Fair Trade Myths and FAQs

As awareness of fair trade grows, so do misconceptions. These are some popular myths about fair trade and the realities behind them.

Reality: Wages are designed to provide fair compensation based on the true cost of production, and are not based on North American wage standards.

Fair wages are determined by a number of factors, including:

  • The amount of time, skill, and effort involved in production
  • Minimum and living wages where products are made
  • The purchasing power in a community or area
  • Other costs of living in the local context

Reality: Fair trade seeks to improve the lives of the poorest of the poor who frequently lack alternative sources of income. Most fair trade craft products stem from cultures and traditions which are not represented in North American production. Most fair trade food products do not have North American-based alternatives.

Also, as North American fair trade organizations grow as successful small businesses, they employ more and more individuals in their communities.

Reality: International exchange lies at the heart of fair trade.  360° Fair Trade Organizations seek to maximize the positive elements of globalization that connect people, communities, and cultures through products and ideas. At the same time, they seek to minimize the negative elements that result in lower labor, social, and environmental standards which hide the true costs of production.

Reality:  360° fair trade promotes positive and long-term change through trade-based relationships which build self-sufficiency. Its success depends on independent, successfully-run organizations and businesses–not on handouts. While many fair trade organizations support charitable projects in addition to their work in trade, the exchange of goods remains the key element of their work.

Reality: Most fair trade products are competitively priced in relation to their conventional counterparts.  360°  Fair Trade Organizations work directly with producers, cutting out middlemen, so they can keep products affordable for consumers and return a greater percentage of the price to the producers.

Reality: While handmade products naturally include some variation, 360° Fair Trade Organizations continuously work to improve quality and consistency. Through direct and long-term relationships, producers and fair trade organizations dialogue about consumer needs and create high quality products. Fair traders have received awards at the international Cup of Excellence and Roaster of the Year competitions, SustainAbility in Design, the New York Home Textile Show, and other venues.

Reality: Fair trade encompasses a wide variety of agricultural and handcrafted goods, including baskets, clothing, cotton, home and kitchen decor, jewelry, rice, soap, tea, toys, and wine. While coffee was the first agricultural product to be certified fair trade in 1988, fair trade handcrafts have been sold since 1946.

Fair Trade FAQs

What does “fair” really mean?

The word “fair” can mean a lot of different things to different people. Fair trade is about more than just paying a fair wage. It means that trading partnerships are based on reciprocal benefits and mutual respect; that prices paid to producers reflect the work they do; that producers share decision making power; that national health, safety, and wage laws are enforced; and that products are environmentally sustainable and conserve natural resources.

How do I know that a product is fair trade?

The Fair Trade Federation screens and verifies companies that practice 360° fair trade.  These organizations don’t just buy and sell a few fair trade products; they integrate fair trade practices into everything they do.  These organizations have a deep level of commitment to fair trade practices and maintain long term relationships with small producer organizations.

You will also see some products in the marketplace that carry a fair trade certification seal.  Fair trade certification involves a worksite audit and a 10% fair trade premium.  These labels increasingly focus on large factories and farms.  They are often used by multi-national brands who cannot be fully fair trade but wish to improve some of their practices.

Do fair trade goods cost more than comparable non-fair trade goods?

Generally, goods sold by 360° Fair Trade Organizations cost the same or a few percent more than similar quality, conventional goods.  These fair trade products don’t cost more because the large percentage taken by middle people is removed from the equation. The cost remains the same as conventionally traded goods; however, more of the sale price goes to producers.

In the case of agricultural goods, is the quality comparable to conventional products?

In some cases the quality is actually higher because fair trade organizations factor in the environmental cost of production. For instance, in the case of coffee, fairly traded coffee is often organic and shade grown, which results in a higher quality coffee.

What is a fair wage?

Producers receive a fair wage when they are paid fairly for their products. This means that workers are paid a living wage, which enables them to cover basic needs, including food, shelter, education and health care for their families. Paying fair wages does not necessarily mean that products cost the consumer more.  360° Fair Trade Organizations bypass exploitative middle people and work directly with producers.

How much money (percent of sale price) do the artisans make?

Living wages vary widely between regions of the world and individual communities.  Therefore, there is no set percentage given to artisans.  Rather, open communication ensures that pricing is transparent and meets the full needs of artisans.   A 360° fair trade relationship is a true partnership, allowing all to make a fair profit margin.

Why do 360° Fair Trade Organizations support cooperative workplaces?

Cooperatives and producer associations provide a healthy alternative to large-scale manufacturing and sweatshop conditions, where unprotected workers earn below minimum wage and most of the profits flow to foreign investors and local elites who have little interest in ensuring the long term health of the communities in which they work. 360° Fair Trade Organizations work with small businesses, worker-owned and democratically run cooperatives and associations which bring significant benefits to workers and their communities. By banding together, workers are able to access credit, reduce raw material costs and establish higher and more just prices for their products. Workers earn a greater return on their labor, and profits are distributed more equitably and often reinvested in community projects such as health clinics, child care, education, and literacy training. Workers learn important leadership and organizing skills, enabling self-reliant grassroots-driven development.

How do 360° Fair Trade Organizations offer financial support to producers?

Small-scale farmers and artisans in the developing world lack access to affordable financing, impeding their profitability. 360° Fair Trade Organizations buy products directly from producers and provide advance payment or pre-harvest financing. Unlike many commercial importers who often wait 60-90 days before paying producers, 360° Fair Trade Organizations ensure pre-payment so that producers have sufficient funds to cover raw materials and basic needs during production.

How do 360° Fair Trade Organizations offer technical support to producers?

360° Fair Trade Organizations provide critical technical assistance and support such as market information, organizational development and training in financial management. Unlike conventional importers, 360° Fair Trade Organizations establish long term relationships with their producers and help them adapt production to changing trends.

Note:  Some of the information above was originally published by the Fair Trade Resource Network.