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What are the Benefits of Fair Trade?

Paper Type: Free Essay Subject: Marketing
Wordcount: 3565 words Published: 10th Jul 2017

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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 labour protections. 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 (Anna, 2004)

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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, labour 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. (Alexander, 2002)[출처] [특집] í-¥ê¸°ë¡œìš´ 혁명, 공정무ì-­ì»¤í”¼_01 (한국공정무ì-­ì-°í•©) |작성자 ullimft 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 (Reykia, 2009). 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 (Ponte 2001). 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. (FLO, 2002) 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 (Gresser and Tickel 2002).

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 organisation, 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 (Raynolds, 2002; Murray et al, 2003) 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…” (Lyon, 2002:30).

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 (Douglas et al, 2003). This is related premium fund which is then invested in building schools, clinics, community centres, funding scholarships, paying medical bills and providing low-interest loans. Moreover farmers are learning from each other, with a spread of organic practices to neighbours food production (Jaffee, 2007). 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 recognised organisation and this recognition can accrue with international support from Fair trade attracting other international agencies (NGOs and donors) (Nelson, Tallontire and Collinson, 2002). 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.


The growth of ethical consumerism over the last 30 years provides the main driver behind the development of a fair trade market in the UK (Burke and Berry, 1974; Strong, 1997). Today, many consumers getting consider themselves ethical consumption this is important goal of fair trade movement. Fletcher (1990) suggested that there has been a move away from the self-focused consumer of the 1970s and acquisitive consumer of the 1980s towards a new focus on values. I think fair trade movement has also moved into the consumer awareness and understanding of fair trade.

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The other benefit is closer link between consumers and producer. The fair trade movement give to empowers consumers. As consumers, fair trade accreditation gives us the peace of mind of knowing that the producers in question got a fair deal (The five key benefits of Fair trade, 2009). Raising awareness of the fair trade products here is our primary concern since some consumers don’t even know what fair trade is all about


Economic benefit is most important of fair trade movement because it is directly related to their life. Giovannucci and Koekoek (2003) said the “coffee commodity market is driven exclusively by economic factors and, like all commodity markets, does not recognize, much less internalize into its prices, the very real environmental and social costs of production”.

The main positive impact of economic is guaranteed minimum price this is I can say stable prices. All famers want to increasing incomes it is one of fair trades main objective. Fair trade is reducing intermediaries and get closer between the farmers and the end consumer, farmers earn a larger share of the export price (The five key benefits of Fair trade, 2009). However, fair trade cannot remove risk for small producer. Accordin to Jaffee (2007), while noting that Fair trade farmers are still affected by market fluctuations, also finds positive economic benefits accruing to participants from the guarantee that a fair price is available to them, enabling them to make longer-term investment decisions.


Recently, interest in protection of the environment is growing rapidly throughout the world. Fair trade has improved the natural environment. Aranda and Morales (2002) said fair trade’s organic emphasis has promoted for example improve soil conservation and water management practices as well as the increased consciousness about the importance of conservation in general. Also, fair trade technical team help to make organic coffee for example they supported organic coffee production program, supported in part by fair trade returns and helped reduce soil from erosion. (Perezgrovas and Cervantes, 2002: 19).

Recently certain buyers, so-called “ethical consumers,” think about goods from a societal viewpoint such as “human rights” or “the environment” as being important standards for buying and consuming goods. They pay close attention to labor exploitation and environmental damage that occur as a result of producing the goods, and they regard their purchases as a kind of economic behavior conducive to an eco-friendly future society based on fairness and the justification of consumption. The term “fair trade,” which originated in Europe during the 1950s for the sole purpose of over-coming world poverty, is an organized social movement as a market-based model of international trade that promotes the payment of fair prices, as well as social and environmental standards. I suggest that if they want to keep protect natural environment then producer organize environmental protection management policy. They have to comply with national and international laws of protection (The five key benefits of Fair trade, 2009)

Fair trade movement in Starbucks

Starbuck is one of the good examples following the fair trade coffee campaign. Global coffee chain Starbucks is also helping to raise awareness of fair trade coffee products. Starbucks has been selling fair trade coffee beans since 2003 but from January to April sales of the whole beans increased 86.5 percent on-year. In 2007, 9 million kg of fair trade coffee beans which are 16 % of the world trade amount have been bought by Starbucks. Also Starbucks have self- ethical purchase program called C.A.F.E. Practice which tries to guarantee coffee farmers who are not member of the fair trade organization to sell high quality coffee bean with higher prices in order to continue consistent transaction and return enough profits to the farmers (Starbucks, 2007).

