Fair trade is a social movement whose stated goal is to help producers in developing countries achieve better trading conditions and to promote sustainability. Members of the movement advocate the payment of higher prices to exporters, as well as improved social and environmental standards.
The movement seeks to promote greater equity in international trading partnerships through dialogue, transparency, and respect. It promotes sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers in developing countries. Fair Trade is grounded in three core beliefs; first, producers have the power to express unity with consumers. Secondly, the world trade practices that currently exist promote the unequal distribution of wealth between nations. Lastly, buying products from producers in developing countries at a fair price is a more efficient way of promoting sustainable development than traditional charity and aid.
A component of Fair Trade is the social premium that buyers of Fair Trade goods pay to the producers or producer-groups of such goods. An important factor of the Fair Trade social premium is that the producers or producer-groups decide where and how it is spent. These premiums usually go towards socioeconomic development, wherever the producers or producer-groups see fit. Within producer-groups, the decisions about how the social premium will be spent is handled democratically, with transparency and participation.
Producers and producer-groups spend this social premium to support socio-economic development in a variety of ways. One common way to spend the social premium of Fair Trade is to privately invest in public goods that infrastructure and the government are lacking in. These public goods include environment initiatives, public schools, and water projects. At some point, all producer-groups re-invest their social premium back into their farms and businesses. They buy capital, like trucks and machinery, and education for their members, like organic farming education. Thirty-eight percent of producer-groups spend the social premium in its entirety on themselves, but the rest invest in public goods, like paying for teachers’ salaries, providing a community health care clinic, and improving infrastructure, such as bringing in electricity and bettering roads.