Economics Unit 3- FairTrade

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Why is Fair Trade not always 'fair'?

Many producers in small LEDC’s have not enough market power to push for a higher price with large multinational buyers such as Tesco.

It is also very difficult for LEDC’s to compete with growers in more developed economies such as USA and Europe. This is because in these economies the government subsidises their farmers to keep the market price of their products artificially low.

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How does Fair Trade benefit people in LEDC's?

-Fair Trade is a tool for reducing poverty in developing nations. Fair Trade guarantees many things including the following:

·         1. Producers receive a minimum set price for their goods

·         2.Financial and technical support

·         3. Healthy and safe working conditions

·         4. Economic development of their communities

·        5. Educational opportunities for their children.

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What are the issues with Fair Trade?

-The Fair Trade organisation is huge and there is a significant amount of bureaucracy involved and decision making can be slow.

-As a result, there is scope for corruption of the system. Plantation owners will not be checked on regularly so child labour and poor working conditions and wages can still exist as the owner may keep the extra revenue for himself.

-It may also push smaller producers out of the market as they cannot afford to meet the strict criteria for Fairtrade status.

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