Assisting Disadvantaged Producers

The prime objective of Fair trade is to develop access to markets in developed countries for producers who tend to be marginalized by conventional trading structures. Typically Fair trade focuses on small-scale producers, although this depends on the particular commodity. For example, Fair trade coffee producers are generally small, family-owned farms working through co-operatives for marketing and export, while tea more usually originates from estates where employment practices, environmental management and worker participation structures meet international Fair trade standards.

Fair trade producers must also be able to demonstrate that they can meet market requirements for quality, consistency and continuity of supply as well as the capacity to process orders for export. To avoid dependency on Fair trade, producers are encouraged to maintain and develop existing export business.

To qualify for the being fair Trade, products must be bought from registered producers and  purchased under Fair trade terms.

A Fair Price
For most products, Fair trade criteria establish a minimum guaranteed price that covers the cost of production and ensures a living wage for growers. The set Fair trade price is always the minimum price paid but rises in line with market prices if they rise above the minimum Fair trade price.  There is no minimum price set for tea because Fair trade criteria set standards for wages rather than prices
Pre-Finance Some small producers find it difficult to obtain finance to make their products available for export and often have to pay very high interest rates. Producers may therefore request part-payment of orders in advance of delivery, for which a fair commercial cost should be passed on by the importer.

A Premium
In addition to the purchase price paid by importers, a separate payment is made which is designated for social and economic development in the producing communities. The farmers and growers themselves decide how these funds are to be spent. As part of the Fair trade criteria, registered producers are accountable to central Fair trade organization (FLO in Europe and FTF in the US) for the use of this money. It is generally used for improvements in health, education or other social facilities, although it may also be used for certain development projects to enable growers to improve productivity or reduce their reliance on single commodities.

Long-term Trading Relationships
Fair trade encourages importers to place orders well in advance so that producers can plan their business with some security.