By now, most people have heard of "fair trade." But the real-life, on-the-ground effects of the model are often overlooked. So here's a quick breakdown of what fair trade really means:
Rather than rely on the fluctuating, often low prices that the global commodity market tends to offer, Fair Trade International (FLO) guarantees farmers a minimum per-pound price for their product. That means they can sell beans into a market that promises them a "fair" price, which right now for coffee in the United States is $1.40 a pound, and five cents above market price if the conventional market surpasses the fair trade price. Here are detailed fair trade standards for the United States.
On the whole, fair trade is widely praised not only because it boosts impoverished farmers' income and marks a small step toward equalizing the very imbalanced global economy, but also because it frees up resources for the greater communities in which farmers live.
By earning a better price for their crops, farmers are often able to afford goods and services that are considered necessities in the developed world, but are still a form of luxury in developing economies – such as the ability to send children to school.
Fair trade can also involve companies reinvesting in the community in the form of development projects that benefit entire towns or villages, not just individual families. Because fair trade companies are often built upon principles of providing a high-quality product to the consumer while also benefiting the product's origin community, you'll often see that kind of reinvestment being made to build a school, recreation center, or even a hospital, for example, or to help with other needs identified by the community.