Fair Trade Schemes
The increasing number of child labor, slavery and unfair wages rates in developing world created a need to develop policy measures to protect the vulnerable sectors. As a result, the schemes for fair trade came into existence. Along with protecting the producers, they also ensure ethics, sustainability, fairness and quality within the business environment. Fair trade labels give guarantee to manufacturers, retailers and consumers regarding fairness of supplies, prices and practices respectively.
Apparently, it is sure that there are several benefits attached to these schemes, however, going in deep, certain disadvantages can also be seen. Hence, it is important to keep both sides under consideration while affiliating with any fair trade scheme.
Some of the famous Fair trade certifiers are given below:
- Fair for Life (Certifies for human right and international labor laws)
- The Fairtrade System (certifies for transparency and gender equity)
- Naturland Fair (Certifies for environmental sustainability)
- Fair Food Program (certifies for fair practices in specified crops)
There are many advantages attached with fair trades which can directly impact producers, retailers and consumers. Firstly, the producers get the minimum wage protection all over the world regardless of purchasing power parity in their own countries. Decades back, the businesses operating under free-economy raised some serious issues of labor exploitation. The giant manufacturers like, Nestle and NIKE were alleged of using child labor and forced labor in order to get supplies at lower cost. Apart from this, wage violation cases also became public. Hence, it was thought by higher authorities to introduce fair trade schemes. As a result, the farmers got protection from forced-labor and obtained minimum wages.
Secondly, the schemes helped retailers as well. The labels of fair trade on packaging, gives confidence to consumers about the authenticity of source and prices being offered. Hence, the consumers were less bargaining for prices. So the retailers get maximum possible profit from their sales.
Finally, the consumers get satisfied and confident that they are paying the price at the right place. The products displaying the labels of fair trade would communicate the fairness of price and quality standards.
Looking on the other side, there are some disadvantages associated as well. They can also be classified from the perspective of producer, retailer and consumer. While looking from the perspective of the producer, the major disadvantage is the cost associated with certification. A producer who is already suffering from financial distress cannot afford these costs. Other than this, they discourage the value addition and innovation in the production. Because, every producer has to fulfill their criteria and oblige with the policies. So, the producers feel uncomfortable sometimes.
Next, the retailers also face some problems while getting certified by fair trade companies. The major problem is the limitation of products associated with fair trade. There are only a few products like Coffee and chocolate which come under fair trade regulations. Other than this, corruption is also the problem for small retailers. The giants like Walmart and Tesco PLC can easily influence the fair trade companies by using their corporate power and get the certification easily.
Just like producers and retailers, there are some disadvantages in the perspective of consumers as well. As the label of fair trade guarantees the quality, so the producers do not strive to improve it. The consumers as a result would get the same products throughout the purchase experience. Moreover, as there is no incentive to innovate the products, the businesses would not be environmentally sustainable. Hence they would impact the consumer’s life by diminishing his/her social wellbeing.