The Four Pillars of Fair Trade: Producers

Abstract

Many of Fair Trade’s disadvantaged producers exist in an environment of involuntary unemployment with no benefits, education, training, and unable to realize their own transaction costs (Hayes, 2006). A transaction cost is the price of participating in a market and includes developing, marketing, and selling a product. Poverty leaves producers vulnerable to exploitation. Coyotes or middle men, for example, come to rural agricultural areas to purchase farmers’ goods quoting market prices that are often much lower than the actual market value. Producers are unable to verify these prices and even if they did, they have no choice but to sell their product to the middleman at his price or not sell their product at all (Hayes, 2006). Some products were perishable and producers needed income so they often sold product at a loss, not even covering their transaction costs. Fair Trade however offered price protections, education, training, and market access that eliminated these exploitive practices. Instead of putting vulnerable coffee producers at a disadvantage, it creates a fair level of pay and opportunity by guaranteeing prices, improving production, and providing long-term market access.