In a narrow sense, fair trade is defined based on its best-known component:
fair prices for the products of farmers in developing countries. In
essence, fair trade means buying products from farmers in developing
countries on terms that are relatively more favorable than commercial terms
and marketing them in developed countries at an ethical premium (Bird and
Hughes 1997). This higher price to the consumer is warranted by the higher
price that farmers receive for their products and by the fair-trade control
mechanisms in the trade channel (for an extensive description of fair-trade
mechanisms, see, for instance, Littrell and Dickson [1999] and Krier
[2001]). Companies generally demonstrate their fair-trade behavior to consumers
by means of marketing fair-trade brands or by means of cooperating
with fair-trade organizations that accredit their fair-trade products and allow
them to market these products using a fair-trade label. Fair-trade organizations,
on the other hand, go through considerable efforts to convince companies
to comply with fair-trade rules and sell fair-trade products. For
instance, in April 2000, after a year-long campaign by the human rights
organization Global Exchange, Starbucks decided to carry fair-trade coffee
in its 2,300 stores (Straus 2000).