid, these questions did not answer my basic question of what fair trade actually is. So I decided to find the answers myself and created a Fair Trade 101. Enjoy! ūüôā

What is Fair Trade?

Fair trade is defined as trade in which fair prices are paid to producers in developing countries. The main goal of fair trade is to empower artisans and improve their quality of life as well as establish long-lasting relationships. The wages earned by these producers are determined by their location, skills, and minimum living wages.

So what’s the difference between Fair Trade and Free Trade?

“Free trade” refers to international trade left to its natural course, without tariffs or other restrictions. In a free trade model, wages are determined by supply and demand. This means that in developing countries where there are more people than there are jobs, wages can end up very low. Supporters of fair trade believe that just because workers are desperate for an income, doesn’t mean they shouldn’t receive a fair wage.¬†Fun Fact Friday

There are two main types of Fair Trade: Commodities and Artisan Crafts.

Commodities are raw materials or agricultural products that can be bought and sold by weight, such as coffee or copper. Because they are sold by weight, commodities are sold at a fair trade minimum price to ensure income security for the producers. Fair trade commodity producers also form cooperatives in their local regions to support community development, and receive a social premium on top of the minimum price that is paid to the cooperative to support community projects.

Artisan crafts, on the other hand, are items created by artists, with no two items exactly the same. Artisan crafts do not have a minimum price set because of the variability of the products; however, buyers set fair prices in collaboration with the producers, taking into account the cost of living, labor and housing in the artisan’s local area.

So what makes up Fair Trade?

According to the World Fair Trade Organization, there are 10 Principles of Fair Trade:

Principle 1 Creating Opportunities for Economically Disadvantaged Producers: Reduce poverty by working with small businesses and independent artisans

Principle 2 Transparency and Accountability: Clear and transparent communication with artisans, employees and stakeholders and appropriately including them in decisions.Phontong Handicrafts Cooperative

Principle 3 Fair Trading Practices: Does not maximize profits at producer’s expense, ensures that artisans are paid in a reasonable time, and maintains long-lasting relationships

Principle 4 Payment of a Fair Price: Price mutually agreed upon by producer and buyer that is appropriate in the location and is equal for men and women

Principle 5 Ensuring No Child Labor or Forced Labor: Ensure that there is no forced labor or child labor in the workplace through direct communication or through intermediaries.

Principle 6 Commitment to Non Discrimination, Gender Equity and Women’s Economic Empowerment, and Freedom of Association: No discrimination in hiring, training, promotions etc., a clear policy on equality and support of unions.

Principle 7 Ensuring Good Working Conditions: Working conditions, hours and safety are within the national and local safety guidelines and are continually being improved

Principle 8 Providing Capacity Building: Works directly with the artisans to improve their management and production skills, as well as their access to local and global markets.

Principle 9 Promoting Fair Trade: Educates consumer on fair trade and promotes fair trade with honest advertising and marketing techniques

Principle 10 Respect for the Environment: Maximize the use of raw materials that are sustainable, buy local resource use recycled or easily biodegradable material for packing.

Currently, fair trade is seen as a unique way to buy and sell products with small groups. However, fair trade is a model that can be used in any industry in order to ensure fair wages and a guaranteed minimum standard of living. The prices reflect not the lowest, cheapest way to produce a product, but the amount needed in order for the artisan behind a product to thrive and to continue producing their crafts in the highest quality available. Using fair trade as an economical framework allows us to create a world where creativity is produced and priced fairly and justly.

Resources:

http://smallbusiness.chron.com/trade-vs-fair-trade-1683.html

http://wfto.com/

http://www.fairtraderesource.org/uploads/2007/09/Free-Trade-Is-Not-Fair-Trade.pdf

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