The Fairtrade International certification system covers a wide range of products, including banana, coffee, cocoa, cotton, cane sugar, flowers and plants, honey, dried fruit, fruit juices, herbs, spices, tea, nuts and vegetables.[2]
Fair trade is a strategy for poverty alleviation and sustainable development. It aims to create greater equity in the international trading system. It creates social and economic opportunities through trading partnerships with marginalised farmers and craftspeople in developing countries so that more customers are accessible to their products and they receive a favorable deal.[3] In return, the producers must comply with the standards set by the certifying authority.
Packers in developed countries pay a fee to the Fairtrade organisation for the right to use the Fairtrade certification logo. Importers of Fairtrade certified products must pay exporters a price higher than the market price for non-Fairtrade certified products to cover additional costs borne by Fairtrade certified firms in marketing and inspection. Any surplus after paying these costs must be used for local[clarification needed] social, environmental, and economic projects.[4]
Fairtrade develops private standards that aid the sustainable development of some smaller producers and agricultural workers in third world countries. In order to become certified Fairtrade producers, the cooperatives and their farmers have to comply with private standards set by Fairtrade International.[5] FLO-CERT inspects and certifies producer organizations in more than 70 countries in Europe, Asia, Africa, and Latin America.
The standards set for different stakeholders are as follows:
The majority of the members of the organization must be small-scale producers who do not highly depend on hired workers, but run their farms mainly by their own effort.[6]
Profits earned must be equally distributed among the producers.
Every member in the organisation should have the right to vote in the decision-making process.
The Fairtrade system consists of two types of pricing: the Minimum Price and the Premium. These are paid to the exporters according to the proportion of output companies are able to sell with the brand 'Fairtrade Certified', typically ranging from 17% to 60% of their turnover.
The Fairtrade Minimum Price is the price that must be paid by buyers to Fairtrade Certified producers. It is a floor price that covers producers' average cost of production, protecting producers from selling their products underpriced.[8]
The Fairtrade Premium is a sum of money which is paid[clarification needed] in addition to the payment for the products. It must be invested in the producers' business, livelihood and the socio-economic development of the workers. The producers have the largest power deciding how these funds are to be spent.[9]
The Fairtrade system committed to a programme of Monitoring, Evaluation and Learning (MEL), which aims at generating recommendations and analysis in support of greater effectiveness and impact. Ongoing market progress[clarification needed] is monitored by market-facing organizations present in countries where Fairtrade certified products are sold; market data is consolidated by Fairtrade International on an annual basis. These data form a basis for understanding the dynamics of how certification is developing, and how the impacts of Fairtrade are being distributed between producer organizations, geographies and products.[10]
Fairtrade's governance bodies also review key results and evaluate regularly in order to improve strategy and decision-making. These results are publicised within the Fairtrade system and among relevant stakeholders for further discussion of findings and recommendations.
The Fairtrade Foundation does not monitor how much of the premium paid to exporters reaches farmers. As the cooperatives incur heavy fees on inspection, certification and marketing, only a small amount of money is retained for the farmers.[11] In general, Fairtrade producers are only able to sell 18% to 37% of their output as Fairtrade certified while the rest is sold as uncertified at market prices.
Fair Trade is profitable for traders in rich countries rather than those in poor countries. In order to qualify as Fairtrade producers, cooperatives must meet the strict standards set by certifiers which implies that their constituent farmers must be quite skillful and educated. However, these farmers are predominantly from the poorest countries and lack the leverage to bargain with the cooperatives. Corruption even occurs in some cases.[12]
Fairtrade certified products sold through a monopsonist cooperative may be inefficient and prone to corruption. Fairtrade farmers should have the right to choose the buyer who offers the best price, or switch when their cooperatives are going bankrupt.[13]Amonopsonist cooperative in charge of Fairtrade certification may try to grow the fair trade industry for profit and not so much for the lives of the small farmers. At this point[may be outdated as of March 2022] they are trying to increase the supply of fair trade when the supply is already far beyond the demand.[14]
Concerns around Fairtrade certification were raised by the Institute for Multi-Stakeholder Initiative Integrity, with conclusions from their "Not Fit for Purpose" report that private sector led multi-stakeholder initiatives adopt weak or narrow standards that better serve corporate interests than rights holder interests.[15] Fairtrade responded to explain private standards are no substitute for public regulation.[16]
^Elliot, K. (2012). "Is my Fair Trade coffee really fair? Trends and Challenges in Fair Trade certification." Center for Global Development, Policy Paper, pp. 17.
