Fair trade is a movement to help the producers of goods receive fair treatment. This covers multiple areas of life and work, including:
- Compensation
- Working hours
- Access to resources such as health care
- Right to organize
- And much more…
Fair trade plays an important role in maintaining fair wages and living standards for sellers of all kinds of products, from fair trade espresso to fair trade tablecloths, particularly in less developed countries. It’s important to assess both the pros and cons of fair trade in order to fully understand its impacts.
This fact sheet will walk you through the pros and cons of fair trade to help build a more in-depth understanding of how fair trade impacts farmers, sellers, and buyers alike.
Background Information: Introduction to Fair Trade
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(Note: In this article, “Fairtrade” refers to the organization, Fairtrade International, and systems that derive from it such as the premium and certification. “Fair trade” refers to the concept as a whole).
Pros of Fair Trade
1. Fair trade’s minimum price system ensures a fair wage.
Fair trade guarantees a minimum price that farmers and producers will receive for their product. This helps farmers and other producers earn a living wage and improve their living conditions.
- Fairtrade Certified coffee cooperatives earn about 40% more than the current market price for their coffee products.
2. Fairtrade premiums increase cooperative systems and community strength.
A Fairtrade premium is an extra amount of money farmers and producers receive on top of the price of the product. This money is provided to a fair trade producers organization, a cooperative group of producers in the area, and can be used to fund community projects. Producer organizations can choose how to allocate the money from the Fairtrade premium.
- In 2020, fair trade farmers and workers were paid over $220 million USD in fair trade premiums, which equates to about $117,000 per fair trade producer organization.
- In 2020, fair trade producer organizations invested almost 50% of Fairtrade premiums back into tools or services for their members, such as direct payments and tools for farming.
3. Fair trade increases social equality.
Increased income and education opportunities from fair trade initiatives can have large social impacts, including increased gender equality. Many researchers argue that access to education is one of the most effective ways to reduce inequality. Fairtrade International also provides training specifically for women who own farms and other historically marginalized groups.
- 26% of workers spent their Fairtrade premiums on education. This includes projects such as buying school supplies for students in the community, establishing scholarship programs, and increasing access to computers.
- 41% of all fair trade workers are women. Fair trade certified producer organizations must adhere to gender equality standards such as no discrimination on the basis of gender and the implementation of initiatives focused on supporting women and other minority groups.
4. Fair trade encourages practices that are better for the environment.
Organic food: While fair trade is not the same thing as organic-certified, fair trade farms are encouraged to use organic farming practices like reducing the use of pesticides. Fair trade works to make organic farming the norm by providing training and resources to farmers. Fair trade organic products are also sold at a higher price, which incentivizes farmers to grow organic in order to make a higher profit.
- Over 60% of all fair trade certified products in the US are organic, and 52% of all fair trade certified farmers are organic-certified.
Wildlife conservation & climate change mitigation: Fair trade farms must comply with environmental standards that work to support the environment and local wildlife, especially endangered species. These include:
- Reporting their methods for reducing carbon emissions
- Using regenerative farming practices to increase soil health
- Not cutting down trees for farming
- Not using GMOs
More money to invest in sustainable farming techniques: Fairtrade premiums can be used to support projects to restore local ecosystems and to fund shifts to more environmentally-friendly farming methods. Fairtrade International also provides training to farmers on environmentally-friendly farming techniques such as pesticide-free farming and reduced irrigation farming. Fair trade aims to help farmers who are already being impacted by the effects of climate change.
- Around 30% of fair trade producer organizations invest some of their premiums into environmental projects.
5. Fair trade reduces unfair or unsafe working conditions.
Lowered rates of child labor: In 2021, the number of child laborers globally increased to 160 million. Fairtrade International seeks to reduce child labor through several standards, including:
- Fairtrade certified organizations may not employ children under the age of 15, and working children below 18 must prioritize their education and proper development over work.
- Not only does fair trade disallow child labor, but it seeks to reduce the causes of child labor such as low education access and poverty.
Worker safety: Fair trade is dedicated to ensuring worker safety for all types of production. Workplace dangers that fair trade works to prevent include exposure to toxic materials, workplace accidents, and sexual harassment.
