The average consumer is often turned off from buying fair trade products upon learning that the prices are higher than commercial ones. The prices go higher still when the products are sold at specialty shops instead of regular stores. Just how is a product priced?

Fair Trade Certification

When a product obtains certification the minimum price is often set by certain standards. The minimum price of the product is the amount that a buyer, a wholesaler for example, has to pay the producers who made the product. Unlike other commercial items, the price of fair trade products is not fixed. Since it aims for producers to practice sustainable production the minimum is set at the cost that covers the production. This ensures that even if the market price for that product falls below the minimum set, the farmers will not be at a loss. Thus it plays the role of a safety net. However if the market price goes way above the minimum level then the buyer has to pay the producers the current market price. In addition both the wholesalers and producers can negotiate for a higher price if it is determined that the product is of high quality, among other requirements.

Fair Trade Products for sale

Because the idea of fair trade is to cut the distribution chain, it does not answer why some of the products remain to be sold at a higher price.  Thus aside from the price of the fair trade products, it is agreed upon by the producers and wholesalers, the agencies though the FLO Standards Unit puts an additional price on top of it. This may seem counterproductive since the price of the product will obviously be higher than the current market price.

Fair Trade adds improvement to communities

Pilgrim Imports Take Two Theater Fair Trade Ornament

Pilgrim Imports Take Two Theater Fair Trade Ornament

There is however a purpose why a premium is added. The income from the premium is used as investment capital in order to develop projects geared for the producers and workers economic, environmental and social improvement. For example, the amount can be invested to build schools and their communities in the area where the products are manufactured. It can also be used to build or improvement facilities that will help in increasing the yield or enhancing the quality. By focusing on improvements in the area it is