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What Is Fair Trade and Is It Fair?

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What’s Fair in Fair Trade?

A Chat With Brad Jeffery of CAUSEGEAR (now MADE FREE)

Growing interest in conscious consumerism has necessarily brought with it a range of questions about what constitutes fairness, ethics, and transparency. While the definition of fair trade has remained fairly solid over the last several decades, new companies, marketers, freelancers, and bloggers have introduced terms to the marketplace that, at once, appropriately nuance the range of “ethical” perspectives available to us and create confusion.

We’ve gone from having to define one term – which is difficult already – to having to hash out the meaning of dozens of terms: ethical, sustainable, transparent, eco-friendly, vegan, green, slow, minimalist, the list goes on and on. They’re all related, but they’re certainly not all the same.

This questioning has also led people like me to ask what their role is in ensuring that “ethical” adheres to a meaningful set of standards and definitions. And then, to try to understand what our role is in adhering to those standards ourselves.

My friend, Hannah, answering a question on a recent Instagram post, pointed out that she’s uncomfortable making $100 on a blog post when the producer of the item she’s reviewing made far less than that. I appreciated her comment, because it got my wheels turning about the related topic of profit sharing, and what it means to ensure that all participants in a “fair” organization are receiving reasonable, ethical treatment as individuals and employees.

What is Fair Trade?

The term “fair trade” has an ambiguous definition, and is largely defined by certifying agencies. Most certifying agencies set a minimum wage above standard wages (this is called a fair trade premium). And, they put other regulations in place, such as protections against forced labor, child labor, and unsafe working conditions. They also bind the organization to a particular oversight structure to ensure enforcement.

These regulations can be transformative. Still, a fair trade wage is rarely a true living wage. And without that, it is not as clear whether fair trade makes the difference American consumers think it is making.

Add to that the considerable cost of fair trade certification and you end up with a lot of piecemeal or self-regulating programs that may or may not being doing the right thing for their employees.

I reached out to Brad, founder of CAUSEGEAR, a Chicago and India-based social enterprise that operates with a unique 5x wage model to pick his brain about these questions, and see if we could find any resolutions. If you’ve ever wondered about the complicated inner workings of running a fair trade business, I encourage you to read the full interview below.

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Is Fair Trade Really Fair?

StyleWise: I’ve noticed that most fair trade certification agencies and membership organizations require companies to set a minimum wage that is higher than the base wage in the country of production, but there seems to be a lot of wiggle room on whether these companies are required to provide a meaningful living wage. Can you speak to that?

Brad: We don’t put a lot of stock in fair trade certifications. I’ve read Fair Trade Federation standards and others like it, and they’re kind of ambiguous. They’re not hard and fast – they leave a lot up to individual discretion. Because its ambiguous and there’s a lot of corruption in these regions, people aren’t held to task [despite the good intentions of the parent company].

It’s really hard to decide [what the appropriate wage is] and so we came up with this 5x model, because I personally needed some hard standard for ourselves.

When we surveyed the people we were trying to help, the multiple [for what constituted a living wage] was about 5x the typical wage in that region. Some of our partners take a portion of that higher wage and use it for childcare or other benefits. The 5x Model is enough income to provide for the needs of the crafter plus 3 dependents.

The test that I use is to work really closely with the organizations and groups that are actually running the factories, looking at both qualitative and quantitive results. If you visit an employees’ home for dinner, you can tell really quickly if the wage they’ve received is not enough.

For that reason, we work directly with the nonprofit that runs the factory (we work with nonprofits because they have missions aligned with ours) and we audit through consistent, close relationship, not just questioning financials but observing the obvious, tangible results.

That being said, we have to be careful to not place our North American standard of a “livable wage” on people using the fair trade model. Consider the fact that the minimum wage in Bangladesh is $1.58 a day and in India it’s $2.40. Paying 5x that wage still looks like very little to our eyes, but it is what the producers themselves believe is livable.

I’ve heard stories of women in fair trade factories having to continue to participate in sex work due to unsatisfactory wages. Do you know of this happening among your work force?

We work in the largest red light district in Asia in Kolkata. Our team is right in the center of it. Two hundred and fifty women have left red light work and are now involved in crafting and are doing well. They are out of trafficking, but they still live in the environment. It’s right outside their doors.

I’ve heard that some women continue work in prostitution while they’re transitioning into full time work in another field. In some cases, the fair trade co-op is not able to provide enough work hours – for instance, when the item produced is seasonal – so they will make ends meet by continuing in the sex work industry, though our partners provide a full time wage when business is slow to help women stay out of prostitution.

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What are your thoughts on the fact that most fair trade business owners are making more money than the artisan? In light of varied cost of living, I understand that some adjustments must be made, but do you think makers are getting the short end of the stick?

It’s true that the artisans are not making as much as the business owners, but you have to look at the cost of running a business and what is the appropriate wage for skill and responsibility. As you grow, your wages should track with that. This is true whether you live in America or India.

Another thing many consumers don’t realize is that shipping and import taxes take a huge amount of potential profit out of the equation.

At the end of the day, you have to use best practices, so we’re paying the crafters 5x a basic wage and the way we’re going to pay for that [in the long term] is by lowering unnecessary expenses.

Causegear has a “low profit” model. What does that mean and how does that relate to profit sharing?

90% of the profit goes to a special fund to go toward crafter benefits. We are designated an L3C, or low profit limited liability. The guideline itself doesn’t set a standard, so we have set our own standard.

[In regard to profit sharing,] from my experience in business, the best business culture is a collaborative team culture that provides everyone the opportunity to make an impact on the company overall. We practice Open Book Management, which means we share financials with our team.

Every week, we have a team meeting and we actually show the income statement. When everyone can see how the company is doing, it makes teams stronger.

And lastly, I’ve been thinking a lot about “social good” companies that market themselves around charity but don’t seem to prioritize ethical labor standards. What are your thoughts on this? It seems to me that, rather than being revolutionary, it’s completely in line with traditional business models that give back after they’ve made a profit. 

Charitable giving can at times reinforce rather than alleviate poverty. The greatest region of poverty is sub-Saharan Africa. If you look at the amount of aid over 26 years it’s 1 trillion dollars. In that same 26 year period, poverty has gone up. So I think we need to be careful to not see charity as the long term solution. In the end people need good jobs that empower them.

So, where does all of this leave us as consumers and advocates? It means we should ask more questions, prioritize low profit and profit sharing models, and understand that there isn’t always one right answer.

While bloggers, influencers, and ethical businesses should be conscientious about the wages we demand – ensuring that they fit within an integrated ethical business model – there is nothing wrong with making a modest salary. We seek fairness at each step of the process.

Question everything. Go to the source. Build relationships that matter. That’s what “ethical” business should be about.

Thanks to Brad at Causegear for letting me talk your ear off!

Leah Wise is the founder of StyleWise Blog. She has been writing, speaking, and consulting on sustainable fashion, the fair trade and secondhand supply chain, and digital marketing for over ten years. An Episcopal priest, Leah holds a B.A. in Religion from Florida State University and an M.Div. from Yale Divinity School. When not working, you can find her looking for treasures at the thrift store.

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