Fair Trade minimizes the exploitation of producers. It provides a safe workplace
ID: 2572143 • Letter: F
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Fair Trade minimizes the exploitation of producers. It provides a safe workplace for workers and farmers in developing countries and ensures a fair return for their labor. Fair Trade enables a respectable livelihood, creates a balanced relationship between producers and businesses, reduces environmental degradation and enables a sustainable, just society. Worldwide coffee represents a US$55 billion a year industry, employing 25 million people. Of those employed in the industry, over 20 million are small farmers, typically producing less than 1,500 kilograms of beans per year on one-to two-hectare properties. These growers, who struggle to survive on incomes averaging less than US$1.00 per day, receive less than 10 percent of the retail value of their product. The low prices, lower now than during the 1930s Depression, are only part of what many perceive as the unfair treatment of these farmers. As with many North American farmers, their income is received only after harvest; therefore, they must often borrow to acquire inputs such as fertilizer. For the small producers in the less developed economies, the only source of credit is often the intermediary who purchases their crop, and interests rates are often as high as 20 percent per annum. Such costs further reduce the incomes of these poorest members of society, who face the prospect of losing their land if they default on the loans. One group attempting to improve the situation for the small growers of coffee and other commodities such as tea, cocoa, and sugar is TransFair Canada (TFC), the Canadian affiliate of Fairtrade Labeling Organization (FLO). Through its procedures, Trans-Fair ensures that coffee bearing its Fair Trade certification has met the requirements of the FLO. Fair Trade-certified coffee is purchased from over 300 cooperatives representing 550,000 small growers. The cooperative receives a minimum of US$1.26 per pound, more than double the current world price of less than US$0.60 per pound. A premium is paid if the beans are certified as organically grown. Since the members of the cooperatives are small growers who follow traditional methods of growing coffee, few chemical inputs are used. The price of chemical fertilizers is also prohibitive. Therefore, almost 40 percent of the cooperatives on the FLO register were either certified organic or in the process of becoming certified as of February 2001. Only about 22 percent of the 78.7 million kilograms of coffee produced by the FLO-registered cooperatives in 1999 was sold through Fair Trade. However, the small growers also benefit from the direct access to world markets that the cooperatives provide. This marginal increase in income when combined with the more profitable Fair Trade sales has a disproportionate economic impact on the growers. The cooperative also lowers production costs by recycling wastes into low-cost organic fertilizers, which in turn produces higher incomes for the growers and at the same time improves environmental stewardship. Higher incomes allow the small growers to reinvest in their farms, to provide better nutrition and housing for their families, and through cooperative funded schools, to provide more educational opportunities for their children. These benefits accrue even though Fair Trade certified sales in Canada, as in other countries, represent only a small but growing proportion of the total coffee market. Because the fees are high and because workers earn competitive rates, fair trade products have a premium price associated with them when compared to “regular” products that fall outside of this type of market. The higher prices weigh on consumers who are living paycheck to paycheck, usually causing them to choose a cheaper product of similar quality. Questions 1. Is it the responsibility of coffee consumers to ensure that the small producers receive a fair price for their product? Why or why not? (15%) 2. If the price paid to the grower represents only 10 percent of the retail price of coffee, why is the retail price of Fair Trade coffee approximately double the regular price? (10%) 3. Who benefits the most from the higher price paid by consumers for Fair Trade labelled coffee? (5%) 4. What alternative approach to the problem of poverty among small producers can you suggest? (5%) Fair Trade minimizes the exploitation of producers. It provides a safe workplace for workers and farmers in developing countries and ensures a fair return for their labor. Fair Trade enables a respectable livelihood, creates a balanced relationship between producers and businesses, reduces environmental degradation and enables a sustainable, just society. Worldwide coffee represents a US$55 billion a year industry, employing 25 million people. Of those employed in the industry, over 20 million are small farmers, typically producing less than 1,500 kilograms of beans per year on one-to two-hectare properties. These growers, who struggle to survive on incomes averaging less than US$1.00 per day, receive less than 10 percent of the retail value of their product. The low prices, lower now than during the 1930s Depression, are only part of what many perceive as the unfair treatment of these farmers. As with many North American farmers, their income is received only after harvest; therefore, they must often borrow to acquire inputs such as fertilizer. For the small producers in the less developed economies, the only source of credit is often the intermediary who purchases their crop, and interests rates are often as high as 20 percent per annum. Such costs further reduce the incomes of these poorest members of society, who face the prospect of losing their land if they default on the loans. One group attempting to improve the situation for the small growers of coffee and other commodities such as tea, cocoa, and sugar is TransFair Canada (TFC), the Canadian affiliate of Fairtrade Labeling Organization (FLO). Through its procedures, Trans-Fair ensures that coffee bearing its Fair Trade certification has met the requirements of the FLO. Fair Trade-certified coffee is purchased from over 300 cooperatives representing 550,000 small growers. The cooperative receives a minimum of US$1.26 per pound, more than double the current world price of less than US$0.60 per pound. A premium is paid if the beans are certified as organically grown. Since the members of the cooperatives are small growers