- Farming is the 8th most dangerous profession in the United States, and is equally dangerous abroad.
- Producer organizations can choose to spend their Fairtrade premiums on reducing the costs of workers’ health insurance. For example, one fair trade farm used Fairtrade premiums to increase the number of workers with health insurance by 83%.
6. Fair trade allows smaller producers to compete on the global market
The combination of aid from Fairtrade International as well as higher profits, cooperative support, and educational opportunities means that fair trade farmers can become more competitive on a global scale, and even compete with larger brands.
Additionally, many consumers are aware of the Fairtrade label and are more likely to buy fair trade products because they can trust they are ethically and sustainably made.
- A recent study found that 70% of Americans sometimes make purchasing decisions based on a company’s ethics.
- 48% of these consumers consider employee treatment a major factor of what makes a product ethical.
Cons of Fair Trade
1. Fair trade benefits certified farmers, but may not benefit the workers they hire.
A 2019 study found that farmers who are part of a Fairtrade cooperative (Fairtrade certified farmers) receive higher wages and better working conditions. However, farm workers they hire do not benefit from fair trade standards because their own wages are kept low. This may be because:
- Farmers are not incentivized to increase farm workers’ wages and working conditions because they are not being adequately monitored by Fairtrade.
- Labor standards may be unclearly defined, and thus are not enforced.
- Smallholder farmers are often poor themselves and may be unable to pay higher wages, especially if they are not receiving significantly higher income as a result of fair trade certification.
Higher accountability is needed to ensure that fair trade is actually resulting in higher wages and more ethical labor conditions.
2. Fairtrade certification requires fees.
Fairtrade certification requires a fee that may be higher than small farms and producers can afford, especially if the certification does not pay off as intended. The cost of certification depends on the product, but in some cases, the fee can be thousands of dollars. This may exclude the poorest producers who need fair trade most.
- For example, Fairtrade certification was around 6 cents/lb for coffee in 2006, with an annual fee of 3 cents/lb. This was not much lower than the amount farmers received as the Fairtrade premium.
3. Fair trade requires time and community investment.
Running a fair trade cooperative takes time and investment from community members who may have limited time to spare. Gaining certification is a time consuming process, which may discourage some small producers from seeking it out.
- Becoming Fairtrade certified requires filling out an application online, working with the Fairtrade organization to get approved, upholding fair trade standards, and maintaining certification.
4. Fair trade products may be more expensive (but are generally competitively priced).
In some ways, this con is actually more of a myth. Some fair trade products are more expensive than traditional goods because the price is designed to support the workers. However, many fair trade products cost the same or only slightly more as other products, but a larger percentage of the sale price goes to producers. This is possible because fair trade organizations cut out middlemen who would normally take a percentage of the profit.
- Some fair trade products like coffee may be 40% more expensive than conventional products.
5. Fair trade products must be globally exported.
Most fair trade products are sold in a country other than where it was produced, meaning that the products must be transported. This transportation of goods has a high carbon footprint. Some argue that eco-conscious consumers should focus on locally-produced products, rather than imported fair trade products.
- In 2017, there were fair trade farmers in over 75 countries, and 30,000 Fairtrade Certified products were available in 150 countries around the world. While the spread of fair trade products is generally a good thing, it does increase the environmental costs of transportation and importation as compared to local products.
6. Buying fair trade may limit your options.
In many ways, the entire point of fair trade is to limit your purchasing options to only companies that engage in ethical practices. However, a downside is that fair trade is still growing and it may be difficult for consumers to find multiple fair trade options for products beyond coffee and tea. Buying fair trade means you will likely have fewer brand choices.
- Over 322,000 small farms produced Fairtrade certified chocolate. There are far fewer options for other fair trade products, like neck ties or food containers for example.
Key Takeaways of Fair Trade Pros and Cons
While fair trade does have some challenges that must be addressed, such as increasing oversight and increasing the number of fair trade certified products, overall, the pros of fair trade outweigh the cons. Fair trade helps increase equality, ensure fair wages, living conditions and working standards, and promotes sustainable practices.