What is Fair Trade? Explaining the Meaning, Necessity, and International Fair Trade Standards
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Fair trade is a system that enables producers to trade at fair prices and protects livelihoods and the environment through fair trade. Familiar examples include coffee, chocolate confections, wine, and other items found in retail stores that bear Fairtrade certification labels.
This article provides an overview of Fairtrade, its criteria, and market size for those interested in Fairtrade.
Fairtrade is an initiative in which consumers can participate with only a small change in their awareness. Please read to the end.
What is Fair Trade？
If you carefully check food labels and packaging for your purchases, you have probably seen the Fair Trade label. What is this Fair Trade? This section introduces the meaning and necessity of fair trade and the products covered by it.
・The Meaning of Fair Trade
The literal translation of the word “fair trade” is “fair and equitable trade. The word “fair,” like the word “fair play” in sports, implies the nuance of respecting others and engaging with them on an equal footing, while observing the rules.
Fair trade in international trade is a system that allows producers, mainly in developing countries, to sell their products at a fair price on a continuous basis. Fair trade targets mainly agricultural products and handicrafts, and guarantees payment commensurate with the labor and value of the products.
In addition to fair compensation, the concept of fair trade also includes safe working conditions and the prohibition of child labor.
The purpose of fair trade is to realize trade free of poverty and exploitation, and to help producers improve their lives and become self-reliant. Furthermore, it is also expected to have the effect of shifting from deforestation and overexploitation production processes to environmentally sustainable production processes through the payment of fair compensation.
・Why Fair Trade?？
The reason for the need for fair trade is the history of unfair trade, where producers in developing countries have not received fair compensation.
After World War II, many colonies became independent, but trade relations with the former sovereign countries still continued, putting producers at a disadvantage. It was clear that low wages and long working hours were the norm due to lack of fair compensation, and that they could no longer afford education and medical care. Against this backdrop, a citizens' movement demanding fair trade spread, mainly in Europe and the United States.
There were also growing problems of soil and water pollution due to excessive use of pesticides and chemical fertilizers, and ecological destruction due to deforestation. However, there was no money available to pay for these improvements, causing health problems and further impoverishment of the local population.
This social problem remains unresolved to this day, and fair trade remains an important issue.
・Examples of fair trade products
The main targets of Fairtrade are agricultural products and handicrafts, where the working conditions and trading conditions of the producers are particularly unfair.
Coffee, in particular, is in high demand worldwide and is a major export product of developing countries, and is one of the main products of fair trade. Coffee has some challenges, such as “the price fluctuates widely, making producers' income unstable,” “there are many middlemen, making it difficult for profits to reach producers,” and “trying to produce coffee at a low price imposes a heavy environmental burden.
Therefore, the need for fair trade is high, and it accounts for a large percentage of the certified product market.
The following products have similar challenges and are subject to Fair Trade.
● Black tea
Cacao
Spices and herbs
Fruits
Processed fruits
Processed fruits
Wine
Oilseeds/oil fruits
Foods and others (honey, sugar, etc.)
Cotton products
Non-food products and others (cosmetics, sports balls, etc.)
The number of products covered is increasing every year, and there is a growing movement to achieve fair trade in more and more areas.
・Countries Covered by Fairtrade and Number of Certified Producers
The majority of the countries are what we call developing countries. The number of participating countries has remained flat since reaching 75 worldwide in 2015.
The number of Fairtrade certified producers and the workers who work there is increasing every year.
Fair Trade Producers and Plantation Workers
| counter for years | producer | Workers on the plantation |
|---|---|---|
| 2015 | 1,389,044-ian | 195,701-ian |
| 2016 | 1,479,068-ian | 185,986-ian |
| 2017 | 1,520,110-ian | 193,007-ian |
| 2018 | 1,605,010-ian | 178,051-ian |
| 2019 | 1,716,245-ian | 174,136 |
In addition, the number of participating organizations increased from 1,240 in 2015 to 1,822 in 2019.
reference：FAIRTRADE JAPAN.Fair Trade｜Producers
What is Fair Trade?？
The fair trade movement spread mainly in Europe and the United States, but there was a need for a system that would allow consumers to easily identify products made through fair trade. To this end, the International Fairtrade Standards were established in 1997, and a fair trade certification system was put in place.
This section provides an overview of the International Fairtrade Standards, the contents of the standards, and the role of the certification label.
What are International Fair Trade Standards?
The International Fairtrade Standard is an international standard to ensure that Fairtrade products are produced and sold on a fair trade basis. The standards are reviewed on a regular basis by Fairtrade International, as well as other stakeholders including producers, workers, companies, consumers, and NGOs.
The International Fairtrade Standards are designed to promote sustainable development for producers and workers in developing countries. Producers and trade partners must produce and trade in accordance with the International Fair Trade Standards.
The International Fairtrade Standards give priority for certification to producers from disadvantaged regions in trade. This is to promote fair trade, taking into account economic disparities and social conditions. The products eligible for certification are basically the same as those introduced above.
・Contents of International Fair Trade Standards
The International Fair Trade Standards set forth the rules that producers and trading partners must adhere to in order to conduct fair trade, based on three criteria: economic, social, and environmental.
【economic standard】
Guarantee of Fairtrade minimum price to help stabilize producers
Fairtrade premiums (incentive payments)
Promotes long-term trade and guarantees up-front payments
【social standard】
Ensure safe and fair working environment
Prohibit discrimination, child labor, and forced labor
Encourage democratic management
【Environmental Criteria】
Reduction and proper use of pesticides and chemicals
Encourage organic farming and biodiversity conservation
Prohibit genetically modified products
Of the above, the most important features of the International Fairtrade Standards are the Fairtrade Minimum Price and Fairtrade Premium systems. The Fairtrade Minimum Price Guarantee guarantees a minimum price at which producers can cover their production costs even if market prices fluctuate.
