What is the Definition of Fair Trade and Why It is Important

What is Fair Trade?

Fair Trade is a trade system regulating trade practices between producers and importers. It is a trade system that ensures people who produce products in third world countries are paid a liveable wage and work under humane conditions. Products produced under the Fair Trade label must be produced using environmentally friendly and sustainable methods. Fair Trade is a solution to the practices of slave labor and non environmentally friendly production processes commonly employed by large companies. Besides the economic and environmental benefits of Fair Trade, the products meet high quality standards to ensure consumers get superior products for a reasonable price.

There are three main components contributing to the Fair Trade system. The three components are producers, importers, and certifiers. Producers create the product to be sold. Importers purchase the product from producers and import them into the country where they will be sold in. Both producers and importers must enter into an agreement stipulating rules that must be followed in order to be considered Fair Trade. Certifiers are agencies that set forth rules that must be contained in the agreements between producers and importers. Certifiers also label Fair Trade products to provide a way for consumers to know that a product meets Fair Trade standards.

How do Producers Become Involved?

For producers to participate in the Fair Trade system, they must start or join a group such as a cooperative, association, or organization. The cooperative, association, or organization must be controlled by the members and benefit member producers economically and socially. The main way this is done is through paying member producers liveable wages as determined by the local economy. The group must abide by certain rules to be certified Fair Trade. Fair wages, environmentally friendly production methods, and safe production methods are required practices by the group. Additionally, Fair Trade groups can not used forced labor, child labor or discriminative practices against a race or gender.

Importers have to abide by rules set forth in a Fair Trade agreement in order to be certified Fair Trade. Importers must pay a liveable wage to producers and pay a premium that producer groups can use to invest in the economy and other local projects. To ensure Fair Trade producers will have a buyer for their product, Fair Trade importers must sign a long term contract guaranteeing the purchase of the Fair Trade producer’s products.

How do Producers Become Certified?

Fair Trade certifiers are independent organizations that monitor producers and importers to ensure Fair Trade rules are being followed. There are different Fair Trade certifiers throughout the world that certify producers and importers and label Fair Trade products.