Is Fair Trade fair trade?

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On Saturday I went to Greggs and had their porridge with apple and cinnamon plus a cuppa before work. All well and good and they do a nice sandwich.

Sitting at the table, the cup was emblazoned with Fair Trade Coffee, in fact the words “fair trade” were everywhere about. Yep, I’ve heard of it before and the word “fair” when presented to us is a red flag of course. Any organization with a glossy poster pointing out how “fair” they are is one to be deeply suspicious of, ultra-PC.

So it was only after getting back and googling it that the larger story of Fair Trade seemed to confirm these fears. One has to start somewhere, so Wiki’s the logical place:

§  Consumers have been shown to be content paying higher prices for Fairtrade products, in the belief that this helps the very poor.[35]

§  The main ethical criticism of Fairtrade is that this premium over non-Fairtrade products does not reach the producers and is instead collected by businesses, employees of co-operatives or used for unnecessary expenses. Furthermore, research has cited the implementation of certain Fairtrade standards as a cause for greater inequalities in markets where these rigid rules are inappropriate for the specific market.[36]

§  The Fairtrade Foundation does not monitor how much extra retailers charge for Fairtrade goods, so it is rarely possible to determine how much extra is charged or how much reaches the producers, in spite of the Unfair Trading legislation. In four cases it has been possible to find out. One British café chain was passing on less than one percent of the extra charged to the exporting cooperative.[9]

§  There is a dearth of economic studies setting out the actual revenues and what the money was spent on. FLO figures[40] are that 40% of the money reaching the Third World is spent on ‘business and production’ which would include these costs, as well as costs incurred by any inefficiency and corruption in the cooperative or the marketing system. The rest is stated to be spent on social projects, rather than being passed on to farmers. There is no evidence that Fairtrade farmers get higher prices on average.

§  Coercion: for instance, Fairtrade encouraged Nicaraguan farmers to switch to organic coffee, which resulted in a higher price per pound, but a lower net income because of higher costs and lower yields.[28]

§  One reason for low prices is that Fairtrade farmers have to sell through a monopsonist cooperative, which may be inefficient or corrupt – certainly some private traders are more efficient than some cooperatives. They cannot choose the buyer who offers the best price, or switch when their cooperative is going bankrupt[44] if they wish to retain Fairtrade status.

§  The Fair trade marketing system provides more opportunities for corruption than the normal marketing system; and less possibility of, or incentive for, controlling corruption.

§  The Fairtrade minimum price means that when the world market price collapses, it is the non-Fairtrade farmers, particularly the poorest, who have to cut down their coffee trees.

§  Fairtrade supporters boast of ‘The Honeypot Effect’ – that cooperatives which become Fairtrade members then attract additional aid from other NGO charities, government and international donors as a result of their membership.[56]   Critics point out that this inevitably means that resources are being removed from other, poorer, farmers.

§  Griffiths (2011)[9] points to false claims that Fairtrade producers get higher prices, the almost universal failure to disclose the extra price charged for Fairtrade products, to disclose how much of this actually reaches the Third World, to disclose what this is spent on in the Third World, to disclose how much, if any, reaches farmers, and to disclose the harm that Fairtrade does to non-Fairtrade farmers. He also points to the failure to disclose when ‘the primary commercial intent’ is to make money for retailers and distributors in rich countries.

§  The Fairtrade criteria are essentially political, and critics state that it is unethical to bribe Third World producers to adopt a set of political views that they may not agree with, and the donors providing the money may not agree with. In addition many of the failures of Fairtrade derive from these political views, such as the unorthodox marketing system imposed.[57] Boersma (2002, 2009)[58] the founder of Fairtrade, and like minded people[59] are aiming at a new, non-capitalist way of running the market and the economy. This may not tie in with the objectives of producers, consumers, importers or retailers.

The Fairtrade criteria are essentially political, and critics state that it is unethical to bribe Third World producers to adopt a set of political views that they may not agree with, and the donors providing the money may not agree with. In addition many of the failures of Fairtrade derive from these political views, such as the unorthodox marketing system imposed.[57] Boersma (2002, 2009)[58] the founder of Fairtrade, and like minded people[59] are aiming at a new, non-capitalist way of running the market and the economy. This may not tie in with the objectives of producers, consumers, importers or retailers.

§  Booth says that the selling techniques used by some sellers and some supporters of Fairtrade are bullying, misleading, and unethical.[60]

§  Crane and Davies’[63] study shows that distributors in developed countries make ‘considerable use of unpaid volunteer workers for routine tasks, many of whom seemed to be under the (false) impression that they were helping out a charity.’

Crane and Davies’[63] study shows that distributors in developed countries make ‘considerable use of unpaid volunteer workers for routine tasks, many of whom seemed to be under the (false) impression that they were helping out a charity.’

§  There are many complaints of poor enforcement problems: labourers on Fairtrade farms in Peru are paid less than the minimum wage;[69] some non-Fairtrade coffee is sold as Fairtrade[70] ‘the standards are not very strict in the case of seasonally hired labour in coffee production.’[71] ‘some Fair trade standards are not strictly enforced’[72] supermarkets avoid their responsibility.[73]

§  Segments of the trade justice movement have also criticized Fair trade in the past years for allegedly focusing too much on individual small producer groups while stopping short of advocating immediate trade policy changes that would have a larger impact on disadvantaged producers’ lives.

The impression I’m getting from all this is that money is the root of the game and there are many middlemen who are raking off along the way.   The overriding objection I have is to the dishonesty.    In Greggs or in Starbucks [not that I go to the latter], the cost to consumers is up to what we will bear in this market – someone’s making a lot of money and to sell higher prices to consumers for social policy reasons is unethical.

My solution for now is to drink only tea at Greggs.

One Response to “Is Fair Trade fair trade?”

  1. A K Haart February 17, 2014 at 12:38 Permalink

    Very interesting. Why am I not surprised?

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