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I was wondering about Fair Trade foods/products (products carrying the international certificate) as I have never seen an actual policy or standards on how much farmers/producers get paid.

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Is there a standard cut or a policy that guarantees that farmers/producers of Fair Trade foods are actually being payed more? If so, is this increase in pay even worth it (ie. does it make a real difference to the original producers)?

seadowg
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    "Worth it?" Worth *what*? Worth it to *who*? The producer? The buyer? – Shog9 Apr 30 '11 at 16:13
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    I am referring to whether the pay increase helps the original producers. – seadowg Apr 30 '11 at 19:49
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    Oetzi: as a general advice - fix the question, don't answer in the comments :-) – Sklivvz Apr 30 '11 at 23:43
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    An interesting question is whether it is better to buy Fairtrade or to buy normal products and donate the difference to charity – Casebash May 01 '11 at 02:23
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    Nothing in life is fair. – Job May 01 '11 at 19:28
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    @Casebash There is more to Fairtrade than the amount of money producers get. It's important that developing world people don't become depedent on what we think of as 'charity'. Fairtrade gets them on the way to being self sufficient, and gives them business skills rather than handouts. Also there's a dignity issue - would you rather be paid a fair wage for your work, or be paid less than a fair wage and have someone give you some charity money -assuming they felt like it. – DJClayworth May 02 '11 at 16:47
  • Define "fair" also... – jwenting Jun 22 '11 at 13:11
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    I am very skeptical of anything that's more "fair" than normal free market. There could be, such as occasional FTC interference. Even that causes more problem than it solves. –  Jul 22 '12 at 15:15

2 Answers2

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Very little of the extra the end customer pays goes actually to the primary producer. While the fair trade goods cost usually substantially more than competitive products (often +50-100 %), the price difference paid to the primary producer is only marginally smaller.

Fair Prices for Farmers: Simple Idea, Complex Reality

"Farmers often receive very little," said Lawrence Solomon, managing director of the Energy Probe Research Foundation, a Canadian firm that analyzes trade and consumer issues. "Often fair trade is sold at a premium, but the entire premium goes to the middlemen."

Fair Trade labels don't list the amount paid to farmers; that sum requires research. The amount can vary depending on the commodity. An analysis using information from TransFair shows that cocoa farmers get 3 cents of the $3.49 spent on a 3.5-ounce chocolate bar labeled "organic fair trade" sold at Target. Farmers receive 24 cents for a one-pound bag of fair trade sugar sold at Whole Foods for $3.79.

The coffee farmer who produced the one-pound bag of coffee purchased by Mr. Terman received $1.26, higher than the commodity rate of $1.10. But whether Mr. Terman paid $10 or $6 for that fair trade coffee, the farmer gets the same $1.26

In some cases, the individual farmers may receive less than fair trade rules require because the money goes to cooperatives, which have their own directors who decide how much to pass on to farmers.

"We did a breakdown and saw that sometimes, what they're paying farmers is only 70 cents to 80 cents a pound" for coffee instead of the entire fair trade price of $1.26, said Christy Thorns, a buyer at Allegro Coffee, a roaster in Thornton, Colo., that is owned by Whole Foods. "There are so many layers involved."

Moreover, FairTrade also requires certification and annual fees, and they are quite substantial:

Flo-Cert Producer Certification System

  • Initial Basic Fee at least € 1.400.00
  • Annual Fee at least € 1,137.50

Note: this does not include "organics" certification. If the producer is to receive organics premium, it has to undergo another certification.

To be fair, the price difference may differ. When free market price drops down (like it was in years 2001-2005, see e.g. tables in this fair trade report), the fair trade price still stays at a decided minimum level, which at some periods meant the farmer received 100 % more (with free market coffee price $.60 the producer still gets $1.21). Still, this 100 % represents only minor part of the difference the end consumer pays.

