What is a Fair Trade Company?

Patrick Roland

A fair trade company is one that aims to provide appropriate wages for goods originating in developing countries and then distribute those goods. This distribution theory originated in the 1940s and has developed into an alternative to sweatshop-produced goods. There are several organizations that work to provide fair trade goods; most follow unique guiding principles and are monitored similarly. Industries that utilize the fair trade system range from coffee and clothing, to toys and much more.

Fair trade started with the sale of handicrafts made by impoverished people.
Fair trade started with the sale of handicrafts made by impoverished people.

The foundation of fair trade organizations began in 1946, when Edna Ruth Byler began taking fabric and lacework from Puerto Rico, selling it in the United States, and returning the money to the impoverished areas where the items originated. Over the years many groups started operating on these same principles, with the goal of not taking advantage of poorer worldwide regions by only paying a small percentage of what would normally be paid. The fair trade company model began getting a larger amount of attention in the 1990s and beyond when fair trade coffee became a popular item.

Fair trade chocolates.
Fair trade chocolates.

There is no single fair trade company overseeing the production of various goods, but rather a series of federations and cooperatives with similar principles and goals for providing the earnings to those who deserve it. There are no concrete rules about what constitutes fair trade from one company to the next, but most follow similar sets of principles that differentiate them from traditional business models. Some of these principles include: creating opportunities for developing nations by purchasing goods at fair prices, having transparent relationships between producers and buyers in order to know where costs and expenses go, promoting working conditions that are conducive to good health and productivity, and avoiding child labor.

Fair trade originated as an alternative to sweatshops.
Fair trade originated as an alternative to sweatshops.

In order to assure consumers that a fair trade company is following these principles, there are certification stamps on all goods that meet these requirements. Fair trade producers are usually inspected by an organization and if the conditions meet requirements, an approval stamp is granted. This is intended to give consumers confidence that the goods being bought are produced in the environments that they claim.

In order for goods to be considered fair trade they can not be produced using child labor.
In order for goods to be considered fair trade they can not be produced using child labor.

A fair trade company can produce a number of different goods. Fair trade tea and coffee are found in many coffee shops and restaurants around the world. Fair trade art, fair trade crafts, and fair trade clothing are also found in various stores. One popular method for fair trade purchasing is the fair trade shop, a store that features nothing but goods produced in a fair trade environment.

Fair trade coffee and coffee beans.
Fair trade coffee and coffee beans.

Discussion Comments


@Ana1234 - The education part of that is really important, particularly when it comes to craft goods. I worked overseas for a while and one of the things I realized is that many craftspeople don't know how to sell to a market where people are used to consistent quality.

They are used to selling utilitarian items and think that good enough, is always going to be good enough and it doesn't matter if the seam is completely straight on that blanket or that one carved whistle has a hole and the other doesn't.

But if you're selling to a Western market, in bulk, you have to be able to give them a consistent quality of goods, which means that every item has to come up to a particular standard.

In fair trade fashion, for example, you have to be able to make a dozen shirts that are all the same, or the place selling them won't be able to advertise them or price them and so forth. Education in business practices can help to overcome this kind of ignorance.


@MrsPramm - Often fair trade organizations don't just throw money around like that. They give the workers a small stake in the company, or they include health benefits or reduced hours as well as a wage increase.

Or they might not directly employ people at all, but give them their own land and training and then buy the product from them.

It's been around as a model for a long time. I'm sure most fair trade companies want to create a stable partnership, which means nurturing the communities they buy from.


I've always wondered how they can do this in a way that doesn't upset the local economy too much. You can't just go into a place and start paying a small sector of the population with a massive wage increase. If you pay them the equivalent of minimum wage from your country in a place where the average person earns a tenth of that, you could make all kinds of strife.

I suspect that when you buy fair trade you're buying something that was still not produced with what you would consider a "fair" wage, but perhaps just an amount larger than the average.

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