Tuesday, October 2, 2007

The Fair Trade Debate

Working in a market where we sell fair trade products I wanted to know more about this rising certification. The Fair Trade label is has been spreading rapidly as of late and it cannot be ignored anymore. In principle the idea of leveling the market playing field with fair trade is a good one, but not everyone thinks so.

Fair Trade principles include:

-Fair prices: Democratically organized farmer groups receive a guaranteed minimum floor price and an additional premium for certified organic products. Farmer organizations are also eligible for pre-harvest credit.

-Fair labor conditions: Workers on Fair Trade farms enjoy freedom of association, safe working conditions, and living wages. Forced child labor is strictly prohibited.

-Direct trade: With Fair Trade, importers purchase from Fair Trade producer groups as directly as possible, eliminating unnecessary middlemen and empowering farmers to develop the business capacity necessary to compete in the global marketplace.

-Democratic and transparent organizations: Fair Trade farmers and farm workers decide democratically how to invest Fair Trade revenues.

-Community development: Fair Trade farmers and farm workers invest Fair Trade premiums in social and business development projects like scholarship programs, quality improvement trainings, and organic certification.

-Environmental sustainability: Harmful agrochemicals and GMOs are strictly prohibited in favor of environmentally sustainable farming methods that protect farmers health and preserve valuable ecosystems for future generations.

Fair Trade is currently the main answer the question of whether the market is fair. But is Fair Trade the only answer and are there other questions we should be asking? Please watch this short film promoting fair trade made by Transfair, the only United States Fair Trade certifier.

Find more videos like this on EQ CONNECT

The idea seems glamorous enough and I agree with all the principles, especially the idea of ending child labor by ensuring children go to schools with scholarships, but there has been some debate that has arisen as to whether this is the right way to deal with market failures that perpetuate poverty.

One argument is that establishing price floors for goods such as coffee will encourage many more producers to go fair trade and this will lead to oversupply and lower prices for producers. In reality fair trade currently represents only a small percentage of world trade and there is significant room for additional demand. In addition, Producers in developing countries may deserve to earn more because their goods are undervalued. Fair trade also represent only a niche in each individual market and doesn't threaten to take over industries.

Others argue similarly that when more people join the fair trade sector and produce, prices could fall hurting non fair trade producers. To counter that argument, evidence suggests that fair trade raises prices across the board by improving infrastructure and distribution systems which lower the costs for distributors and allows them to pay more. I'm not quite sure about either of these perspectives at this point. I think more research will have to be completed as fair trade increases in popularity to witness the effects on non fair trade producers.

Another opposition is that fair trade typically only deals with cooperatives of small farms and ignores plantations or large individual farms. The counterargument to this would seem to me to be that the individuals that need to be most educated about about working conditions, agricultural chemicals and trade would be the small producers. Maybe in the future the programs could expand to include farms of various sizes granted they were admitted to the cooperatives. The cooperatives are essential in being the educating body.

As you can see, a full length research paper could be written about the controversy surrounding fair trade, but there is one more essential argument that I need to bring up, though countless other questions remain (Why only one US certifier? Which countries can be fair trade?). Fair trade does not fully address the true cause of the unfair market which is the establishment of huge farming subsidies in the United States and Europe. This question unfortunately has no answer at the moment, but in my opinion this is what really needs to be focused on. I think fair trade is an acceptable short term solution until the world economy is ready to be restructured enough to allow for legitimate equal competition.

Images from Transfair.

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