Paying a Fair Price

Fair Trade products yet are not well known, that is why fair trade products taking a small fraction in the consumer consumption bundle. According to Nicholls, the dominant country for Fair Trade sales is the United Kingdom and Switzerland; Belgium, France, Italy and the USA are the fastest growing markets (Zaccai, 2008, p.110)

Fair trade goods cost generally from 10 to 20% more, compare to the ordinary items with the same quality. The reason is that "fair price" means a price that is higher, that includes premium in order to support the producers in Africa, Asia and Latin America (Nicholls et al., 2005, p.199). The premium also called base or floor price that covers the cost of production and protect producers against variable market-price. Thus, the Fair Trade minimum price is always either the market price or the Fair Trade floor (Hilson, 2014, p.54). Costs of production are intended to cover land labour and capital costs of sustainable production (Nicholls et al., 2005, p.41). They also paid an additional "social premium" that can be directed to local development needs such as schools, roads or health centers (Litvinoff et al., 2006, p.66). Today Fair Trade organizations are aimed to cut out the middleman and trade directly with the farmers (Nicholls et al., 2005, p.12). The most efficient way to increase someone's income is to hand them money directly, rather than hand extra money to a retailer, who hands some of it to a distributor, who hands some to an importer, who pays a farmer. Fair Trade organizations want to know how the small farmers work, their daily lives and difficulties. It is important to narrow the distance between producers and consumers (Zaccai, 2008, p.208).

Fair Trade sales depends on the information provided about its products. Lack of the information leads to less demand for the good. Furthermore, a place where it is traded plays a key role. The Fair Trade commodities can be found in small and medium shops and supermarkets. The highest share is realized in hypermarkets, but often they are hidden away on the shelves where they only get very limited amount of shelf space. Therefore they are not easy to find (Zaccai, 2008, p.124).

Furthermore, not everyone can allow to buy it. According to Pelsmacker, for the people in the 18 to 24 years age fair trade goods are too expensive. Consumers who are familiar with fair trade, who appreciate their quality, purchase fair trade goods at least once a month (De Pelsmacker et al., 2005, p.371). According to Zaccai, those people who buy fair trade products usually are higher educated (Zaccai, 2008, p.112).

Conclusion

This academic paper explains how Fair Trade differs and why it is necessary. Fair Trade creating new relationship between business and civil society. Although Fair Trade remains a small movement, it is one of the efficient way to help developing countries. It is entirely a consumer choice model, which is not under control of government. Fair trade guarantee for farmers a higher price, increases the options and choices available to consumers. Transferring market knowledge to producers in developing counties will make them better off, so that brokers and middleman, who had been only one source of information for the farmers will lose (Nicholls et al., 2005, p.52).

Fair Trade-labelled products got the attention of European supermarket chains. Fair Trade has become part of the business plans of many importers, retailers throughout Europe and North America. It is concentrated more on marketing effort on promoting its products and the nature of production. Fair Trade products usually are invisible for the people who doing shopping at the supermarket. It should be more visibly available and provide more information on the package about the nature of production. Mass-media advertising could be a good strategy as well to attract attention on the ethnical quality of a product (Zaccai, 2008, p.125). Fair Trade is driven by consumers who wants to know more about the nature of products they buy (Nicholls et al., 2005, p.56). Fair Trade seeks to make a challenge and satisfy both producer and consumer (Zaccai, 2008, p.125).

Most Fair Trade products enter the market via the FLO system, which gives the right to use the "Fair Trade" label by certifying that products have met required Fair Trade standards. They are: fair prices for farmers and better working and living conditions for workers; direct trade with farmers, bypassing middlemen; free association of workers (Zaccai, 2008, p.227). Fair Trade traders are required to pay the minimum price to producers that covers the costs of production and living; to pay a premium that producers can invest in development; to pay in advance, when requested by producers; sign contacts that allow for long-term planning. The minimum price is meant to be used for environmental or social improvements (Lee et al., 2005, p.10)