Direct Trade Vs Fairtrade; Which Is Better For The Economy?

Ogbo Godfrey

Direct Trade Vs Fairtrade; Which Is Better For The Economy?

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Direct Trade Vs Fairtrade; which is better for the economy? This is one million dollar question that begs for an immediate answer.

You’ve probably seen “Fairtrade” on a lot of product labels. When you see that label, you probably think that everyone in the supply chain, from the farmers on up, is getting a higher price for their product than they would otherwise. 

This, however, doesn’t always happen. For example, farmers who pay for a Fairtrade certification for their cacao could get paid less than the already-too-low commodity price for cacao. 

Does that mean that Fairtrade is bad? No. But it does mean that we all need to spend more time learning about the food supply chain so we can make smart choices.

How our food gets to us is a very important thing to know. Many of us have come to rely on certifications to tell us how safe our food is, how well the people along the supply chain are being treated and how much they are paid. 

We rely on certifications because they are easy. We’re all busy and don’t have time to fully research every food we buy. But the truth is that if you really want to know how safe your food is and what’s going on all along the supply chain, you need to do more than just read the labels on packages.

In this post, we’ll discuss Fairtrade and direct trade. These two terms are often used on chocolate packagings and we will reveal if any of them is better for the economy.

Direct Trade Vs Fairtrade; Which Is Better For The Economy?

What Is Fairtrade?

Fairtrade has become more popular over the years, and the most obvious sign of this is the growth of more Fairtrade groups.

Fairtrade certifications guarantee that producers pay their workers enough to live on. They also ensure that supply chains are honest, and that labor laws are followed. Fairtrade International and Fairtrade USA are two of the biggest and most global Fairtrade standards. 

Who Fairtrade is willing to certify is the main difference between fairtrade certifications. Fairtrade International only certifies farmers who are part of a group whereas, Fairtrade USA certifies plantations so that there will be more Fairtrade products on the market.

In the same way, certified fairtrade products have to follow a set of rules that include practices that are good for the environment, good business practices, and living wages for producers and their workers. 

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To be certified Fairtrade, every farm should meet these strict rules, no matter how hard it is in their area. 

Fairtrade also uses farmer cooperatives which creates a community of farmers. These cooperatives enables their members have a democratic voice in making decisions, and make sure that a Fairtrade certification is helping a lot of people. 

For them, this means that exporters and wholesalers will be able to buy more farm produce.

In return, Fairtrade groups have set prices for goods to help protect farmers from changes in the market. If a farmer has a bad harvest season, their families and employees won’t have to pay for something that was out of their control. 

When the season goes well and there are more profits than needed, the extra money is put back into the community to build schools, hospitals, and other amenities that will help the community grow. 

Even though Fairtrade has a minimum price for a good, it isn’t always the same as a living wage, especially if the supply chain is uncertain. As a result, Fairtrade International is looking at its pricing structure to see how it can help farmers more.

For example, Fairtrade has made life better for millions of farmers and their families all over the world but Fairtrade doesn’t have a standard for the quality of the products that these farmers produce.

Direct Trade Vs Fairtrade; Which Is Better For The Economy?

Obstacles In Developing Countries

Developing countries are not neglected by fairtrade however, there are challenges that hinders the smooth implementation of Fairtrade in developing countries. Below are some of the challenges.

a. Few Jobs

In places where there aren’t many jobs, people have no choice but to work long hours for low pay. These jobs are often carried out in dangerous conditions.

b. Low-value

When local markets become saturated, the value of locally made goods like coffee reduces a great deal.

c. Unfair deals

Middlemen pay farmers less for their goods than they are worth so that they can make more money for themselves. Because of this, farmers, their families, and their communities suffer.

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What Is Direct Trade?

Direct trade happens because processors want to make sure the quality of the farm produce they buy stays the same. By building a relationship with farmers, roasters can make sure they meet their standards year after year. 

Lets take coffee beans for example. Usually, a roaster meets with a farmer to talk about this need and build a relationship. Some direct trade roasters pay coffee farmers well for their high-quality beans, but this depends a lot on the company.

Direct trade roasters can also tell how their relationship with their partner farmers and the community around them affects them. Roasters can tell their customers about this and show them how their partnership makes a difference. 

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Direct trade is much more personal in this way, especially if the roaster gets to see the farm and meet the farmer’s family. Since they will only be used by one roaster, this usually means fewer beans at a time.

One of the most important differences between Fairtrade and direct trade is who they trade with. Even though a cooperative has many benefits, it also means that Fairtrade farmers may not know who is drinking the coffee drinks made from their beans. 

This could mean that they don’t put as much emphasis on making sure the beans are always of good quality. Since direct trade partnerships are between a single farmer and a coffee company, it is up to the roaster to decide year after year if the quality meets their standards.

The biggest problem with direct trade is the same thing that makes Fairtrade so good: it sets standards. Every roaster does business in a unique way. One roaster might go to the farm every year to buy coffee, while another might buy from an arbitrator or small cooperative. 

One may pay their farmers well and have strict rules about the environment, while the other may not do any of the two. There is no third party in the supply chain to make sure that people are held accountable and that everything is transparent.

Similarities Between Direct Trade And Fairtrade

Fairtrade and direct trade have some similarities. They include the following:

  • They both want to give farm workers more money in the form of better wages.
  • They both want to stop things that are bad for the environment and people.
  • They both aim to eliminate poverty through higher wages, efficient business, better education, and improved healthcare.

Differences Between Direct Trade And Fairtrade

  • Fairtrade helps get rid of poverty by setting rules about wages, business practices, and the environment while direct trade reduces poverty by giving farmers a lot of money for producing quality farm produce.
  • Fairtrade USA has strict rules and clear guidelines for the certification while there are many methods to do direct trade sourcing.
  • Fairtrade roasters get their beans from large sellers or importers while direct trade roasters buy directly from the farmer or a close representative of the farmer.

Which Is Better For The Economy?

Direct Trade Vs Fairtrade; Which Is Better For The Economy?

This question doesn’t have a clear answer. The main difference between the two is what they value: quality, social justice, and practices that are good for the environment. 

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There is a lot of overlap between these areas, but both direct trade and Fairtrade tend to favor one over the other. Both want to help people who are poor and give farmers more power. 

Even though Fairtrade farmers don’t get paid for quality farm products, there are fewer farmers who get paid through direct trade.

Neither direct trade nor Fairtrade is the best way for farmers to get out of poverty. It’s also important to remember that these strategies don’t compete with each other. Instead, they are different ways to improve people’s lives and help farming communities grow.

So, the question isn’t which method is better for the economy; rather, it’s how a customer can make an informed choice about which product to buy. Your values will tell you what to do. 

Both strategies are good for the people they help. If you want a consistent taste, you can buy direct trade. Fairtrade is a good option if you want to bring justice for people and the environment. 

The values of each option are different, but they are not mutually exclusive. It just depends on the company or Fairtrade certification.

Conclusion

Fairtrade and Direct Trade are both important and they help farmers in different ways. Fairtrade uses a standard living wage to make sure farmers get more money, while direct trade cuts out middlemen so that farmers get more money upfront. So to answer the question, the both are good for the economy. 

Ogbo Godfrey
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