Fair Trade

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Fair trade is a term used to describe a system of trading where each of the participants in the supply chain gets a fair price for the part they play in the chain without any party using their buying power to distort the relationships.

In a narrower sense fair trade is normally used to describe a relationship between poor commodity producers in the developing world and commodity buyers; a relationship where some buyers exploit their position of strength by buying at an unfair price. Other buyers may impose conditions on their continued purchase of a commodity; for example by insisting that the producer buy seeds and necessary fertilizer from them at inflated prices.

A number of fair trade organizations have been set up to encourage and ensure a fair trade deal is struck between the commodity producer and the buyer. Typically this fair trade relationship ensures the producers receive prices that cover the costs of sustainable production, advance credit, longer term trade relationships, and decent working conditions for hired labour. Those commodities that are fairly traded can then state this on their products which gives the end consumer the option to buy them and so encourage fairly traded products and reinforce the benefits of fair trade. To make it even easier for the consumer a system of labelling has been established which clearly identifies the product as having been fairly traded.

The idea of fair trade is strongly linked to the Trade Justice Movement.

Additional resources

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Author: Peter Marcham