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Understanding Fair Trade Certification

We touch the Third World every day. The clothes we wear. Much of our hot drinks and exotic fruits. So, how can we touch them more kindly, more justly, more respectful of their dignity?

The easiest answer is buying Fair Trade Certified products whenever we buy coffee, tea, sugar, cocoa, bananas and other fresh fruit, honey, cotton, wine, chocolate, flowers and gold.

Take a look at the impact it has on producers:

Santiago’s story
Fair Trade Cotton in Cameroon
Paul Rice: Impact of Fair Trade
Paul Rice: Uncommon Hero

Fair Trade is a development strategy to address poverty among producers by helping them build sustainable businesses and communities. The funding for development comes from producers receiving a fair price for their goods, rather than from government handouts or foreign charity. Where producers have struggled against poverty because they have been impoverished by the unfair advantages exporters and developed nations have in the trade relationships between North and South, Fair Trade uses the free market system for the benefit of those producers.

Fair Trade has become organized as a certifying (= labelling) system. As a certifying system, Fair Trade is made up of:

  • the international standards-setting body called FLO [Fairtrade Labeling Organizations] International,
  • the international auditing organization called FLO-CERT that works in developing countries to certify the export products, and
  • the national auditing bodies that oversee importing, licensing and selling certified goods. In Canada the national certifying organization is Fairtrade Canada.

While many of the principles of Fair Trade have been in operation since the 1940s, the certification or labelling organizations began to emerge in the late 1980s and became organized in the late 1990s. Fairtrade USA, for example, only emerged in 1998, ten years after the European organizations began. So Fair Trade is very well known in Europe, with Britain being the country most aware of and committed to it. It is still not well understood in much of Canada.

FLO International standards cover fair wages, safe working conditions, democratic empowerment of all (including women), and ecologically sound agricultural practices. FLO does research to determine commodity-specific price floors that ensure the costs of production and costs of living are covered by the Fair Trade price paid to the farmer. Along with determining a fair selling price, FLO also sets a “social premium,” a small amount of money that goes to the producer co-op to use in community development projects such as building schools, medical clinics or roads, creating scholarships, developing export enterprises, etc. Coffee, for example, currently has a Fair Trade price of $1.40/lb. and the social premium is $0.20/lb. So the importer will pay $1.60/lb. to the producer co-op. That extra $0.20 can have a huge impact. In East Timor a coffee co-op used its premiums to build a medical clinic and so has become the primary provider for health care in their region.

FLO-CERT audits producers to ensure the international Fair Trade standards are met — labourers are paid fair wages, there is democratic involvement, protection of the environment, etc. FLO-CERT also audits exporters to ensure they are paying the appropriate prices. If prices on the world markets rise above the price floor, the Fair Trade price also rises, but regardless of how low the market price falls, the Fair Trade price floor guarantees the livelihood of the producer. Most producers sell whatever they can into the Fair Trade system, but until market demand for Fair Trade products increases, they must sell most of their goods on the world markets, even if they get less than the cost of production. (That’s why we are encouraging people to buy Fair Trade: if we don’t buy it, they can’t benefit from it.)

Fairtrade Canada monitors the importing, licensing and sale of all Fair Trade goods to Canada to ensure that all goods sold as certified can be traced, and that none is being sold as certified that has not come through Fair Trade channels. In this way, buying Fair Trade is the best guarantee that what we buy is having a direct and positive impact on the well-being of producers, their families and communities in the global South. Fairtrade Canada also promotes public awareness to grow the market for Fair Trade goods, which in turn increases the number of producers able to benefit from Fair Trade. The Fair Trade Town campaign is one of the strategies for increasing community awareness and commitment to Fair Trade.

Is Fair Trade a perfect system? No. There are no perfect systems in this world. If you would like to see some of the criticism of the Fair Trade system, read Colleen Haight’s “The Problem with Fair Trade”, but I suggest you read the responses, which are very good and show the weaknesses of the article. To be fair, also read Paul Rice’s response. In my opinion, the power of the Fair Trade model has been its capacity to organize and develop co-ops that have empowered millions of small producers, and its capacity to promote trade justice as a focused social movement.