Fair Trade and Standard of Living

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A Better Living Standard

You may have seen fair trade products in the supermarket before. They all bear the fair-trade logo and will be licensed by the Fair-trade Labeling Organizations International. These products aim to promote development and a better standard of living for the producers of such products by guaranteeing them a fair price for their products. While it may be surprising, this does not in fact lead to significantly higher prices for such products on the supermarket shelf. This is because instead of large corporate products for the multinationals that generally dominate this area of the economy, there is a commitment right along the supply chain to give producers a fair price and not to excessively profiteer on the back of third world labor.

Fair trade products seek to do this in a number of ways, one of the most important of which is the provision of a fair price to producers. This trading standard means that buyers must pay a price to producers that covers the cost of sustainable production of the commodity. Shockingly, it is frequent in such commodity markets for purchasers to be able to pay even less to producers than it cost them to grow the product. This is because of the volatility of global commodity markets and the desperate need of third world growers to sell their product no matter what the price.

On top of the sustainable price that is paid, traders also pay a premium to producers that goes into local funds and is used to pay for local development projects and investments that are necessary to improve and protect the future prospects of the community. These projects can range from building improved irrigation systems to building schools or housing for those in need. The buyers will also take up fair practices such as partial payment in advance to allow for unforeseen shortfalls being covered, and the signing of long term contracts that allow producers to plan for the future and use better and more sustainable practices.

All of these steps are seen as necessary and justifiable in light of the fact that while many of these products are produced by people with very low standards of living, they are sold in some of the richest countries in the world, with high, or even the highest standards of living. When a standard of living comparison is used to compare producer countries with consumer countries, the index shows unsustainable differences in the living cost. The amount of effort and work that food producers in undeveloped countries have to perform in order to scratch out a basic living is the very definition of injustice.

A Better Trade System

To take a practical example you can compare the American way of life, as a country with highest per capita income, with Mexico. The USA is one of the richest countries in the world, yet much of its food imports come from Mexico and South America. The trade practices that have kept food producers so poor when compared to the United States cannot be fair. No matter what criteria is used to examine the workings of the trade system, the results will always speak for themselves. The poor countries are impoverished. While not all of this poverty is due to trade practices, and such countries cannot totally avoid all of the responsibility they bare for these problems, the trade system must be reformed to give farmers a fair chance to improve their lot through their own honest efforts.

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