An arrangement aimed at assisting producers in developing nations to establish equitable and sustainable trading partnerships is known as fair trade. The fair trade movement combines better social and environmental standards with the payment of higher prices to exporters. The movement is primarily focused on commodities, which are goods that are usually exported from developing to developed nations but are also used in domestic markets (such as Bangladesh, Brazil, and the United Kingdom). Commodities include gold, sugar, wine, coffee, cocoa, fruit, flowers, and handicrafts.

A common definition of fair trade used by fair trade labeling organizations comes from FINE, an informal alliance of four global fair trade networks: European Fair Trade Association (EFTA), World Fair Trade Organisation (WFTO), Network of European Worldshops, and Fairtrade Labelling Organisations International. According to this definition, fair trade is a trading relationship that aims to increase equity in global trade and is founded on communication, openness, and respect. With the help of customers, fair trade organizations assist producers, spread awareness, and advocate for modifications to the regulations and procedures governing traditional international trade.

Fairtrade International (previously known as FLO, Fairtrade Labelling Organisations International), IMO, Make Trade Fair, and Eco-Social are a few of the accredited fair trade certifiers. Furthermore, Fair Trade USA, which was originally in charge of licensing the Fairtrade International label, defied the system and established its own fair trade labeling program, extending the definition of fair trade to encompass independent smallholders and estates for all types of crops. Fairtrade International certified about €3.4 billion worth of goods in 2008.

Wales became the first Fair Trade Nation in the world on June 6, 2008, and Scotland followed suit in February 2013. In the UK, where there are more than 500 Fairtrade towns, 118 colleges, more than 6,000 churches, and more than 4,000 UK schools that are part of the Fairtrade Schools Scheme, the fair trade movement is well-liked. The fair trade system run by Fairtrade International involved over 1.2 million farmers and workers in over 60 countries in 2011. The fair trade premium paid to producers was €65 million, which they used to strengthen their communities.

Some criticisms have been raised about fair trade systems. One 2015 study concluded that producer benefits were close to zero because there was an oversupply of certification and only a fraction of produce classified as fair trade was actually sold on fair trade markets, just enough to recoup the costs of certification. A study published by the Journal of Economic Perspectives, however, suggests that Fair Trade does achieve many of its intended goals, although on a comparatively modest scale relative to the size of national economies.

Some research indicates that the implementation of certain fair trade standards can cause greater inequalities in some markets where these rigid rules are inappropriate for the specific market. In the fair trade debate, there are complaints of failure to enforce fair trade standards, with producers, cooperatives, importers, and packers profiting by evading them.

One proposed alternative to fair trade is direct trade, which eliminates the overhead of fair trade certification and allows suppliers to receive higher prices much closer to the retail value of the end product. Some suppliers use relationships started in a fair trade system to autonomously springboard into direct sales relationships they negotiate themselves, whereas other direct trade systems are supplier-initiated for social responsibility reasons similar to fair trade systems.

Fair Trade Principles

The goal of the fair trade movement is to create a society where everyone may maintain a respectable and dignified living via their labor, with justice and sustainable development at the center of trade structures and practices both domestically and internationally.

More than just commerce, fair trade demonstrates the possibility of more justice in international trade. It draws attention to the necessity of altering the regulations and procedures governing traditional trade and demonstrates how a prosperous company can prioritize its customers.

Fair trade Certifiers and Membership Organizations all agree on these basic fair trade principles:

• Long-Term Direct Trading Relationships
• Payment of Fair Prices
• No Child, Forced or Otherwise Exploited Labor
• Workplace Non-Discrimination, Gender Equity, and Freedom of Association
• Democratic & Transparent Organizations
• Safe Working Conditions & Reasonable Work Hours
• Investment in Community Development Projects
• Environmental Sustainability
• Traceability and Transparency

However, there is a crucial difference between fair trade certification and membership in a fair trade organization. 

Organizations Promoting Fair Trade

The majority of fair trade import associations are either certified by or members of multiple national or international associations. The work of fair trade organizations is promoted, coordinated, and made easier by these federations. Among the biggest are the ones listed below:

Fairtrade International, created in 1997, is an association of three producer networks and twenty national labeling initiatives that develop fair trade standards, license buyers, label usage, and market the Fair Trade Certification Mark in consuming countries. The Fairtrade International labeling system is the largest and most widely recognized standard-setting and certification body for labeled Fair Trade.

Formerly named Fairtrade Labelling Organizations International, it changed its name to Fairtrade International in 2009, when its producer certification and standard-setting activities were separated into two separate, but connected entities. FLO-CERT, the for-profit side, handles producer certification, inspecting and certifying producer organizations in more than 50 countries in Africa, Asia, and Latin America.

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Fairtrade International, the nonprofit arm, oversees standards development and licensing organization activity. Only products from certain developing countries are eligible for certification, and for some products such as coffee and cocoa, certification is restricted to cooperatives. Cooperatives and large estates with hired labor may be certified for bananas, tea, and other crops.

Fair Trade USA is an independent, nonprofit organization that sets standards, certifies, and labels products that promote sustainable livelihoods for farmers and workers and protect the environment. Founded in 1998, Fair Trade USA currently partners with over 1,000 brands, as well as 1.3 million farmers and workers across the globe.

Global Goods Partners (GGP) is a fair-trade nonprofit organization founded in 2005 that provides support and U.S. market access to women-led cooperatives in the developing world.