However, Starbucks was not the first main company of Fair Trade Coffee. One of examples is that Starbucks had used to pay 15 pence for 1 kg coffee and then sold it to consumers up to 130 pounds after a couple of processes so that Starbucks had harsh blame on getting excessive profits from consumers by not to pay enough to farmers. Since 2000, Starbucks has been increasing to buy fair trade coffee afterwards.

Why are Kenya, Ethiopia, and Srirangka getting poorer as Starbucks is getting prosperous at the same time? One of the main reasons is that plenty of money have been poured to buy to import foods because it is failed to self- support of foods on the fertile land and they try to produce coffee on the land which is supposed to use for foods instead. Worse fact is that coffee farm makes land useless by consuming all fertility. Coffee consumption in developed countries makes the standardization of these farm product systems and it is a consequence which is made by multinational companies like Starbucks. Human being has started to consume huge amount of coffee without precedent in history, and this happening makes agriculture system standardization as well as Starbucks is a main organization making price of raw material going down. Therefore, Starbucks has to take more responsibility for 95 % of poor farmers than to be proud of purchase 5 % of Fair Trade Coffee. (Starbucks, 2007)

It could be unfair to ask profit- making companies which try to maximize profit as much as they can to take responsibility of behaviour however, Starbucks has to at least purchase 50% of Fair Trade Coffee to get rid of the past’s act of barbarity and pay same contribution as its reputation they have to world. Of course, price of coffee sold by Starbuck could be being increased at the same if they would have bought coffee beans from the Fair Trade.


This paper has showed that the real benefits of fair trade movement. Actually, businessmen do not bring any profits in sales or benefits as they buy coffee beans from the Fair Trade. However, many countries have fair trade organizations and fair trade movement is getting issues. Then, why we need to buy fair trade product? Because it is an act of investing for the social goods noting that the more developed a nation’s coffee culture becomes, the more likely it is to import fair trade coffee. The main priority is to inform its citizens of what fair trade is and what is necessary to do in order to extend the quantity and improve the quality of products, so conscious consumers are more apt to search for buy fair-trade-based goods.

Fair trade movement has numbers of benefits then, if we buy coffee as much as we can coffee famers get lots of profits and their countries are getting strong and rich? The answer is no. What things do consumers do? Drinking less coffee is the way. Why? It would be better to let people in Kenya, Ethiopia, and Sriranka produce rice, wheat, and other plants on the fertile land rather than coffee farm by people in developed centuries consuming less coffee. Could it be fair that if someone feels hungry and only produces coffee corps by myself who drink coffee, Cappuccino, and Caramel Macchiato daily?

For these fair trade still comes many problems such as slow growth in the fair trade market. For example in Europe, the fair trade marketing campaigns have been underway for nearly a decade in many countries, fair trade coffee sales represent on average 1.2pervent of total coffee sales at the national level (EFTA, 2001). But fair trade movement try to growth of the market for coffee produced and big chain company trade like Starbucks buy more fair trade coffee beans so I guess this problem can figure out. On the other hand, fait trade is a difficult control system, especially to consumers’ willingness to support third world producers, and the transfers are therefore perhaps not comparable to government or NGO support (Anna, 2004). It may be that futher improvements to the global fair trade system.

The fair trade movment has improved in a short time but the range of benefits is getting wider and higher. In a world where consumption is separated from production over incresingly treater space and time, modern consumers experience the processes shaping their livees with growing datachment (Anna, 2004). Also, modern consumers concern natural this mean is they focus about well bing and organic. I belive that this little change is make great result in the future. Fair trade movement is one of the difficult challenge but this is neccesary to economic success the third world. As Appadurai (1996) has persuafively argued, we live in a world characterized by rapid trascontinental trvel and the instaneous trasmission of images and informantion via terevision and the internet. Fair trade, along with a wide range of other global and local movements that have emerged in recent years, has the potential to stimulate this glical collective imagination. (Anna, 2004)

Now it is the time when we should seriously question and consider the unknown truth behind the making of brand name goods. For example, where are the products produced? Who made the products? All the workers get paid fairly? Personally, I make it a rule when buying goods to take few seconds. First to examine the producer, price, and consumer of the goods is one of the ways and I’m going to buy what I will buy. Before buying a product, take a few second and ask yourself questions such as, “Is this a fair price?” “Do I consider myself a bad or ethical buyer and consumer?” bear in mind that by doing so you may be instrumental in helping the needy around the world climb out of poverty.


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