The fair trade movement was created to promote the ethical exchange of goods from production to shelf. At its core,
fair trade is meant to benefit the producers; typically, the
poorest farmers and laborers in developing countries. Although some critics argue that the system may cause more
damage than good, producers who adhere to fair trade
guidelines generally receive higher compensation than if
they were to sell in conventional markets. Fair trade supply
chains tend to be shorter, and consumers who purchase
fair trade products typically pay more than for conventional substitutes (Nelson and Pound, 2009). To qualify
for fair trade certification, producers must meet standards
managed by private third party certification organizations.
These standards vary, based on the product, region, and
third party system in ways that might not be fully understood by consumers.
The fair trade certification industry is complex. Dozens
of certifying bodies are responsible for labeling claims. The
largest governing body is The Fairtrade Labeling Organizations International (FLO-I), which serves as an umbrella
organization for several groups. In 2012, the main North
American member—Fair Trade USA—left FLO-I to pursue
its own standards. This impacted FLO-I and perhaps the
United States and Canadian markets—but in which ways?
Total global fair trade sales have been increasing. In 2011,
global retail sales topped $6.7 billion, an eight-year compound annual growth rate of ~25% (Figure 1). While the
United States and Canada accounted for sales of more than
$1.7 billion in 2011, this is still a relatively under-developed
market compared to the EU. In 2011, before Fair Trade
USA left FLO-I, the U.S. market share was 25% compared to the EU’s 65% (FLO-I Annual Report). For the first time,
2012 saw a decline in the value of FLO-I-certified sales as
Fair Trade USA increased its share of the market.
Explanation:
