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What is a Fair Trade Policy?

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  • Written By: Leah Bloom
  • Edited By: Lauren Fritsky
  • Last Modified Date: 27 August 2016
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A fair trade policy is system of trade that advocates the payment of fair wages to workers, as well as high standards of environmental stewardship and social conduct. Fair trade emerged in the 1940s, when organizations began importing handicrafts made by impoverished people, selling them in churches or at fairs and returning the proceeds to the artists. The Fair Trade Federation evolved from this practice, as businesses that put workers' well-being first began to join forces. By the 1990s, a labeling system was developed to identify fairly-traded products, and international standards for fair trade policy were created. Many goods sold on the global market can be purchased from companies with fair trade policies, including crafts, coffee and chocolate.

When the fair trade movement expanded beyond handicrafts, its first focus was on coffee. In the late 1980s, coffee prices began to drop, which was believed to have a negative impact on coffee growers' quality of life. To artificially raise the price of coffee, and, therefore, the growers' living and working conditions, a group in the Netherlands developed a special label for brands of coffee that paid high enough wages. This group soon joined with three others to form the Fair Trade Labeling Organization, which sets fair trade policy.

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The fair trade policy for coffee requires safe working conditions and fair wages, prohibits child labor and mandates that producers invest in the development of their communities. These same principles have also been applied to hand-picked foods such as tea, cocoa and bananas. They also apply to the manufactured goods that have become available through fair trade, including shoes and clothing, accessories and toys. Often, producers of a given product may form a fair trade cooperative through which they can share resources, learn from one another and jointly determine their priorities for community-building.

The group to pioneer fair trade policy grew into the store Ten Thousand Villages, one of the largest fair trade retailers in North America. Its policy includes advancing producers 50 percent of the purchase price when an order is placed and paying in full promptly upon shipment of an order. Fair payment is determined in consideration of not only cost of labor and materials, but also the amount of skill involved in producing a given product, as well as the cost of meeting the producer's basic needs. Its policy also calls for the development of long-term relationships between the store and its producers and an exchange of information that allows traditional art to be made in accordance with popular market trends. Finally, Ten Thousand Villages encourages its staff and producers to work sustainably, using natural and recycled materials wherever possible.

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