The term fair trade has become a trendy and in some cases a politically correct concept . However, the term has varying meanings in how it is used and understood. Many people who have heard the term or use it, likely do not have a shared understanding of what it means. Unlike other international trade practices, fair trade does not have a regulatory body that monitors it, so it is difficult to know what products can and cannot be called fair trade.
International trade laws may also not allow trade to be equitable in some areas, for example rules against which nations or areas can sell roasted coffee beans instead of cheaper, raw beans. This article discusses the various definitions of fair trade and a brief summary of the limitations it currently faces.
What is the Definition of Fair Trade?
The meaning of fair trade and what it means for both the consumer and seller, is defined in vague and broad terms that may imply different things to different organizations and individuals. The UK based charity Oxfam defines fair trade as “an alternative livelihood for small producers, generating a new source of income and employment.” Supporters term it “a trading partnership based on dialogue, transparency and respect that seeks greater equity in international trade.”
The World Conservation Union (IUCN) emphasizes the rights of women in fair trade, characterizing it as a mechanism in ensuring that women’s work is properly valued and rewarded.
Fair trade may currently be better defined as an ideology rather than a practice as there are no formal standards and rules. It is further defined as a concept of: "Paying as much as possible rather than as little as possible [for products] … with the emphasis [of trade] being on social responsibility, where careful consideration is given to how business transactions will affect issues including natural resources, cultural traditions, working conditions, worker income and business sustainability." (Littrell and Dickson, 1999 cited in Carpenter, 2000:8)
Is Fair Trade Possible?
Fair trade is an ideology that is well meaning and aims for an ideal situation in terms of equitable or better compensation for growers, producers and sellers. However it is far from ideal as the term is relative and there is very limited regulation in which products or organizations can be labeled as fair trade. International trade regulations, many of which are directly designed to benefit richer, developed nations, may also hinder fair trade objectives. These trade regulations govern which nations or areas sell mainly cheaper, raw materials at prices determined by richer, developed nations which then produce more expensive, finished products.
Additionally, the concept of fair trade may sound ethical and make consumers feel good, but there are numerous questions to be asked in relation to economic realities. Further study and research is needed to ensure that fair trade continues to expand and benefit those that are currently disadvantaged and oppressed by common trade practices.
Fair Trade vs Free Trade
The concept of fair trade was borne in response and reaction to inequitable international trade regulations and to the concept of ‘free trade.’ Free trade is a trade policy which allows traders (companies and entrepreneurs) to act and transact without interference from government. Thus permitting trading partners mutual gains from trade at their agreed rates and with standard set by themselves. Under free trade, prices are a reflection of supply and demand of products and goods.
Author Twinkle Brar
International trade laws may also not allow trade to be equitable in some areas, for example rules against which nations or areas can sell roasted coffee beans instead of cheaper, raw beans. This article discusses the various definitions of fair trade and a brief summary of the limitations it currently faces.
What is the Definition of Fair Trade?
The meaning of fair trade and what it means for both the consumer and seller, is defined in vague and broad terms that may imply different things to different organizations and individuals. The UK based charity Oxfam defines fair trade as “an alternative livelihood for small producers, generating a new source of income and employment.” Supporters term it “a trading partnership based on dialogue, transparency and respect that seeks greater equity in international trade.”
The World Conservation Union (IUCN) emphasizes the rights of women in fair trade, characterizing it as a mechanism in ensuring that women’s work is properly valued and rewarded.
Fair trade may currently be better defined as an ideology rather than a practice as there are no formal standards and rules. It is further defined as a concept of: "Paying as much as possible rather than as little as possible [for products] … with the emphasis [of trade] being on social responsibility, where careful consideration is given to how business transactions will affect issues including natural resources, cultural traditions, working conditions, worker income and business sustainability." (Littrell and Dickson, 1999 cited in Carpenter, 2000:8)
Is Fair Trade Possible?
Fair trade is an ideology that is well meaning and aims for an ideal situation in terms of equitable or better compensation for growers, producers and sellers. However it is far from ideal as the term is relative and there is very limited regulation in which products or organizations can be labeled as fair trade. International trade regulations, many of which are directly designed to benefit richer, developed nations, may also hinder fair trade objectives. These trade regulations govern which nations or areas sell mainly cheaper, raw materials at prices determined by richer, developed nations which then produce more expensive, finished products.
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Additionally, the concept of fair trade may sound ethical and make consumers feel good, but there are numerous questions to be asked in relation to economic realities. Further study and research is needed to ensure that fair trade continues to expand and benefit those that are currently disadvantaged and oppressed by common trade practices.
Fair Trade vs Free Trade
The concept of fair trade was borne in response and reaction to inequitable international trade regulations and to the concept of ‘free trade.’ Free trade is a trade policy which allows traders (companies and entrepreneurs) to act and transact without interference from government. Thus permitting trading partners mutual gains from trade at their agreed rates and with standard set by themselves. Under free trade, prices are a reflection of supply and demand of products and goods.
Author Twinkle Brar
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