Instant expert

Fair Trade

Fair trade is quite the buzz word these days, but what exactly is it?

Fairtrade Certified quinoa producers in Ecuador

Fairtrade Certified quinoa producers in Ecuador.

Credit: Fairtrade Labelling Organisations International / Dider Gentilhomme

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What is fair trade?

Fair trade is about ensuring fair prices, fair terms of trade and decent working conditions so that farmers and workers who have been economically disadvantaged or marginalised by the conventional trading system can achieve sustainable livelihoods.

The World Fair Trade Organisation defines fair trade as a "trading partnership based on dialogue, transparency and respect, that seeks greater equity in international trade."

Sounds good, but what's wrong with conventional trade?

Conventional trade is governed by numerous rules, regulations and agreements that tend to favour the richer, developed countries and discriminate against the poorest ones.

Many farmers and producers in developing countries don't have access to market or price information, and rely on middlemen to sell their products, which means they receive smaller and smaller returns for their goods.

Workers often suffer low pay, unsafe working conditions and poor living conditions.

For example, in Ecuador banana plantation workers are paid just US$1 per day while independent producers are paid as little as US$2 for a 40lb box of bananas, which does not even cover the cost of production.

Plantation workers also face health risks owing to the aggressive agricultural chemicals used.

So how does fair trade work?

The main objective of fair trade is to increase producers' incomes; this means that farmers and producers are guaranteed a fair minimum price.

The minimum price is calculated to cover the costs of sustainable production and a sustainable livelihood and includes an additional premium, which is invested in social projects such as building schools or health clinics.

If the international, or conventional, trade price exceeds the fair trade price then the fair trade price is adjusted to reflect this.

If, however, the international price falls below the fair trade price (the international coffee price for example is extremely volatile), then the producers will still receive the fair-trade price.

In addition to providing a fair income to producers, fair trade products address issues of environmental sustainability, fair trade producers must not use banned pesticides for example. Workers also enjoy better labour standards and learn skills to help them develop their businesses in the global economy.

How do I know if a product is Fair Trade or not?

The easiest way is to look for products that carry a 'Fair Trade' sticker, a labelling system that tells consumers about the origin of the product.

Fair trade focuses in particular on exports such as coffee, bananas, cotton, cocoa, sugar, tea and handicrafts, so if your box tea carries the Fair Trade marker then you know that it meets certain minimum environmental and developmental standards.

Although there are 23 different fair trade initiatives in 21 countries around the world - in Australia fair trade products carry the Fair Trade label administered by the Fair Trade Association of Australia and New Zealand (www.fta.org.au).

They all belong to Fairtrade Labelling Organisations International (FLO).

FLO is responsible for setting international fair trade standards that producers in developing countries and international trades are required to meet.