Fair trade is a concept that advocates for better prices, local operational sustainability, respectable working environment and fair terms of trade for farmers, business people and workers in the developing world.
Fair trade has specific focus on exports from developing to developed nations with emphasis on agricultural products and precious metals like gold. The key principle in fair trade is that products are certified by the Fair trade LabelingOrganization (FLO) as an indication that their production, processing and packaging comply with the internationally set and acceptable trade standards. These core standards include fair and stable price for farmers produce, respect for environment, shorter link between producers and consumers that eliminates middlemen, additional income for farmers and stronger position for small farmers in the world market.
This research paper utilizes Quantitative methods which involve the use of questionnaires in verifying pre-determined hypotheses. The questionnaire captures consumer opinions on fair trade products, comparison of fair trade against non-fair trade products and determines the consumer knowledge of the Fairtrade Mark. The research paper also outlines the history, structure, reasons for the development of the fair trade and the benefits as well as its limitations.
Development of Fair trade
The fair trade movement was started in Europe in the 1940s but did not gain popularity until 1960s when it was adopted by the United Nations Conference on Trade and Development (UNCTAD) to emphasis on the formation of fair trade relations between the developing and developed countries (Blackboard Academic Suite).
Among the reasons that necessitated the formation of this movement was among other things the protectionist policies put in place by developed nations which barred producers from developing countries from getting access to their markets. This was achieved through tariff barriers and export subsidies that served to undermine markets in these developing countries. There is also a dominance problem where a few large scale buyers who account for a large percentage of the total purchases. This leaves small scale farmers with limited options of where to sell their produce, the end result is selling at extremely low prices which lead to huge losses.
Many developing countries have a slim range of primary export products, these limited exports are processed by organizations in developed countries that then market them and as a result make huge profits on the value added. In as much as the producing countries have the ability to invest in value addition, developed countries have put in placetariff barriers that limit the sale of these value added products in their markets. This is a clear indication of unfair trade conditions and it for this that the fair trade movement was formed to try and address this imbalance.
Major developments in fair trade took place in the year 1988 when the first fair-trade label named Max Havelaar was launched. Fairtrade Labelling Organization (FLO) was set up in 1997 with the purpose of bringing together all the labeling programs under one body as well as putting in place product certification standard measures that are accepted the world over. The FLO then saw it fit to launch in 2002, a new International Fairtrade Certification Mark to help improve their visibility in retail outlets. It was then necessary for the FLO to split its roles into two, one being FLO International whose duty was to set Fair trade standards and FLO – CERT which served the purpose of inspecting and certifying the products.
Structure of Fair trade
The fair trade principles are implemented by a network of non-governmental organizations(NGOs) in 20 countries the world over that subscribe to FLO, an organization that is charged with the task of setting and maintaining product standards alongside trading relationships that facilitates flow of goods between the producers and importers in the respective markets. This flow of goods takes place after full certification by the FLO to ascertain the quality and compliance of the products with the internationally set standards.
Benefits of the Fair Trade Movement
One of the benefits is that the movement ensures that farmers obtain fair, consistent and stable price for their produce. By reducing the number of middlemen, farmers are able to share into a reasonable percentage of the selling price. The minimum price offered to farmers takes into account the cost of production and this ensures sustainability of farmers’ production activities. Other than the minimum price, farmers are paid a premium that caters for their social and environmental ventures.
Farmers must incorporate best environmental management policies in their production processes to be able to get certification of their products by FLO. This as a result encourages them to use inputs that are environmentally friendly like pesticides recommended by FAO and other organizations, controlled erosion, recommended irrigation techniques among others. This leads to protection of the ecosystem and sustainability of their agricultural activities.
Another benefit for fair trade is that helps small scale farmers in forming a strong united front in world markets. The information disconnect between farmers and their intended markets is usually so big to an extent that many farmers in developing nations do not know what these markets expects and offers. Membership to fair trade organization ensures that farmers are fed with the required information regarding their produce and with these they are able to meet the expected standards to be enable them receive the appropriate rewards.