Community
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Suma
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    So what is certified in the end? That nearly nothing is achieved? – user unknown Jun 22 '11 at 01:34
  • Interesting comment. However, I’ve noticed that certainly Fair Trade products (particularly chocolate) *isn’t* more expensive than conventional products (in Germany). This may be the exception, though. – Konrad Rudolph Jun 22 '11 at 09:33
  • It is possible the difference will gradually disappear. This would be in accordance with what the TransFair spokeswoman said in the linked article "As the demand and volume of Fair Trade certified products increase, retailers will naturally start to drop prices to remain competitive." Still, currently most Fair trade products I have seen are priced significantly higher and Fair trade shoppers I know automatically (and naively) assume the price difference goes to the primary producer. – Suma Jun 23 '11 at 08:38
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    This somewhat misses the point, While the amount of a Fairtrade product that goes to the producer is still a tiny fraction of the cost to the consumer, it is still much higher than the price they get from non Fairtrade sources. – DJClayworth Jun 23 '11 at 13:33
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    "fair trade goods cost usually substantially more than competitive products" I'd dispute this, *Some* fairtrade products cost more, many products (Cadburies chocolate for example) are becoming fair trade without costing more. – Jeremy French Jun 23 '11 at 13:39
  • No. The fact is it is not "much higher" (at least most people would not consider it "much"). I would not tell $1.20 is much higher than $1.10. However, I prefer giving facts, not drawing conclusions, I have referenced all the facts and you are free to draw your own conclusions. – Suma Jun 23 '11 at 13:40
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    If you know fair trade product which are not costing more, then the reasoning about why they cost more cannot be applied. What I think is a lesson to learn is that IF some Fair Trade product costs a lot more than a normal one, a consumer should not assume (as many people I know do) the difference goes mainly to the primary producer. – Suma Jun 23 '11 at 17:54
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    "I would not tell $1.20 is much higher than $1.10" I'd say 9% is substantially higher. It may be only $0.10, but on $1.10 that's a big percentage. – jwenting Oct 08 '11 at 12:53
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    @jwenting: Yea, but if you pay 3 $ more for the producer to receive 0.1 dollar more, where do the other 2.9$ go (263% of 1.1) ? It's a scam, and nothing else. And who's the "producer" ? The director of the producing co-op, or the slave workers in the fields ? And what has a higher price for the end-consumer to do with fair trade ? Fair trade is when you can export to country X to the same conditions as any other country; anything else may be social, but has nothing whatsovever to do with fair trade. – Quandary Aug 17 '16 at 11:43
  • Also, if a company in one country produces with slave labour and exports to the same condition as a company that produces in another country that pays proper wages, and then both of these companies can sell to a third country at equivalent conditions - that has nothing to do with fair trade, irrespective of whether the "farmer" gets 0.1$ more per kg or not. Just as higher consumer prices have nothing to do with fair trade, and fair trade has nothing to do with abhorrent social and labour conditions in whatever non-industrial country of your arbitrary choosing. – Quandary Aug 17 '16 at 11:54
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    It's not "Fair-Trade"/"Develo‌​pment-Aid" when the poor people of a rich country pay for the rich people of a poor country, and everything else stays the way it is. Also, stable prices have nothing to do with fair trade. When you produce something, you get the market price, not a fantasy-price. That's business as usual, not economic discrimination. If there's an excess supply of one particular good, it's the fault of the producers, not the consumers. And no amount of charity can change that economic reality on a large scale. By offering wrong incentives, you only make the problem(s) worse ... – Quandary Aug 17 '16 at 12:02
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    @StefanSteiger I wasn't commenting on the distribution of the money, only at the fallacy that 10 cents can't be a high percentage of the price. I've since visited Fairtrade suppliers, and they get paid very little. The markup put on the products by the Fairtrade organisation are massive (to the point where a factory in Indonesia gets maybe $1 for something that sells for $150 in Europe or the US). – jwenting Aug 19 '16 at 12:12
  • Ah.... interesting. My coffee bean supplier calls almost all of their product "fair trade," but I don't think they are officially certified as such. However, they do actually travel to the farms and cooperatives and pay them directly, so the whole "the middleman gets the premium" thing doesn't apply to them. That's part of how they are able to offer a fair price and not have their product be hideously expensive - cut out that non-value-added middleman (talking about unroasted green beans, so I don't have much of a standard for comparison, though). – PoloHoleSet Nov 06 '17 at 21:43
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I think this document should answer most of your questions.

In particular:

The FAIRTRADE Mark means farmers receive a fair and stable price for their products
A main objective of Fairtrade is to increase producer incomes. This is achieved by payment of a guaranteed, fair price and by reducing the number of intermediaries in the supply chain so that the growers get a larger share of the export price.
[...]
FLO audits each transaction to ensure the Fairtrade price and premium are paid to the producer organisation. A quick reference guide to Fairtrade producer prices and premiums is available on our web site.

Looking at the site, there's plenty of documentation on how much the individual producers are paid, see here:

http://www.fairtrade.org.uk/producers/default.aspx

Sklivvz
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    do they have any comparison of Fair Trade pay vs. non-FT pay? A naked # is not enough to pick Fair Trade since you don't know if that's of any comparable advantage to the producer. – user5341 May 02 '11 at 00:45
  • I have deleted my comments here and I try to provide a competitive answer instead. – Suma Jun 21 '11 at 20:35
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    that's their claims, no independent verification. – jwenting Jun 22 '11 at 13:11
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    I'm gonna have to agree with @jwenting here. I have read many things about how fair trade products are only a marketing scheme, and don't produce much in terms of result (sere Suma's answer). I don't think this answers meets the criteria of sufficient proof. – Borror0 Aug 12 '11 at 15:13
  • Mmm so--these numbers are put forward by the fair trade international NGO. You may not trust them, but then what would you accept as an answer? Eg: "is IBM making money?" "here's their balance sheet" "oh, I can't trust it because it's written by IBM..." – Sklivvz Aug 12 '11 at 17:17
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    Sometimes the UN and the OECD give different numbers for a number of statistics and they are too NGO's. There can be an independent verification of this. I strongly agree with @jwenting. I don't think this answer meets the criteria of sufficient proof either. Citing the direct source of doubt is like proving the bible with the bible. – Jose Luis Oct 07 '11 at 13:47
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    @Sklivvz A company's ballance sheet has to be signed and verified by a registered/licensed accountant. An NGOs propaganda/information website isn't in any way so verified. Not saying the information is a lie, just that you've no way of verifying it and shouldn't use the NGOs own statements as proof that they're above the board. – jwenting Oct 08 '11 at 12:43
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    @jwenting you are joking right? I am pointing you to official financial information by the NGO (who is legally responsible for it) and said NGO is backed up by very reputable insititutions (like OxFam). Now - if you think these are not reputable enough, please explain why. – Sklivvz Nov 04 '12 at 21:29
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    @Sklivvz OxFam is one of the worst of the lot when it comes to being unreliable. – jwenting Nov 05 '12 at 03:43
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    @jwenting Can you provide citation for this claim ("OxFam is one of the worst of the lot when it comes to being unreliable")? – reducing activity Mar 23 '17 at 10:02