World Fair Trade Organization (formerly the International Fair Trade Association) is a global association created in 1989 of fair trade producer cooperatives and associations, export marketing companies, importers, retailers, national and regional fair trade networks, and fair trade support organizations. In 2004 WFTO launched the FTO Mark which identifies registered fair trade organizations (as opposed to the FLO system, which labels products).

The Network of European Worldshops (NEWS), created in 1994, is the umbrella network of 15 national worldshop associations in 13 countries in Europe.

The European Fair Trade Association (EFTA), created in 1990, is a network of European alternative trading organizations that import products from some 400 economically disadvantaged producer groups in Africa, Asia, and Latin America. EFTA’s goal is to promote fair trade and to make fair trade importing more efficient and effective. The organization also publishes various publications on the evolution of the fair trade market. EFTA currently has eleven members in nine countries.

In 1998, the four federations listed above joined together as FINE, an informal association whose goal is to harmonize fair trade standards and guidelines, increase the quality and efficiency of fair trade monitoring systems, and advocate fair trade politically.

• Additional certifiers include IMO (Fair for Life, Social and Fair Trade labels), and Eco-Social.
• The Fair Trade Federation (FTF), created in 1994, is an association of Canadian and American fair trade wholesalers, importers, and retailers. The organization links its members to fair trade producer groups while acting as a clearinghouse for information on fair trade and providing resources and networking opportunities to its members. Members self-certify adherence to defined fair trade principles for 100% of their purchasing/business. Those who sell products certifiable by Fairtrade International must be 100% certified by Fairtrade International to join FTF.

Student groups have also been increasingly promoting fair trade products. Although hundreds of independent student organizations are active worldwide, most groups in North America are either affiliated with United Students for Fair Trade (USA), the Canadian Student Fair Trade Network (Canada), or Fair Trade Campaigns (USA), which also houses Fair Trade Universities and Fair Trade Schools.

The involvement of church organizations has been and continues to be an integral part of the fair trade movement:

• Ten Thousand Villages is affiliated with the Mennonite Central Committee
• SERRV is partnered with Catholic Relief Services and Lutheran World Relief
• Village Markets is a Lutheran Fair Trade organization connecting mission sites around the world with churches in the United States
• Catholic Relief Services has their own Fair Trade mission in CRS Fair Trade

Effect of Fair Trade on Growers

Workers in developing nations gain either little or a lot from fair trade. Due to the worldwide scope of fair trade, there are a variety of reasons why groups centered around fair trade arise. Globally, the fair trade movement has also produced varying socioeconomic transformations.

A study of coffee growers in Guatemala illustrates the effect of fair trade practices on growers. In this study, thirty-four farmers were interviewed. Of those thirty-four growers, twenty-two had an understanding of fair trade based on internationally recognized definitions, for example, describing fair trade in market and economical terms or knowing what the social premium is and how their cooperative has used it. Three growers explained a deep understanding of fair trade, showing a knowledge of both fair market principles and how fair trade affects them socially.

Nine growers had erroneous or no knowledge of Fair Trade. The three growers who had a deeper knowledge of the social implications of fair trade all had responsibilities within their cooperatives. One was a manager, one was in charge of the wet mill, and one was his group’s treasurer.

These farmers did not have a pattern in terms of years of education, age, or years of membership in the cooperative; their answers to the question, “Why did you join?” differentiate them from other members and explain why they have such an extensive knowledge of fair trade. These farmers cited switching to organic farming, wanting to raise money for social projects, and more training offered as reasons for joining the cooperative, other than receiving a better price for their coffee.

Many farmers around the world are unaware of fair trade practices that they could be implementing to earn a higher wage. Coffee is one of the most highly traded commodities in the world, yet the farmers who grow it typically earn less than $2 a day. When surveyed, farmers from Cooperativa Agraria Cafetalera Pangoa (CAC Pangoa) in San Martín de Pangoa, Peru, could answer positively that they have heard about fair trade, but were not able to give a detailed description of what fair trade is.

They could, however, identify fair trade based on some of its possible benefits to their community. When asked, farmers responded that fair trade has had a positive effect on their lives and communities. They also wanted consumers to know that fair trade is important for supporting their families and their cooperatives.

Some producers also profit from the indirect benefits of fair trade practices. Fair trade cooperatives create a space of solidarity and promote an entrepreneurial spirit among growers. When growers feel like they have control over their own lives within the network of their cooperative, it can be empowering. Operating a profitable business allows growers to think about their future, rather than worrying about how they are going to survive in poverty.

As far as farmers’ satisfaction with the fair trade system, growers want consumers to know that fair trade has provided important support to their families and their cooperatives. Overall, farmers are satisfied with the current fair trade system, but some farmers, such as the Mazaronquiari group from CAC Pangoa, desire a higher price for their products in order to live a higher quality of life.

A component of trade is the social premium that buyers of fair trade goods pay to the producers or producer groups of such goods. An important factor of the fair trade social premium is that the producers or producer groups decide where and how it is spent. These premiums usually go towards socioeconomic development, wherever the producers or producer-groups see fit. Within producer groups, the decisions about how the social premium will be spent are handled democratically, with transparency and participation.

Farmers’ organizations that use their social premium for public goods often finance educational scholarships. For example, Costa Rican coffee cooperative Coocafé has supported hundreds of children and youth at school and university through the financing of scholarships from funding from their fair trade social premium. In terms of education, the social premium can be used to build and furnish schools too.