Is fair trade fair Research Paper Example | Topics and Well Written Essays - 1500 words

Is fair trade fair - Research Paper Example 1923). Fair Trade organizations works in opposition to the capitalist market system, but works within it (Fair trade critique, 2010). They are backed by consumers and are engaged enthusiastically in supporting producers, raising consciousness and in organizing campaigns for bringing changes in the existing policies and practices of international trade. The producers in the South are often found to be marginalized to a great extent. The Fair Trade Organizations are working to make trading a fair practice which would accommodate the interests of all the trading partners. The concept of fair trade is relatively new and is commanding the interest of many researchers in current times. This paper presents a critical analysis of the concept of fair trade and evaluation of the practice by utilizing the theory of economics. The benefits of fair trade One of the most vital market based mechanisms is the practice of fair trade, which helps in the improvement of the livelihoods of the producers based in the developing countries (Nicholls & Opal, 2005, p. 5). The partnership between the producers and the consumers is targeted to provide a fair share of the benefits of trade to the farm workers and the farmers. This addresses â€Å"the imbalance of power in trading relationships† (What is Fairtrade? 2011). In many countries, particularly in the countries in the South, the farmers and agricultural producers are deprived of the actual yield of profits. Under fair trade the price for the products they sell is set according to the norms of the Fair trade Standards. Involvement of these workers in fair trade helps them to get better deals and also a superior terms of trade (O’Neill, 2007). This in turn provides them with the opportunity to lead a better standard of life and make better plans for their future. Fair trade prices The fair trade price is the minimum price that has to be paid to the fair trade producers. This price acts â€Å"as a safety net† (Wha t is Fairtrade? 2011) for the farmers. It is determined by the regulations mentioned in the Fair trade Standards. This price is associated to all the products that are Fair trade certified. This price is set in such a way that it can cover the â€Å"average costs of sustainable production† (What is Fairtrade? 2011). When the markets fall below the level of sustainable production, the farmers obtain a meager price for their produces; the fair trade prices are designed to safeguard the interests of the vulnerable producers. Sometimes the prices are negotiated with the buyers to yield a higher price on the basis of the quality of the products. Classical theory of employment According to the classical school of economics â€Å"the wage is equal to the marginal product of labor† (Keynes, n.d.). This implies that the real wage entitled to an employed person is the minimum amount of remuneration provided to the person to induce him to put the amount of effort or labor that is actually exerted. The wage is equal to the value of output that is foregone when one unit of the labor is removed from the process of production. The classical theory of economics is built under the assumption of the competitive market, in which the amount of labor employed and the amount of wages are determined by the forces of the market. In this context, the disutility