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5 Common Misconceptions about Fair Trade
July 20, 2022
Properly compensating producers shouldn't be controversial or confusing. However, with conflicting information about the loosely-defined fair trade movement and a growing distrust of corporations, it can be hard not to be skeptical. The lack of understanding about the differences between various fair trade certifiers makes misconceptions common, and some myths criticizing Fairtrade are even perpetuated by some companies to validify their own practices. Here are 5 misconceptions about Fairtrade we want to debunk so that you can be confident in choosing Fairtrade.
Misconception #1: “Fairly-traded, fair trade, Fairtrade… It’s all the same!”
There’s a difference, and it’s all in the name. While “fair trade” is the general movement advocating for better pay for farmers and producers (which anyone can say they support), “Fairtrade” refers to the label trademarked by a non-profit multi-stakeholder group, called Fairtrade International. Fairtrade International is the most highly regarded and trusted fair trade certification body in the world, operating in 145 different countries and working with 1.8 million producers globally. You might see other labels on coffee, tea, or chocolate in the grocery store that say things like “fairly-traded”, “direct trade”, or “fairly paid”, etc., but these terms are separate from Fairtrade and aren’t based on any reputable certification system. Unfortunately, some companies really are taking advantage of consumers overwhelmed by an oversaturation of eco-labels, so it’s important to know the difference.
Misconception #2: “Companies displaying fair trade labels are all talk, no action.”
With greenwashing and ethics washing a real problem, it’s no surprise consumers are distrustful of the ethical claims companies make. The Fairtrade certification label is one you can trust (and it’s the only fair trade label in Canada that our government endorses!), so you can make your ethical purchases confidently.
Why is it reliable? Fairtrade International sets out strict social, environmental, and economic standards for producers to meet if they want to receive the Fairtrade Minimum Price and Fairtrade Premium Price. While any company can say they have something similar, Fairtrade does the work to line up their actions with their promises. It’s the only fair trade certification label to explicitly state what their standards are, how these standards are measured, and how much is paid for each product. Additionally, Fairtrade uses a third-party auditing company to ensure compliance, and shares reports online for total transparency.
Producer audits are an ongoing process in which producers are evaluated with both scheduled and unannounced audits. These independent auditors are usually based in the regions where they work, meaning they are sensitive to the producers’ cultural and legal differences, and able to communicate in their language. Moreover, Fairtrade does all it can to ensure impartiality through regular rotation of auditors in various producer networks, payment given solely by the certifier, and a fully-documented auditing process for transparency.
From workers’ wages and safety to the environmental impact of their farming practices, the Fairtrade logo is not a meaningless symbol that gives companies ethical brand value. Rather, it guarantees that there is a reliable process involved that assures accountability, where farming cooperatives, traders, and producers are all being regularly monitored by a third party following Fairtrade’s standards. More information about Fairtrade’s certification standards can be found here.
Misconception #3: “Fairtrade is expensive.”
There’s a lot to unpack here, but it’s important to mention we can’t speak in absolutes when every product has a different price point, which also differs between countries.
One thing that businesses selling Fairtrade products will always have to pay more for is the yearly Fairtrade licensing fee. For example, if a small local coffee roaster wants to start sourcing Fairtrade coffee beans, they will have to pay a few hundred bucks per year to get to use the Fairtrade logo. It’s not something that can be cut out, though. This licensing fee is crucial to keeping Fairtrade International running, by paying people employed by Fairtrade International who ensure product authenticity and transparency. It also makes up the Fairtrade Premium, which is directly given back to producer cooperatives. The fee itself is relative to the amount of Fairtrade product a business sells, and can usually be covered by marginally raising the price of the end product for consumers. When we say marginally, that would be like paying 5 cents more for a cup of Fairtrade coffee, which is so low, most of us would never even notice! But even so, it can be discouraging for smaller local businesses that are more sensitive to paying lump sums.
Then there’s the impact that lack of demand for Fairtrade products (specifically perishable items like produce) has on pricing. Because of the slow buy rate, shipping companies risk making less profit compared to importing conventional products. To make it worthwhile for the shipper, the retailer might have to pay more per pound of Fairtrade product imported, resulting in having to sell it at a higher price on the shelf. This ups the cost for Fairtrade products for both the retailer and the consumer, when it could be different if there was reliable demand for Fairtrade items.
Fairtrade products with a longer shelf life, however—like coffee, tea, sugar, or chocolate—are a safer bet for importers, and will generally have a similar price to conventional products. If it does cost a little more, this difference is usually pretty small: tens of cents. At the same time, many Fairtrade products are organic, meaning you’re paying for a high-quality product.
It’s important to mention that many big brands that offer extremely cheap prices are only able to do so by exploiting workers in the global south. Cheap pricing is no excuse for supporting sweatshop, slave, or child labour if it can be helped. While some Fairtrade products might cost more than non-Fairtrade items, this price difference makes a huge difference for workers in the global south, with families to support and children to send to school.
Fairtrade is built on empowering producers to thrive through self-sufficiency, not donations or ideas of white saviorism. One way that Fairtrade does this is by determining a floor price that covers at least the cost of production, known as the Fairtrade Minimum Price, for each Fairtrade-certified product. When the market fluctuates, farmers are still able to sustain production, ensuring farmers always get paid what they deserve.
On top of getting a fair price for their goods, farmers also receive a Fairtrade Premium, which is calculated as a percentage of the volume sold. This premium is not a donation, but the money that is generated from sales and delivered back to the producer co-op. The democratically-run cooperative of farmers decides how this premium is used in the community. Fairtrade Premiums empower communities to thrive on their own, and the minimum price allows cooperatives to continually invest in their community even when the market falls.
Fairtrade also offers educational support and training services to producer communities to increase their own self-sufficiency. These business schools, workshops, and networking opportunities give farmers the tools to be more sustainable, confident business operators for the future.
Misconception #4. “Fairtrade is a charity system based on donations.”
Misconception #5: “Fairtrade can’t ensure all workers get a fair wage.”
How can Fairtrade make sure each farmer is actually getting paid? It’s a valid question if you consider how many people are involved in the farming, selling, exporting, importing, and distribution of a product. It is an impossible task to try to surveil every transaction, but Fairtrade is constantly working to keep its accountability measures top-tier with third-party auditing strategies, receipt systems, pricing structures, and penalties. Even if it can't be perfect, the comprehensive methods Fairtrade uses are in place to ensure compliance and trust. Either way, it is a lot more than can be said of most businesses who rely on exploitative conventional methods and don’t have any safety nets or guarantees for producers.
Regardless, some Fairtrade critics point out that the ‘cooperative’ terminology used to refer to farmers collectively doesn’t necessarily mean every individual farmer will get their fair share of the money earned. This is not true. Farmers, who each own their own plot of land, are paid individually for their product upon delivery to the exporting warehouse, not from the cooperative. In this situation, everything is recorded through a receipt system and regularly audited to ensure accountability.
While cooperatives are paid an extra sum from sales, called the Fairtrade Premium, this money is added to wages already received and is reinvested into the cooperative’s collective through democratic decision-making processes. This means farmers are held accountable to each other and build their communities together by agreeing on positive impacts for everyone.
For workers on plantations, those employed at Fairtrade certified businesses have the right to join a union. This means they can negotiate their working conditions and compensation. If this option is not available for farmers, the plantation is stripped of its certification.
The whole reason Fairtrade exists is to support individual farmers who have been taken advantage of historically, and it does the work to prove it.