Background

“Fairtrade is a strategy for poverty alleviation and sustainable development. Its purpose is to create opportunities for producers and workers who have been economically disadvantaged or marginalized by the conventional trading system. If fair access to markets under better trade conditions would help them to overcome barriers to development, they can join Fairtrade.”

Fairtrade is a tool for development that ensures disadvantaged farmers and workers in developing countries get a better deal through the use of the international FAIRTRADE Mark.

Fairtrade Labelling was created in the Netherlands in the late 1980s. The Max Havelaar Foundation launched the first Fairtrade consumer guarantee label in 1988 on coffee sourced from Mexico. Here in the UK, the Fairtrade Foundation was established in 1992, with the first products to carry the FAIRTRADE Mark launched in 1994.

The FAIRTRADE Mark

The FAIRTRADE Mark is a registered certification label for products sourced from producers in developing countries.

For a product to display the FAIRTRADE Mark it must meet international Fairtrade standards which are set by the international certification body Fairtrade Labelling Organisations International(FLO). These standards are agreed through a process of research and consultation with key participants in the Fairtrade scheme, including producers themselves, traders, NGOs, academic institutions and labelling organisations such as the Fairtrade Foundation.

The FAIRTRADE Premium

The FAIRTRADE premium is a sum of money paid on top of the agreed FAIRTRADE price for investment in social, environmental or economic development projects, decided upon democratically by producers within the farmers’ organisation or by workers on a plantation.The premium is fixed by the FLO Standards Unit in the same way as the minimum price and remains the same, even if the producer is paid more than the minimum price for the product. The premium fund is typically invested in education and healthcare, farm improvements to increase yield and quality, or processing facilities to increase income.

The FAIRTRADE Minimum Price

The FAIRTRADE minimum price is the minimum price that a buyer of FAIRTRADE products has to pay to a Producer Organisation for their product. It is not a fixed price, but should be seen as the lowest possible starting point for price negotiations between producer and purchaser. It is set at a level which ensures that Producer Organisations receive a price which covers the cost of sustainable production for their product. This means it also acts as a safety net for farmers at times when world markets fall below a sustainable level. However, when the market price is higher than the FAIRTRADE minimum, the buyer must pay the market price. Producers and traders can also negotiate a higher price, for example on the basis of quality, and for some products, FLO also sets different prices for organic crops, or for particular grades of produce.

The standards also allow producers to request partial pre-payment of the contract. This is important for small-scale farmers’ organisations as it ensures they have the cash flow to pay farmers at the time they deliver their crop. Buyers are also required to enter into long-term trading relationships so that producers can predict their income and plan for the future.

If you would like to find out more about FAIRTRADE and FIARTRADE products go to www.fairtrade.org.uk/what_is_fairtrade