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Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices, Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives.
Infographic: Why is Fairtrade important?
Today, more than six million people - farmers, producers, workers and their families - around 63 countries benefit from the unique, independent Fairtrade system. Fairtrade provides farmers and workers in developing countries with a fair price (the Fairtrade Price) for their produce, helping protect them from damaging fluctuations in world market prices. They also receive an additional sum of money (The Fairtrade Premium) for investment in social, economic and environmental development in their community, such as educational and medical facilities. Fairtrade Certification standards also prohibit the use of forced and abusive child labour.
Fairtrade delivers a better deal for farmers and producers in the developing world through:
The Fairtrade minimum price is the minimum price that a buyer of Fairtrade products has to pay to a Producer Organisation for their product. It is not a fixed price, but should be seen as the lowest possible starting point for price negotiations between producer and purchaser. It is set at a level which ensures that Producer Organisations receive a price which covers the cost of sustainable production for their product. This means it also acts as a safety net for farmers at times when world markets fall below a sustainable level. However, when the market price is higher than the Fairtrade minimum, the buyer must pay the market price for example on the basis of quality, and for some products, Fairtrade International (FLO) also sets different prices for organic crops, or for particular grades of produce.
The standards also allow producers to request partial pre-payment of the contract. This is important for small-scale farmers' organisations as it ensures they have the cash flow to pay farmers at the time they deliver their crop. Buyers are also required to enter into long-term trading relationships so that producers can predict their income and plan for the future.
The Fairtrade Premium is a sum of money paid on top of the agreed Fairtrade price for investment in social, environmental or economic development projects, decided upon democratically by producers within the farmers' organisation or by workers on a plantation. The Premium is fixed by the FLO Standards Unit in the same way as the minimum price and remains the same, even if the producer is paid more than the minimum price for the product. The Premium fund is typically invested in education and healthcare, farm improvements to increase yield and quality, or processing facilities to increase income.
For more information on Fairtrade, the Fairtrade Premium and minimum price, the Fairtrade Standards, Fairtrade International Licensing Initiatives across the globe and the Ten Principles of Fair Trade, please visit the Fairtrade International website.