Fair Trade: a social movement and a business model

“Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the actions of human beings” – Nelson Mandela

Poverty has always existed and, despite progress being made, it is still severe in many parts of the world especially in Africa, Asia and Latin America. Women, making up 70% of the world’s 1,4 billion poor people and over 60% of the 925 million hungry, are highly affected and so are children. But poverty is not something irreversible. On the contrary, taking action and working to help those in need can reduce and maybe eradicate poverty. With the intention to help the poorest sector of society, a new social movement started between the 1950’s and 1980’s, later called Fair Trade, promoting trade between producers from developing countries and marketers from developed countries.

The movement started in Europe and North America where Alternative Trade Organizations were founded. They defined their trade model as a new one, different from conventionnal ones, since it was based on charity and solidarity to help the poor in Third World countries. Rather than buy products from industrialized countries, they would buy them from small producers in poor countries and bring them to the markets of developed nations such as the United States, France, Italy or Spain. After uniting in 4 major fair trade organizations such as the Fair Trade Federation in the US and Canada, the fair trade label was introduced in 1988, in order to show consumers that they were buying from producers living in the ‘Global South’ and thus, contributing to the improvement of their livelihoods.

Fair trade benefits both social and environmental problems. Since countries exporting their products live in political instability, war or have no respect for human rights, safe working conditions and children’s rights are important criteria, as well as respect of the environment. This international trading partnership provides equity and fairness to artisans, farmers, producers, and workers by guaranteeing minimum fair prices, fair salaries, a fair trade premium, transparency, the enforcement of certain working conditions, a long-term partnership and sustainability. The guarantee of fair prices is essential to ensure a fair salary and the fair trade premium. This social premium is a communal fund, paid on top of the fair trade minimum price, that is invested in the community to improve social, economic and environmental conditions in their communities. It can be used to build schools or improve healthcare, for instance. Another important aspect is the training that many organizations provide to producers to improve their skills, help them start or expand their own business.

Fair trade is considered an alternative business model whose principal goal is to empower producers to make their life better, fight against poverty and precarity, as well as, in the long term, participate in the economic development of those countries. But what makes it a business model?

Being considered as a business model means that fair trade has a different way to ensure that it generates income, especially for the producers that depend on it to contribute financially to the livelihoods of their families. Thanks to the partnership, producers do not have to worry about reaching the customers, since the partners will directly import the products in developed countries and sell them online or distribute them in stores. The marketing strategy for an organization or a business involved in fair trade is educating customers about the benefits of buying unique fair trade products from poor countries in order to help people get out of poverty and contribute to the economic growth of their communities. For example, an organization or trader working with artisans can highlight the uniqueness of handmade products versus mass produced goods.

Unfortunately, fair trade faces many challenges, like sustainability, that question the model. Even if the producers are guaranteed a fair price, this price cannot be too high in order to attract customers that could also decide to buy a cheaper product, regardless of its origin, instead of an expensive one, despite the fact that it comes from a fair trade source. In addition to that, supporting customers is also challenging since returning products to the producer is hardly possible, considering they usually live in remote areas in other countries and mostly on another continent. As a consequence, customer satisfaction is not 100% guaranteed when the product cannot be returned or exchanged. This situation also makes it imperative that traders have to travel to meet with producers, so the general logistics can be a big issue as well. Another problem is the instability of market prices affecting the producers, not because of the variation of the prices, but the quantity of products traders will buy from them. Despite a fair price, the producer does not have a guarantee of fair income.

We also need to take into account that, unfortunately, to be a certified producer or have fair trade products labelled as such, traders and producers sometimes have to pay expensive fees to fair trade organizations. As a result, less money reaches the Third World. Finally, the political situation in those countries has always been, and is still, challenging since producers are confronted with corruption, violence and the non-respect of human rights, especially women’s and children’s rights.

Fair trade has always seemed like a promising trade model working for the empowerment of the poor. Sadly, true and properly beneficial fair trade faces many challenges that need to be addressed. However, striving for fair trade should not be abandoned, since many improvements have been made for the livelihoods of many, especially women. Working through fair trade has helped women restore their self-esteem, gain economic independence and, by bringing an income to the household, become empowered. All these improvements have contributed to the reduction of gender inequalities in some communities and also help resolve conflicts. In sum, the fair trade movement does improve the possibility of conflict resolution and helps bring political stability to developing nations by empowering local manufacturers.

Sacha Vignault, University of La Rochelle, France, Intern for the Women’s International Center, San Diego (CA, USA)