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Fair Trade vs. Direct Trade - What's the Difference?

on January 09, 2023

Fair trade and direct trade are both alternative trade models that aim to improve the lives of small-scale producers and workers in the global economy. However, there are some important differences between the two approaches.

Fair trade is a certification and labeling system that aims to promote more equitable and sustainable practices in global trade. It was developed in the 1940s as a way to help small-scale producers in developing countries gain access to markets and receive a fair price for their products. Fair trade certification is granted to producers who meet certain social, environmental, and economic standards, such as paying fair wages, protecting the environment, and providing good working conditions. Fair trade products are typically sold in mainstream retail channels and are often more expensive than non-fair trade alternatives.

Direct trade, on the other hand, refers to a model of trade in which producers and buyers deal directly with each other, bypassing intermediaries such as brokers, importers, and wholesalers. The goal of direct trade is to create more direct and transparent relationships between producers and buyers, and to ensure that producers receive a larger share of the price paid for their products. Direct trade often involves establishing long-term partnerships between producers and buyers, and may involve direct investment in the production process.

One key difference between fair trade and direct trade is the way in which prices are determined. Fair trade sets minimum prices for certain products based on the cost of production and a premium to cover social and environmental costs. These prices are intended to provide a safety net for producers and to ensure that they receive a fair wage. In contrast, prices in direct trade are often negotiated directly between the producer and the buyer, and may be based on a variety of factors such as quality, quantity, and market demand.

Another difference is that fair trade is a standardized and third-party certified system, whereas direct trade is more flexible and relies on the trust and transparency between the two parties. Fair trade certification is granted by independent organizations that verify that producers are meeting the fair trade standards. Direct trade, on the other hand, relies on the buyer to establish and maintain relationships with producers, and to ensure that they are being treated fairly.

There are also some differences in the types of products that are typically associated with fair trade and direct trade. Fair trade is most commonly associated with commodities such as coffee, cocoa, and tea, as well as handicrafts and other artisanal products. Direct trade is more commonly associated with specialty and high-end products, such as specialty coffee, chocolate, and other craft products.

In summary, fair trade and direct trade are both alternative trade models that aim to improve the lives of small-scale producers and workers in the global economy. However, they differ in their approach to setting prices, their reliance on third-party certification and standardization, and the types of products they are typically associated with. Both approaches can play a role in promoting more equitable and sustainable trade practices, and consumers may choose to support either approach based on their own values and priorities.

Mavuno Harvest actually started as a Fair Trade certified company - achieving Fair for Life status in 2012.  We wanted to clearly tell our customers that we were trying to do something good - and thought the fair trade symbol on the front of our bags would make this clear.  Unfortunately, this fair trade status actually made sourcing more difficult.  Fair Trade is a cost for both buyers and suppliers.  When we were seeking new suppliers, they were often small scale and paying for an expensive certification such as fair trade was not in their budget. 

The irony was that Mavuno Harvest was trying to fairly source dried fruits from small scale farmers and the farmers wanted to sell to us.  However, fair trade requires both producers and buyer's to be certified and our potential suppliers were hindered by the cost of the certification.  And to be honest, fair trade can often be seen as patronizing to the supplier's themselves.

It was for these reasons that Mavuno Harvest decided to go for Direct Trade certification instead.  We now have personal relationships with all of our suppliers and frequently work with them to achieve all of our mutual goals.  And because our suppliers set the fair prices which they need, as Mavuno Harvest grows - so too will our suppliers businesses, affecting change all down the supply chain.

For more information about the differences between fair trade and direct trade, check out the following links:

  1. "Fair Trade vs. Direct Trade: What's the Difference?" - This article provides a brief overview of the differences between fair trade and direct trade: https://www.fairtradeusa.org/resources/fair-trade-vs-direct-trade-whats-difference

  2. "Direct Trade vs. Fair Trade: What's the Difference?" - This article provides a comparison of the two models, including the benefits and limitations of each: https://www.perfectdailygrind.com/2018/09/direct-trade-vs-fair-trade-whats-the-difference/

  3. "Fair Trade vs Direct Trade: What's the Difference?" - This article discusses the origins and principles of both fair trade and direct trade, and provides examples of each: https://www.globalhand.org/en/fair-trade-vs-direct-trade

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