As Starbucks announces that it will only sell Fairtrade products, it does sometimes seem as if people are being pushed into purchasing goods labelled fair trade. We are told that free trade hurts the poorest countries, and only ‘Fairtrade’ can guarantee a fair price. Fortunately for the world’s poor, the majority of whom don’t, nor will ever, benefit from fair trade, the ethical superiority of Fairtrade was challenged in February, at least on an academic level (after a research paper from the Adam Smith Institute was published):
â€¢ Fair trade is unfair. It offers only a very small number of farmers a
higher, fixed price for their goods. These higher prices come at the
expense of the great majority of farmers, who â€“ unable to qualify for
Fairtrade certification â€“ are left even worse off.
â€¢ Fair trade does not aid economic development. It operates to keep the
poor in their place, sustaining uncompetitive farmers on their land and
holding back diversification, mechanization, and moves up the value
chain. This denies future generations the chance of a better life.
â€¢ Fair trade only helps landowners, not the agricultural labourers who
suffer the severest poverty. Indeed, Fairtrade rules deny labourers the
opportunity of permanent, full-time employment.
â€¢ Four-fifths of the produce sold by Fairtrade-certified farmers ends up
in non-Fairtrade goods. At the same time, it is possible that many
goods sold as Fairtrade might not actually be Fairtrade at all.
â€¢ Just 10% of the premium consumers pay for Fairtrade actually goes to
the producer. Retailers pocket the rest.
â€¢ The consumer now has a wide variety of ethical alternatives to
Fairtrade, many of which represent more effective ways to fight
poverty, increase the poorâ€™s standard of living and aid economic
â€¢ Fairtrade arose from the coffee crisis of the 1990s. This was not a free
market failure. Governments tried to rig the market through the
International Coffee Agreement and subsidized over-plantation with
the encouragement of well-meaning but misguided aid agencies. The
crash in prices was the inevitable result of this government
intervention, but coffee prices have largely recovered since then.
â€¢ Free trade is the most effective poverty reduction strategy the world
has ever seen. If we really want to aid international development we
should abolish barriers to trade in the rich world, and persuade the
developing world to do the same. The evidence is clear: fair trade is
unfair, but free trade makes you rich.
I don’t think that Fairtrade is bad per se, providing that it is just one option in a free market. If people want to buy their produce in that manner, then so be it. The problem comes with the inevitable attempt to distort free markets with calls for trade barriers and subsidies. Despite all the problems with market-based economies recently, a free market is still the best way to move goods around. Person A sells Person B something: Person A is happy because she preferred the money to the product, while Person B is happy because he preferred the product to the money. Yes, the system is far from perfect, but what is the alternative? The state interfering in what we can sell and purchase? Because that is the system that the fairtraders advocate when they call for trade barriers:
“The Fairtrade model fails because it is profoundly unfair: it rewards
inefficient farmers who produce poor quality goods. The Fairtrade model
assumes that poor farmers must always remain farmers, and it seeks to
subsidize their agrarian niche, denying them the possibility of dreams of a
By guaranteeing prices, the Fairtrade movement tries to hold back the tide.
Instead of helping unsustainable farming communities to develop new
sources of income, they encourage them to continue in the old ways. According to Oxfam, in the time it takes five hundred people in Guatemala to
fill a large container with coffee, the same amount of coffee can be picked in
Brazil by five people and a mechanical harvester. Fairtrade supports
inefficient, labour-intensive cooperatives in a battle they can never win,
trapping them in their poverty.
Imhof and Lee (2007) note blandly that, â€œFair Trade-sponsored organic
production helps generate sufficient additional income and labour
opportunities, allowing more family members to stay in coffee production.â€
Yet as the documentary film The Bitter Aftertaste makes clear, these additional
labour opportunities are incredibly inefficient, and by resisting mechanisation can conflict with national plans for economic development. No country has
ever become rich while remaining agrarian. Fair Trade keeps farming families
working the land: it refuses to consider that they might wish the next
generation to do better than the last.”
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Filed in: Current affairs,Economics,Moral police