For a young woman concerned with the sustainability of 21st century production and the protection of workers’ rights, the gradual growth of the fair trade market (8% in 2018, with sales topping $1 billion in the United States) is exciting. Twentieth century reforms have created safer and fairer conditions and wages in America, but some workers still face exploitation both in the States and internationally. The fair trade movement began in response to this reality. In the United States, the creation of Ten Thousand Villages and SERRV in the 1940s kickstarted the organization; in Europe, Oxfam led the charge.
In the beginning, fair trade organizations met informally. In 1987, eleven European organizations formed the European Fair Trade Association, which relations expanded to the World Fair Trade Organization in 1989. The WFTO unites 401 fair trade organizations from 76 countries. Members of the WFTO must adhere to their ten principles of fair trade, which are:
- Opportunities for economically disadvantaged producers – Support for workers in moving from poverty to economic self-sufficiency
- Transparency and accountability (in management and commercial relations)
- Fair trade practices – Includes prompt payment of producers
- Fair payment – Prices, wages, and local living wages
- No child labor, no forced labor
- No discrimination, gender equity, freedom of association
- Good working conditions
- Capacity building – Improvement of productivity and management skills
- Promoting fair trade – Raising awareness, honest advertising and marketing
- Respect for the environment – Maximization of raw materials, sustainable sourcing, reduction of energy consumption, minimization of environment impact
In 2017, fair trade sales reached over $9 billion, and the volume of sales continued to increase. In the United States, fair trade retail sales rose 5%. In addition, all of the top seven fair trade products but one increased in sales in 2017: bananas +11%, coffee +15%, cocoa +57%, sugar +30%, tea -12%, flowers +0.7%, and cotton +33%. These sales account for less than 2% of the global market, amounting to only 1.7% of market share in Switzerland, the country with the highest share, in 2015.
Despite the relatively small presence fair trade products have in the global economy, the movement is gaining attention. Most consumers are at least familiar with the fair trade label and the basic ideas behind it; and a field study from 2011, conducted in major U.S. grocery stores in New England, found that the sales of two popular coffee brands rose by 10% when marked as “fair trade”, suggesting that consumers respond positively to the label. Why wouldn’t they? The principles the WFTO promotes certainly sound undebatable.
For economists, though, fair trade isn’t so sunny and simple. In many cases, fair trade goods cost more than than non-labeled goods because a main initiative of the movement is to ensure for producers higher prices made of a minimum price and a price premium. This artificial increase of prices disturbs the world’s supply and demand balance, as it encourages fair trade crop producers to grow or make more of a product than the market demands, which naturally decreases the price of the non-fair trade goods.
As far as fair trade helping third-world producers goes, Oxford University economics professor Paul Collier argued in The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It that the framework boils down to unsustainable charity. “The price premium in fair trade products is a form of charitable transfer,” he explains. “They [the recipients] get charity as long as they stay producing the crops that have locked them into poverty.”
On that count, researchers also question whether fair trade really puts more money in producers’ pockets. Professor Philip Booth at the UK’s Institute of Economic Affairs notes that maybe only 25% of the extra money spent on fair trade goods returns to the farmers and craftspeople. A 15-year study of coffee mills in Costa Rica found that farm owners and skilled coffee growers reaped most of the benefits of fair trade; the poorer unskilled workers, none.
These inefficiencies notwithstanding, fair trade is still a worthy cause. It seeks to protect workers from forced and exploitative labor and to support sustainability in a world where households contribute 21% of carbon emissions and only 0.5% of water is fresh and accessible. The impact it has now and in the coming future for third-world producers will depend on the fair trade model that the organizations develop next.
More on buying fair trade
Labeling fair trade products started in the late 1980s with the Max Havelaar label for fairly traded coffee in the Netherlands. Today most fair trade products contain one or more of three major fair trade labels:
- The Fairtrade Mark: Fairtrade Labelling International, now Fairtrade International, assembled in 1997 to set international standards for fair trade. Fairtrade International, through the certification body FLOCERT, created the Fairtrade Mark that is the most well-recognized fair trade label today. This label adorns over 27,000 products, mostly food items.
- Fair Trade Certified: A popular label in America is Fair Trade Certified, which launched in 1998 through the originally coffee-focused Fair Trade USA and has expanded to produce, tea, and other agricultural products. The organization has unique standards for different industries.
- Fair for Life: Fair for Life is an international certification program that originated in Switzerland in 2006. It differs from the Fairtrade Mark and Fair Trade Certified in that the certification is not limited to some set of products. Any producer dedicated to the principles of free trade and who applies fair trade principles to their production, manufacture, and trade are eligible.
Read about fair trade production of specific goods at the Fairtrade Foundation here.