Fair Trade: Definition, Meaning & Principles

Fair Trade is not tied to any single organization, yet its principles resonate across global supply chains.

Definition of Fair Trade
Definition of Fair Trade

Quick guide:

What is fair trade?

Fair trade is a global movement and certification system that transforms trade by labeling products that directly benefit producers. Focused on creating a fairer and more equitable market for producers in developing countries, fair trade aims to address social, economic, and environmental sustainability.

By providing better prices (that never fall below market price) for commodities, fair trade practices hope to provide an alternative market system for those who have been traditionally disadvantaged by conventional trade practices, such as farmers and workers.

Today, there are several reputable, fair trade organizations working around the world to help indigenous farmers and craftspeople create and sell their wares in a more equitable manner. These organizations work with local producers and large companies to negotiate fair prices and then certify the producers’ work, the finished products, and the mechanisms that are used for trade.

This system allows consumers to buy fair trade-certified products with confidence that more money has gone to the producers rather than into the pockets of large corporations.

What are the most well-known fair trade organizations?

The following is a non-exhaustive list of some of the most well-known and verifiable fair trade organizations:

Though the primary aim of these fair trade organizations is to create more equitable market conditions, there is usually a strong environmental component as well. Understanding that a clean local environment will help to ensure long-term sustainability for producers, most certified products must be produced in an environmentally-preferable manner – conserving water and energy and using fewer toxins.

What types of principles do fair trade organizations operate by?

The following are common principles upheld by fair trade organizations:

  • Community improvements: A thriving community fosters sustainability and ensures long-term success for local producers. Thus, many fair trade organizations focus on community enhancement through development, medical assistance, environmental initiatives, and educational projects.
  • Credit assistance: Fair trade organizations aid local producers in achieving self-sufficiency by facilitating access to credit markets, thereby fostering independence. An example of an organization centered around this is be the Fairtrade Access Fund (FAF).
  • Cultural protection: As major corporations increasingly influence local economies, many cultural traditions face extinction. Fair trade organizations endeavor to safeguard the cultural heritage of communities.
  • Fair pricing: Conventional markets are inherently volatile due to the dynamics of supply and demand. Such fluctuating prices can leave small producers vulnerable, especially if commodity prices plummet below production costs. Fair trade organizations, however, guarantee fair prices, ensuring security and long-term viability for producers. This is called the Fairtrade Minimum Price.
  • Eliminating the middleman: By promoting direct trade systems, fair trade organizations aim to maximize the profit retained by producers. They foster this by assisting producers in forming cooperatives, which provide both bargaining power and stability.
  • Market and production education: A core objective for many fair trade organizations is to educate their members. This helps them enhance their product quality, understand environmental implications, and hone their market navigation skills, thereby achieving better product pricing and independence.
  • Safe working conditions: Foremost among the concerns of fair trade organizations are worker conditions. They guarantee that workers, whether producers or their employees, operate in safe environments and receive fair compensation for their labor. The use of child labor is stringently prohibited by the majority of certification systems.