Limitations of Fair trade
1) Limited points of sale
Many Fair Trade goods are usually sold at specialized shops which prevent many of them from making it to mainstream distribution chains and supermarkets. This limits the reach to majority of potential customers of fair trade products who mainly shop at supermarkets and major retail stores.
Tariffs are much lower for non-processed products than for processed ones and this makes it less profitable for farmers to export, a case in point is roasted coffee which fetches better prices than green coffee beans. This is a major setback to farmers who cannot make any value additions to their produce in order to get better prices. The end result to farmers and producer countries is that are not motivated to invest on processing facilities, an act that hinders industrial development in these countries.
Labeling is an issue that is yet to be resolved because as of today, certain large corporations are large amounts of produce like coffee that should be bought under fair trade, process them in their plants and mount the label on the final products. Fair trade was started to help protect small-scale producers from abuses and when large corporations make use of fair trade labels, consumers then make purchases with the knowledge that these companies are involved in fair trading which is not the case. This leads to foul play on the poor farmers that this system is meant to protect.
Analysis of Questionnaire results
A bigger percentage of the people who responded to the questionnaire were students with 67.3% being between 26-36 years of age. It is only 51% of the total number of respondents who are aware of the fair trade concept. This means that fair trade is not famous among the residence having detrmined that nearly half the total population does not know that it exists. It is therefore imperative for more marketing to be done on the importance of fair trade to improve the customer knowledge which will eventually lead to an increase in customer base for the fair trade products.
Out of the respondents who are aware of fair trade, only 36.7% buy their products with 91.7% purchasing between 1 and 5 products only and 8.3% between 6 and10. There is no concrete reason that motivates the consumers to purchase the products. This percentage is very low for the sustainability of fair trade concept and need to be improved for future growth to be achieved. Its advantages should be well communicated to turn the 40.5% of people who do not know the reasons why they consume the products into customers, loyal to the fair trade and the 49% of those completely unaware of the existence of fair trade into fair trade product consumers. The content of marketing should include the benefits of fair trade that include member farmers receiving fair and stable prices for their produce, protecting the environment, helps small scale farmers in forming a strong united front in world markets by getting full information on what is expected of them, allow farmers to get additional income from premiums and that it help to reduce the links between the producers and the consumers.
From the data collected, 57.1% of the respondents knew about fair trade in less than a year ago while 42.9% within the last five years with only 35.4% having the knowledge of the member counties to fair trade. This indicates that marketing of fair trade hardly started in less than five years ago. If 57.1% of the total respondents knew about it in less than a year, then going by the same trend, it is projected that the remaining 49% of the total world population currently not aware of fair trade will have the information in less than two years. A good percentage of consumers are very conscious about the price they pay for the products and in this regard, prices charged should not be exorbitant but competitive in comparison to non-fair trade goods.
It is worth noting that 57.4% of the respondents welcome the existence of fair trade, with 67.4% ready to pay additional 10% on price to be able to support the farmers from developing nations. It is therefore clear from this data that with proper management and marketing, fair trade has a bright future. Many consumers are of the idea that the quality of fair trade products is not the same to those of non-fair trade. The quality needs to be improved and the certification done by FLO CERT should be communicated to help consumers distinguish the authenticated products from those not approved. Many consumers of these goods use the foodstuffs and are keen on promoting these products. 60.4% of the total users are aware of the fair trade logo out of which 89.5% notice them on food products and drinks; this is more popular among the youth of less than 36 years old. Promotions should be done to popularize the other products like clothing, books and stationery products, skin products, home decoration, crafts and games products to ensure that consumption of these products covers all product lines.
Fair trade concept is a sociological intervention that ensures that there is fair trade between farmers from developing countries and the developed nations. Knowledge of this idea has substantially spread within the last five years and is currently known by 51% of the population. More marketing is recommended to ensure that substantial market is created and that fair trade is popularized in all nations around the world.