Fair or equitable trade had its origins in Europe in the 1960s as a political movement that focused on the imbalance between the relative returns for farmers and the buyers’ supply chains that catered to the consumer market. This applies very significantly to coffee, which is the second largest commodity traded globally, after only petroleum. Statistically, two-thirds of the coffee in the entire world was produced on small farms with less than five hectares. To understand the wide gap between producers and buyers, the average small farmer in 2011 Laos and Vietnam earned $300 annually compared to Starbuck’s revenues of $8 billion. A large portion of these revenues and profits goes to unproductive intermediaries (importers, cooperative layers, exporters, packers).
Fair trade, as a global business model to empower the small growers, took wings in the late 1980s. It provides an alternative trade supply chain that places greater emphasis on ethical economics. It promotes the concept, that paying premium prices for coffee and other commodities, was not just morally justified but was also attributable to better quality. The Direct free trade movement goes one step further by providing more income for the farmers who need it most, by cutting out some of the middlemen.
The Positive Effect of Direct Fair Trade
The negative interplay of remote locations in emerging countries, different customs, religious and language barriers have driven these areas into extremes of poverty. At times, remote and isolated villages may be cut off from fast growth in the rest of the country. Climate change has exacerbated the frequency and devastation wrought by earthquakes, droughts, and typhoons, destroying homes and livelihoods in their wakes.
The people, and particularly women, do not seek charity from developed nations. They simply wish to participate in a more equitable supply chain that will provide better income for their community by cutting out some of the intermediaries. This empowers them to help their families more, revitalize the soil in their land holdings, and to improve the yields of coffee in their average one to two-hectare plots. It ultimately provides a path to the ranks of coffee fair trade producers that have experienced a dramatic rise in their socioeconomic well-being. This is accomplished through investing in education, better health care, and basic infrastructure. In 2011 over 1.2 million farmers in 60 countries invested $100 million in developing their communities. Most of those people seeking to join the fair trade business model ask for the same opportunity to raise themselves from dire poverty.
How buyers can support the fair trade business model
Increase access to direct fair trade for more small villages in impoverished countries, which cuts out unproductive layers of middlemen. Realize that the premium prices are merited from both an ethical and economic perspective.
Help the UN reach its target to end extreme poverty through sustainable development by 2030. Of the approximately 1 billion people still exposed to extreme poverty, 64% are farmers.
Make a significant contribution to the modernization of farmers’ skills to better adapt to global demands and sustain themselves over the long-term.
Recognize that direct fair trade provides more personalized control of quality standards for the buyers, which, in turn, protect their consumers. This alone justifies the higher premiums paid to the farmers.
Transform the mindset in impoverished communities, from desperation to hope in the future for themselves and their families.
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