With fair trade, peasant farmers become members of a community cooperative which has direct access to a fair trade organization (FTO). The goods they produce are sold directly from a producer cooperative to the fair trade organization at a guaranteed price and market, as outlined in a long-term contract.  This is done without the need for any local or corporate intermediaries.  Products are then sold through wholesalers or retail outlets to the consumer. What Fair Trade provides is an alternative trading method, developed with the purpose of helping to improve the situation for producers.  

Fair Trade provides consumers with an opportunity to make a difference by helping producers receive a fair price for their product, contributing to a better livelihood for both the farmer’s family and the local community.

Principles of Fair Trade[1]

1)      Direct Trade

Fair trade organizations (FTOs) buy directly from cooperatives (or other FTOs).  Producers and FTOs are equal commercial partners and treat each other with mutual respect and support.  They share information freely and help each other in the pursuit of their respective goals.  The number of intermediaries is reduced.

2)      A Fair Price

Producers and FTOs together fix a price that accounts for both the needs of Southern producers and the realities of Northern markets.  Producers must plan to cover their costs of production, as well as make enough profit to pay for their daily needs.  As for the FTOs, they must sell their product at a reasonable price.  FTOs pay a higher price for organic coffee.

3)      Long-term Commitment

Cooperatives can count on FTOs to buy their product on a regular basis, allowing them to better plan their operations.

4)      Credit

FTOs offer low-interest credit to producers.  This may be done as a cash advance on a proportion of their orders.

5)      Democratic Management

Producers must divide the profits equitably.  All workers must have a voice in the decision-making process and the way in which the group is organized.

6)      Public Information

FTOs supply consumers with information concerning producers and the need to support fair trade.  The financial records of FTOs must be open to the public.

7)      Environmental Conservation and Community Development

FTOs support producers who practise sustainable agriculture and who have a community development plan.