What is Fair Trade, And Why Should it Matter?

By: Gaurav Batra In: Trade Last Updated: 2011-05-05

Have you wondered what Fair Trade is after seeing a signboard reading so in the supermarket? Here's the answer- Fair Trade refers to an organized social movement and market approach that endeavors to develop better trading conditions for producers in the developing countries and help them grow. It focuses particularly on exports from developing countries to developed countries, most notably Handicrafts, Coffee, Cocoa, Sugar, Tea, Bananas, Honey, Cotton, Wine, Fresh Fruit, Chocolate, Flowers and Gold.

Fair Trade has given a boost to the economies of various developing countries. The six fundamental principles which must be followed in Fair Trade are:

Fair price: It ensures a minimum floor price which is guaranteed to the democratically organized employee groups in developing countries.
Direct trade: Fair trade eliminates the role of middlemen who unnecessarily exploit farmers and gives them a chance to compete in the global market. The importers can purchase directly from the Fair Trade producers.
Environmental sustainability: Fair Trade ensures optimum environment sustainability as the use of harmful agrochemicals and GMOs is strictly prohibited. Farmers are encouraged to use environment friendly methods in order to preserve the nature and eco systems.
Fair labor conditions: This type of trade ensures the fairest working conditions. Workers are provided safe and secure working conditions and exploitation in any form is strictly prohibited. Also child labor is not allowed for those following fair trade.
Transparent and democratic organizations: The working and dealings of all those associated with fair trade are extremely transparent and democratized.
Community development: Workers and farmers under the fair trade program get fair trade premiums which are used for their development in the social spheres. These programs aim to develop communities as a whole.

Nowadays, there are many products available in the market having the Fair-Trade certification which implies that they meet the set labor, environmental and developmental standards. This certification is provided by the FLO-CERT, a body that is in charge of undertaking the inspection and certification. If the products manufactured are required to be certified then it is advisable to do so as it establishes your credibility in the market. Thus, Fair Trade holds ample importance in the current trade scenario as when companies are realizing the significance of continuing ethical business practices rather than indulging in ruthless profit making.