Fair trade – fair for whom?

When I was studying Geography A level Fair Trade was a reasonably new thing to enter the curriculum and it was treated like a panacea. This ultimate solution to the developing world’s problems. It was sold as long term sustainable way for the west to undo the damage it has done in unfair trade practices. It was made out to have come from a bright idea by a kindly western charity that made some clever decisions and got some Trans-National Companies on board and went global with it’s mission to make the world a fairer place.

That is a lie.

I promised to challenge the status quo and make you think twice about things you used to accept.

Fair trade holds the developing world back, it is not a charity nor is it not-for-profit, it does not help the producer as much as it makes out and does in no way help those most in need.

The following comes from the Adam Smith Institute’s (otherwise known as Mecca to me) report on Fair trade from 2008.

  • 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 – unable to qualify for Fair trade certification – are left even worse off.
  • Most of the farmers helped by Fairtrade are in Mexico, a relativelydeveloped country, and not in places like Ethiopia.
  • 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.
  • Fair trade only helps landowners, not the agricultural labourers who suffer the severest poverty. Indeed, Fairtrade rules deny labourers theopportunity of permanent, full-time employment.

Quite frankly it is simple economics that is being ignored. If you want to ensure that everyone gets the deal that is best for them then fair trade is not the answer. If you want to join a fair trade cooperative then you have to pay a premium, so the poorest farmers can’t join. The middle income farmers who can join then more money than the others, which causes price distortion in the local markets, the rich get richer, the poor get poorer.

The evidence is there too. Free trade works. Full stop. Countries like India and China up until the 70s had socialist centrally planned supply driven economies. Within 20 years of them giving up these practices and embracing the free market billions of people, billions, had been lifted out of some of the worst states of poverty the world had ever seen. The evidence is impossible to deny. The gaps between the rich and the poor in these two countries has never ever been smaller. They are now on the verge of becoming global super powers rivalling the EU and USA.

The Adam Smith report was very clear:

“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”

Now if there’s one thing that the curriculum got right was the fact that the developed world’s un-free and unfair trade practices are keeping the poorest countries in their place. We insist on perpetuating the idea that Fair Trade is a good thing. We wallow in the self satisfied glow of propping up unfair trade practices. We tell them to produce what we want and not what they need.

To conclude:

Just 10% of the premium consumers pay for Fairtrade actually goes to the producer. Retailers pocket the rest. The money we pay to Cadburys and Nestle for their marketing strategy other wise known as Fair Trade goes to them, not to the farmers in the Philippines aren’t even that poor, not ‘Rwanda’ poor anyway.

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3 thoughts on “Fair trade – fair for whom?”

  1. a. You need to understand how fair trade works. The idea of the 10% is incorrect. The 10% is a premium which is added to the cost of sustainable production for investment in local projects. The decisions for what this money is spent on are made by a committee drawn from the producers whose sales earned the premium.

    b. Free Trade is as idealistic as my hilariously naïve ideal of a peace loving anarcho-socialist idyll. At least I have recognised it is an utopian idyll. No world government would ever permit true free trade.

    c. Free trade is a wonderful theory. That is all it is. It pretty much requires an absolutely level playing field to start with. You may have noticed that we’re don’t quite have one of those.

    d. Free trade fails to account for human behaviour. There are enough not very nice people to screw your idealistic plan.

    e. I will say one good thing for Free Trade. It’s a cracking pub. It’s sunny and I really should be there.

    f. I know I shouldn’t have, but I couldn’t resist replying to your idiot post. I’m sure you’ll say that you were being ironic all along but there we go. I’ve done it now.

  2. Hi Alistair, I’m really glad you’ve taken the time to comment on this. However please do try and maintain some civility, it’s not much to ask, manners cost you nothing.
    Ahem.

    a) I disagree about the 10% comment. I have never seen any evidence to suggest there is some sort of democracy abound in fair trade cooperatives. I would appreciate any concrete examples you might have, I’m always open to learning new things.
    b) I disagree with the premise of your argument here, I consider anarcho socialism as you put it to be an oxymoron, mutually exclusive. Anarchism implies no restrictions or boundaries whilst all socialism is typified by constraints.
    c) I don’t think that free trade needs a level playing field, I think it’s the way to get there! It’s the process not the product, but I’m glad we agree that it’s good.
    d) I think people’s default stance would be one more inclined to free trade, it seems much more natural and instinctive.
    e) and f) you’re funny, I like you, you make me laugh.

    Keep reading!

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