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Fair trade is an operation aimed at assisting less fortunate countries and its citizens by purchasing goods for a higher price than is offered elsewhere. The goal is to provide opportunities for income that would not normally exist without the aid of other nations. Citizens of impoverished countries can make products and have them distributed to more affluent countries for higher prices. Therefore, fair trade markets may be loosely defined as the countries that are in agreement with one another to abide by certain fair trade guidelines. Not only does fair trade seek to equalize the trading industry, but also aims to educate and assist producers in maximizing potential.
The concept of fair trade markets was first established during the 1940s. Products made by locals from poor communities were sold in North America and Europe for fair prices. The first fair trade certification movement was in 1988 when the price of coffee was dropping drastically. An opportunity to help Dutch coffee-farm workers while still receiving a decent price on coffee was offered to consumers. Agreements are available for a number of different products, including honey, rice, bananas, coffee, and wine.
There is a set of criteria that must be met by both the producer and distributor in order for the product to be stamped with a fair trade label. Different qualifications for different types of products are set by the Fairtrade Labelling Organizations International (FLO). After a site inspection, which is conducted by a separate organization called FLO-Cert, and a thorough application process, the producer may be approved. Once approved, he or she is then subject to yearly inspections to make sure he or she is continuing to uphold the standards.
Typically, there are numerous organizations associated with fair trade markets. Examples include TransFair USA and the Fair Trade Federation. Both groups focus on creating awareness and making agreements with companies to participate.
The most common product associated with fair trade markets is coffee. Starbucks® began offering certified coffee in many of its stores after feeling tremendous pressure from TransFair USA and consumers. The Global Exchange website offers consumers the names of hundreds of coffee distributors that sell at least one fair trade certified brand.
In business, companies typically attempt to purchase goods and services for the lowest possible price. Fair trade focuses a little less on the bottom line. Instead, it focuses more on ensuring that the provider of the goods or services is receiving a sufficient selling price.