Some things to think about What is meant by the term Fair Trade? How does Fair Trade benefit farmers? What are the disadvantages to Fair Trade? The FAIRTRADE Mark is the only independent consumer guarantee of a fair deal for producers in the developing world. Fair Trade is where producers are paid a price for their product that covers the cost of production- despite changes in the price at market. Fair Trade products are often more expensive because an additional 20% is charged to consumers, called a social premium, this is invested in the local communities producing the products. How do LEDC producers benefit... • Farmers receive a fair and stable price for their products. • Sell direct to the global buyers, cuts out local markets, maximising profits. • Partial pre-payment allows more effective long-term financial planning. • Producers have the opportunity to improve their lives through a social premium. • Through co-operatives producers have greater collective bargaining with purchasers and supplies. • Helps diversify into new markets and products, from ones where there is overproduction, via cheap credit. • Help and advice with farming practices, thereby maximising yields. How do MEDCs benefit... • Consumers know they are purchasing a product which is ethical, no child labour, organic, fair price, from co-operatives that are democratically run. • Consumers can directly trace their purchase. • Consumers can have a direct influence on the quality of life of LEDC producers through the goods they purchase. • LEDC producers have more income to purchase MEDC processed goods (?). Potential Drawbacks.... • Niche market, therefore has a limited impact. • It continues to support areas where there is overproduction. • Critics suggest it encourages further overproduction by non-fair trade producers, therefore lowering prices further. • It doesn’t encourage the development of secondary processing, which would generate higher prices. • Market share drops during economic difficulties. • It doesn’t solve the unfair trading practices which limit the development of LEDCs.
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