What Exactly Are Fair Trade And Direct Trade?

Fair trade originated in the coffee crisis of 1988, when there were no price quotas, resulting in a much larger supply of coffee than market demand.

Therefore, the Netherlands has begun this certification, with the expectation of raising the price of coffee and providing workers with adequate wages through human influence.

After several years of repeated experimentation, organizations were set up to help stabilize the coffee market. These organizations eventually joined forces to form what is now the International Fair Trade Organization.

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Fair trade aims to reduce the gap between small farmers in developing countries and large subsidized smallholders in industrialized countries. The goal is to promote equity and growth in international trade.

The ultimate ideal outcome of fair trade is to help troubled farmers sustain their livelihoods and ultimately enable them to deliver more and better products to consumers.

Fair trade regulations may ensure that consumers purchase coffee in conformity with ethical standards, including the prohibition of child labour and forced labour.

In fact, everyone is one of them.

A company called Fairtrade International is responsible for regulating policies affecting each role in the supply chain. Execute their goals through multiple sub-organizations such as FLO-CERT, which is responsible for certification and standards enforcement.

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First, in order to obtain the Fair Trade Label, coffee producers must apply for certification (for a fee) and obtain certification. Once farmers have completed these steps, producers are introduced to and sold their coffee to large companies.

Fair Trade International also provides farmers with economic assistance to grow and sustain their livelihoods.

Fair trade importers are required to register and pay fees at the Fair Trade Centre, and they are also required to pay exporting companies a minimum price that will be adjusted as needed to ensure fair prices for products sold by producers working with exporters.

The weakest part of the link to the fair trade system is exporters. Because of costs, additional costs, and low demand, exporters often suffer losses rather than profits from trading fair trade certified coffee.

Losses ultimately affect the income earned by farmers; However, when these organizations make a profit, the surplus will be spent on social improvement projects aimed at improving the community in which the cooperative is located, which can include everything from school classrooms to recreational facilities and supporting the organization's operations.

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As with any large company, there is growing interest in the transparency of the organization. Some commentators argue that the organization as a whole is only the result of ethical consumerism and could hurt the development of the coffee industry.

There are also problems with quality control, as there is a growing belief that coffee should be seen more as an exquisite crop than as a futures commodity.

Direct trade is not an organization, but more like a trading method. Bean bakers (or dealers) purchase coffee directly from farmers (producers).

As mentioned earlier in this paper, this trade approach is a way to make up for the shortcomings of fair trade operations, including higher incomes through the production of higher quality coffee, leading to a win-win situation in which farmers receive more income and consumers better coffee.

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As noted above, direct trade is being developed to improve the increasingly complex fair trade system. Thus, rather than following a specific set of rules, those who use direct trade choose a more open and mutually beneficial form of trading.

These individuals and companies emphasize consultation, discussion, relationships, and information sharing. Transparency is key to promoting direct trade among these people.

Farmers meet and interact directly with buyers. In exchange for better commodity prices, producers strive to provide buyers with quality products.

Dealers or bean dryers do not purchase raw beans from importers and represent that they do not come from farmer organizations such as cooperatives. Buyers of direct trade buy directly from producers.

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This allows them to directly influence the quality of the goods they purchase, and producers to obtain fair prices. In summary, this adds to the continuity of both parties.

Direct trade does not include importers, exporters, or any intermediary organization

Direct trade directly removes the intermediate role, which at the same time eliminates the additional costs and costs incurred by the fair trade intermediary process.

The main problem with direct trade is that the mechanism relies entirely on the ethics and integrity of buyers. As a result, companies sometimes use this method and claim to use direct trade externally, but not in line with fully transparent expectations.

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These buyers failed to provide information and evidence of their direct trading targets. However, some direct trade "founders" have tried to address the issue with annual transparency reports.

Both trade modes have good ideas and objectives to provide sustainable income for coffee farmers in developing countries. However, neither of these approaches can be comprehensive.

If you buy Fair Trade coffee, you can expect every player in the supply chain to comply with this set of standards. So, if you buy coffee from a company that claims to be fair trade, they all have some ideals. Remember, however, that not everyone can benefit from this mechanism.

As far as direct trade is concerned, while there are no official standards to regulate it, there are certain companies that have the ideal of being committed to fairness and transparency and are trying to improve sustainability and deficiencies in the coffee trade.

So you can look at this part of your coffee before you buy it.

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