What are the Benefits of Fair Trade?

According to many authors, food is physiological basic needs of the human being (Blackwell et al, 2006). Nowadays, people are getting interested health, organic and wellbeing food but most people do not know where products come from and how they are made.

Basically, fair trade aims is to improve the position of poor and disadvantaged food producers in the third World by helping them to become more advantageously involved in world trade (Jones et al, 2004). Also there are many fair trade retail products in many major supermarkets and independent shops most notably chocolates, fresh fruits, cottons, flowers, teas and coffees.

Especially coffee is one of the representative fair trade products. Most coffee has been originated in Ethiopia, Kenya, Colombia, Brazil and India but these centuries are economically poor. For example, if we buy 5pound coffee, coffee farmers get about 2%~5%. Even worse thing is that working condition of many coffee workers on these plantations brings their children to help them but these children and workers are not officially employed, therefore it is not subject to labor protections.

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Although our coffee consumption has been increasing day by day however the condition of the working environment of coffee farmer has been worse at the same time in the developing countries. The fact that Fair Trade coffee premiums only reach the farmers through cooperatives is an aspect that has not been explored yet, neither in study of co-operatives, nor in studies of Fair Trade.

The primary intention of this study is to offer critical perspective on the real benefits of the fair trade coffee movement.

This paper is to explore insight effective fair trade movement from different authors’ point of view. Thereafter, this paper will carry out discussions and disagreeing points address to author’ point of view. First, this study focuses on the impact on the fair trade products. Also, it finds out theories and analyses of the fair trade and fair trade coffee movement. Second, specific things could be divided from the question into four sections which are the social, culture, economic and environment affecting benefits. Moreover, there is fully understanding of what the observed evidence shows. Finally, conclusion with debate of benefits fair trade coffee movement will be discussed. Therefore, it provides the findings of this review of literature for future research and action.

What is fair trade?

Nicholls (2002) defined that the objective of fair trade is “to maximize the return to the supplier rather than the margin of the buyer, within an agreed development structure”. Similarly, Bird and Hughes, (2003) believed that fair trade is product specific and developmentally focused. From their point of view, fair trade related with ethical trade and consumption perhaps is the one that could consider as most benefits fair trade movement for food and beverage development. Past rational consumer defined that achieves a maximum of efficiency at a minimum of effort. These days, calling ethical consumption which is that consumers would focus on the satisfaction of products and information of the products is founded by themselves in a market is more important than the past when possession of products were spotlighted in accordance with low prices. This is another goal of achieving fair trade movement. If consumers understanding fair trade knows ethical consumption, it will influence on all food producers in third world as well as developing and achieving the Food and beverage industry’s goals.

The European Commission (1999) suggests that “the objective of fair trade is to ensure that producers receive a price which reflects an adequate return on their input of skill, labor and resources, and a share of the total profit commensurate with their input”. As well as all fair trade products are distributed by mainly NGO which is neither non-profit nor profit organization.

Historically, fair trade origins in The Netherlands in the mid-1980s, involve the certification of products that are produced, according to what are deemed to be fair trade principles. But Price water house Coopers (2001) suggest that the free trade concept originated in the 1960s in Northern Europe, while Tallontire (2001) argues that fair trade emerged in the 1950s and 1960s. The driving force behind fair trade in the UK was the alternative trade/charity shop axis, perhaps best represented by Oxfam and a host of small, independent traders. The aim here is to provide access to traditional retail distribution chains in an attempt to facilitate greater consumer access to fair trade products.

According to the fair-trade labeling organizations international (FLO) in 2008, fair trade certified products have been growing on an average of almost 40% per year in the last five years and sales amounted to approximately 2.9 billion euro worldwide. From this result, we can find that fair trade movement has a positive impact to their organization system.

A brief description of fair trade coffee.

In most countries, coffee is accounts for the largest portion of fair trade items. This kind of coffee is sold in countries that are completely different from the origin where it was produced. A coffee bean is grown up in warm, tropical areas of Ethiopia, Kenya, Colombia, Brazil and India and the most of coffee is consumed in Europe and North America. This probably sounds like developing countries producing inexpensive raw materials that are manufactured and sold as finished goods in developed countries, and generally, that’s what happens with coffee. Large coffee companies buy coffee beans at a low price and produce cocoa and chocolate products to sell at a relatively high price.

The price elasticity of demand is also low, with coffee demand dropping only when coffee prices increase significantly. This movement is thought to encourage consumers to pay close attention to not only fair prices and quality of products but also the ethical purchase of bananas, chocolate, coffee, flowers, clothes, shoes, furniture, soccer balls, and so on. What is the motivation behind fair trade? It is suggested that the movement is aimed at deliberately paying a fair price to workers and farmers who produce the goods for both their work and time by means of paying a “minimum” price to producers regardless of the going price on the world be $1.21, in comparison to the 70 cents per 500 gram it fetches on the world market. This would make it possible for marginalized producers and workers to move from a position of vulnerability to economic independence and self-sufficiency. A present study showed that today’s coffee farmers receive around 6 percent of the value of a pack of coffee sold in a store.

In response, groups of consumers in Europe and the United States developed “fair trade” organizations to guarantee that farmers of coffee, as well as cacao and tea, would receive fair and consistent prices for their crops.

The benefits of fair trade coffee movement

Over the past few years, there has been an increase in the international market for fair trade coffee. This has been driver buy a number of different benefits can be divide this into four section. The following discussion with obvious benefits, that accrues at the social influences, culture revival, economic and environmental conservation.

Social influences

According to Putnam (1995) social capital is a ‘social organization, such as trust, norms, and networks that improves the efficiency of society by facilitating co-ordinated action’.

The results of fair trade movement are a better standard of living for some farmers and organic coffee made with organically produced coffee bean that consumers don’t feel guilty about buying. This is the main benefit of social part. And although fair trade coffee is somewhat more expensive that other coffee and now makes up only 1 percent of coffee sold, the fair trade idea is spreading quickly.

First, benefit to the individual producers. Most individual producers are small coffee famers. After started fair trade farms the famers make co-operated this is can get benefit for reduced market prices risk. Moreover the famers’ cooperative has a good internal financial management system. This mean is fair trade price that is directly goes to individual farmers. Also fair trade guaranteed minimum price and an additional premium. The additional premium is paid into a fund of bank for development project. Fair trade results in more stable incomes and is consequently one of the most important direct benefits that accrue to coffee producers. There is one interesting examples of individual famers benefits. Fair trade made to improving children’s education in Guatemala. “Cooperative members are able to send their children in higher numbers and a number of associates have children studying at the University level.

Secondly, benefit to communities. One of most visible community benefit has the social premium. The Fair Trade social premium has financed the cooperatives’ technical and other organizational support of coffee producers’ activities. This is related premium fund which is then invested in building schools, clinics, community centers, funding scholarships, paying medical bills and providing low-interest loans. Moreover farmers are learning from each other, with a spread of organic practices to neighbors’ food production. Also famers can help and share market knowledge and technical information this is access and get better prices in the conventional market. This benefit developed small farms and furthermore developed countries as well.

Finally, fair trade has organizational benefits. Benefits to individuals can flow from being part of a recognized organization and this recognition can accrue with international support from Fair trade attracting other international agencies (NGOs and donors). For example, fair trade organizations benefit farmers by buying coffee beans or other products from them directly at higher-than-market prices and eliminating “middle men” such as exporters. Also fair trade organizations encourage farming techniques that are not harmful to the environment or to farm workers, for example, growing coffee bean without chemical pesticides or fertilizers in the shade of rain forest trees.