The Fairtrade Premium is an additional payment to producer associations for social development of the producing region, and can be used for other purposes besides production, such as building schools and medical facilities.
・What is the International Fairtrade Certification Label?
The International Fair Trade Certification Label is a label awarded as proof of fair trade. Products bearing the label indicate that they meet the international Fair Trade standards, which establish social, environmental, and economic criteria.
By looking for the label, consumers can easily choose Fair Trade products. It is already used in many countries, including Japan, and is one of the most recognized ethical labels in the world.
The International Fair Trade Certification Label features a basic design with a human figure symbol in blue and green on a black background. Depending on the purpose and product, the following types are available.
| type | meaning |
|---|---|
| International Fair Trade Certification Label | |
| Fairtrade Certified Raw Materials Label | Used when only some of the raw materials are Fair Trade certified. |
| International Fair Trade Certified Cotton Label | Used in cotton products produced in accordance with fair trade standards. |
| Mass balance label | Applicable when certain raw materials, such as processed products, cannot be physically traced. |
Why not look out for the international fair trade certification label when shopping for everyday items?
The spread of fair trade
The fair trade market is growing steadily. Here, we will explain the expansion of fair trade in the global and domestic markets.
・Global market size of fair trade
Fair trade is growing into a global initiative. In 2016, the global market size for internationally certified fair trade products reached approximately 7.88 billion euros (approximately 947 billion yen), a substantial figure.
This growth is driven by the increase in producer organizations mentioned earlier, as well as the steady expansion of trade in key products such as coffee, bananas, sugar, and tea. Additionally, the rising awareness of sustainability has led to an increase in cocoa sales, which is another significant factor.
In Japan, fair trade is also growing steadily. In 2023, the domestic fair trade market surpassed 20 billion yen for the first time. This figure represents approximately a 2.2-fold increase over the past decade.
The main factors contributing to the growth of fair trade in 2023 include the steady growth of the coffee market (up 108% year-on-year). Additionally, the expansion of private-label products has driven market growth. In particular, the increase in sales of imported chocolate containing cocoa has significantly contributed to the expansion of fair trade.
・The relationship between fair trade and sustainability
Sustainability refers to the ability to develop while maintaining a balance between society, the environment, and the economy for future generations. The international goals for achieving this sustainability are the SDGs (Sustainable Development Goals).
Fair trade is related to most of the SDGs. This is because fair trade promotes poverty alleviation, improved working conditions, and human rights protection while supporting sustainable agriculture and trade, thereby contributing to the protection of the global environment.
The following goals are particularly relevant to fair trade.
● No poverty (Goal 1)
● Zero hunger (Goal 2)
● Decent work and economic growth (Goal 8)
● Reduced inequalities (Goal 10)
● Responsible consumption and production (Goal 12)
● Climate action (Goal 13)
● Life on land (Goal 15)
● Partnerships for the goals (Goal 17)
The concept of sustainability is not limited to international initiatives but is also taking root in individual awareness, driving fair trade through consumers' voluntary product choices.
What is Fair Trade Premium?
・The meaning of fair trade premium
Fair Trade Premium is an incentive payment made separately from the price of goods, which is used as funds for the economic, social, and environmental development of cooperatives and local communities. It is a system whereby importers (brands, retailers, etc.) pay the premium to producer cooperatives (cooperatives, etc.) in the trade of Fair Trade certified products.
Producer cooperatives are required to democratically decide how to use the premium they receive. Specific examples of how the premium is used include the following.
● Improving production activities: Agricultural training to increase crop yields, purchasing agricultural machinery and supplies, etc.
● Educational support: Construction of schools, improvement of facilities, provision of scholarship programs, etc.
● Improvement of living conditions: Provision of funds for housing support or repairs, construction of clinics or hospitals, etc.
● Regional infrastructure development: Construction of roads or bridges, improvement of public facilities, etc.
● Economic support: Income subsidies for producers, low-interest loans, etc.
As such, Fair Trade premiums can be utilized in a wide range of ways.
・Fair trade premium amount
The total amount of fair trade premiums received by producers has been increasing every year. With the expansion of the fair trade market, the total amount reached approximately 222.8 million euros (approximately 30.71 billion yen) in 2022, marking a 10% increase from the previous year and setting a new record high.
Of this amount, approximately 210 million euros (approximately 28.9 billion yen) comes from major products such as bananas, cocoa, coffee, cotton, flowers, sugar, and tea, accounting for the majority of the total.
The recipients of Fair Trade premiums are over 1.8 million producers and workers worldwide. On average, each certified producer organization receives approximately 110,000 euros.
The total amount paid by Japan for Fair Trade premiums was approximately 98.24 million yen. Considering Japan's economic scale, this is not particularly high compared to other countries. However, this also means there is significant potential to increase contributions through growing interest in Fair Trade.
Reference: FAIRTRADE JAPAN. “Fair Trade Premium Paid to Producers in Developing Countries Reaches Record High of Approximately 30.71 Billion Yen, Up 10% from Last Year.”
Summary
Fair trade is a system that ensures producers in developing countries receive fair compensation for their products. Originating as a grassroots movement opposing unfair trade practices, fair trade has gained global support and continues to expand, primarily in the coffee, cocoa, and tea industries.
In recent years, there has been a growing trend to consider fair trade in conjunction with sustainability and the SDGs. Fair trade is not something that is promoted solely by importers or governments; changes in consumer awareness and purchasing behavior are also crucial elements.
Purchasing products with international fair trade certification labels in your daily shopping is one way consumers can easily get involved. By choosing products from manufacturers and importers that prioritize the perspectives of producers, we can contribute to the advancement of fair trade.