Answer to Question #207103 in Management for Pearl

Question

3. Fairtrade in coffee

Fairtrade tries to address a number of issues. Explain three of these

issues.

What is meant by a Fairtrade Minimum Price (floor price) for coffee beans? How did the fixing of a Fairtrade Minimum Price lead to unethical practices

by coffee farmers?

Added to the Fairtrade Minimum Price, coffee bean buyers must also pay a

fixed premium. What should this premium be used for?

Explain what was found when researchers tried to establish how the

premiums were used.

Not everybody is convinced that Fairtrade is working and achieving its

objectives. Explain two reasons why people feel this way.

   

  Discuss how the following alternatives to Fairtrade works, and how it is different from the principles followed by Fairtrade.

SPP-coop

Equal Exchange

Coffee and farmer equity

 

Answer 1

Fairtrade's Definition

The Fairtrade minimum price is the amount that purchasers must pay to producers in order for a product to be certified as meeting Fairtrade standards. It is unethical for coffee growers to choose to market their lower-quality coffee as Fairtrade coffee in order to increase their income.

Fairtrade Premiums are used.

The premium is utilized as a one-time payment that goes into a communal fund for workers and farmers to use to better their social, economic, and environmental circumstances.

According to the researchers, premiums were employed in the following ways:

Farmers are supposed to employ the premium for a certain purpose, such as investing a certain percentage of their resources in environmental sustainability and excellent production.

Fairtrade is Inconvenient for a Variety of Reasons.

People find paying premium pricing bothersome because their products tend to be more expensive because they are unable to pay more money to Fairtrade. Fairtrade certification is also costly for the individuals and small enterprises that the initiative seeks to assist, as the initial certification process is costly.

Alternatives to Fairtrade

SPP-coop represents small farmers' increasing leadership in global trade.

Equal Exchange's objective is to develop mutually beneficial ties between farmers and customers in order to demonstrate success through long-term trading agreements that are both economically and environmentally healthy.

Coffee and farmer equity—Ensures the long-term viability of coffee producing and processing by assessing the economic, social, and environmental elements of the industry against a set of criteria outlined in the C.A.F.E standards.