who follow traditional methods of growing coffee, few chemical inputs are used. The price of chemical fertilizers is also prohibitive. Therefore, almost 40 percent of the cooperatives on the FLO register were either certified organic or in the process of becoming certified as of February 2001. Only about 22 percent of the 78.7 million kilograms of coffee produced by the FLO-registered cooperatives in 1999 was sold through Fair Trade. However, the small growers also benefit from the direct access to world markets that the cooperatives provide. This marginal increase in income when combined with the more profitable Fair Trade sales has a disproportionate economic impact on the growers. The cooperative also lowers production costs by recycling wastes into low-cost organic fertilizers, which in turn produces higher incomes for the growers and at the same time improves environmental stewardship. Higher incomes allow the small growers to reinvest in their farms, to provide better nutrition and housing for their families, and through cooperative funded schools, to provide more educational opportunities for their children. These benefits accrue even though Fair Trade certified sales in Canada, as in other countries, represent only a small but growing proportion of the total coffee market. Because the fees are high and because workers earn competitive rates, fair trade products have a premium price associated with them when compared to “regular” products that fall outside of this type of market. The higher prices weigh on consumers who are living paycheck to paycheck, usually causing them to choose a cheaper product of similar quality. Questions 1. Is it the responsibility of coffee consumers to ensure that the small producers receive a fair price for their product? Why or why not? (15%) 2. If the price paid to the grower represents only 10 percent of the retail price of coffee, why is the retail price of Fair Trade coffee approximately double the regular price? (10%) 3. Who benefits the most from the higher price paid by consumers for Fair Trade labelled coffee? (5%) 4. What alternative approach to the problem of poverty among small producers can you suggest? (5%) Fair Trade minimizes the exploitation of producers. It provides a safe workplace for workers and farmers in developing countries and ensures a fair return for their labor. Fair Trade enables a respectable livelihood, creates a balanced relationship between producers and businesses, reduces environmental degradation and enables a sustainable, just society. Worldwide coffee represents a US$55 billion a year industry, employing 25 million people. Of those employed in the industry, over 20 million are small farmers, typically producing less than 1,500 kilograms of beans per year on one-to two-hectare properties. These growers, who struggle to survive on incomes averaging less than US$1.00 per day, receive less than 10 percent of the retail value of their product. The low prices, lower now than during the 1930s Depression, are only part of what many perceive as the unfair treatment of these farmers. As with many North American farmers, their income is received only after harvest; therefore, they must often borrow to acquire inputs such as fertilizer. For the small producers in the less developed economies, the only source of credit is often the intermediary who purchases their crop, and interests rates are often as high as 20 percent per annum. Such costs further reduce the incomes of these poorest members of society, who face the prospect of losing their land if they default on the loans. One group attempting to improve the situation for the small growers of coffee and other commodities such as tea, cocoa, and sugar is TransFair Canada (TFC), the Canadian affiliate of Fairtrade Labeling Organization (FLO). Through its procedures, Trans-Fair ensures that coffee bearing its Fair Trade certification has met the requirements of the FLO. Fair Trade-certified coffee is purchased from over 300 cooperatives representing 550,000 small growers. The cooperative receives a minimum of US$1.26 per pound, more than double the current world price of less than US$0.60 per pound. A premium is paid if the beans are certified as organically grown. Since the members of the cooperatives are small growers who follow traditional methods of growing coffee, few chemical inputs are used. The price of chemical fertilizers is also prohibitive. Therefore, almost 40 percent of the cooperatives on the FLO register were either certified organic or in the process of becoming certified as of February 2001. Only about 22 percent of the 78.7 million kilograms of coffee produced by the FLO-registered cooperatives in 1999 was sold through Fair Trade. However, the small growers also benefit from the direct access to world markets that the cooperatives provide. This marginal increase in income when combined with the more profitable Fair Trade sales has a disproportionate economic impact on the growers. The cooperative also lowers production costs by recycling wastes into low-cost organic fertilizers, which in turn produces higher incomes for the growers and at the same time improves environmental stewardship. Higher incomes allow the small growers to reinvest in their farms, to provide better nutrition and housing for their families, and through cooperative funded schools, to provide more educational opportunities for their children. These benefits accrue even though Fair Trade certified sales in Canada, as in other countries, represent only a small but growing proportion of the total coffee market. Because the fees are high and because workers earn competitive rates, fair trade products have a premium price associated with them when compared to “regular” products that fall outside of this type of market. The higher prices weigh on consumers who are living paycheck to paycheck, usually causing them to choose a cheaper product of similar quality. Questions 1. Is it the responsibility of coffee consumers to ensure that the small producers receive a fair price for their product? Why or why not? (15%) 2. If the price paid to the grower represents only 10 percent of the retail price of coffee, why is the retail price of Fair Trade coffee approximately double the regular price? (10%) 3. Who benefits the most from the higher price paid by consumers for Fair Trade labelled coffee? (5%) 4. What alternative approach to the problem of poverty among small producers can you suggest? (5%)Explanation / Answer
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