In an article for The Business, Alex Singleton (of the GI) explains "Why 'fair' trade is a bad deal for poorest farmers". He hits the main points, and i'd be interested to hear how the Fairtrade foundation responds (assuming, that is, they're interested in solutions rather than tedius moral judgement):
- Many Fairtrade advocates are liars: they claim to be a voluntary movement (which is fine), but advocate making certification a compulsory standard (which isn't). If you associate with frauds, you have a responsibility to differentiate yourself
- Fairtrade companies like to propogate a myth that the current coffee crisis was caused by free trade, and they should dispense with their ideological barriers and state why general trade liberalisation is an inferior solution to supporting specific agricultural markets
- There doesn't seem to be a distinction between low prices caused by mechanisation, and low prices caused by "exploitation".
- Increasing demand (e.g. Starbucks facilitating coffee-drinking to become more popular) is a better way to raise a price than reducing supply (e.g. Fairtrade schemes incinerating lower quality crops)
- Very little of the price premium spent on Fairtrade products goes to the farmers. Rather than give an extra 10p to farmers and £2.90 to Asda, why not give the whole £3 to a decent charity?
- Only certain farmers can benefit from Fairtrade - this is decided in somewhat arbitrary ways (including the geographical location of the farm). The scheme's biggest benefactors are farms already relatively well off
- Coffee is a relatively easy market to enter - consequently Fairtrade is not a sustainable method for economic development beyond transfering rents to a select group of producers.
I don't speak for Fair Trade or share all their views, so I'll ignore some of your points if you don't mind, but I would like to question you on a couple:
"There doesn't seem to be a distinction between low prices caused by mechanisation, and low prices caused by "exploitation"."
Do *you* draw a distinction between low prices caused by mechanisation and low prices caused by the oligopolistic structure of key points in the coffee supply chain? Do you think the latter are a matter of concern? If all import tariffs were dismantled and the same oligopolies remained, would you call that a 'free' market?
"Very little of the price premium spent on Fairtrade products goes to the farmers. Rather than give an extra 10p to farmers and £2.90 to Asda, why not give the whole £3 to a decent charity?"
Because some people believe in market-based solutions to poverty? As I thought you did.
"The scheme's biggest benefactors are farms already relatively well off"
I'd like to see some actual evidence for this. People talk about supposedly affluent Mexican coffee farmers doing the best out of Fairtrade - but the average income of a coffee farmer in Mexico is around $650 if this source is to be believed: http://www.ashoka.org/fellows/viewprofile3.cfm?reid=96882
Also, Ethiopia at least has a higher share of the Fairtrade market than it does of the generic market, so it's hard to see how it can be said to be losing out from Fairtrade.
"Coffee is a relatively easy market to enter - consequently Fairtrade is not a sustainable method for economic development beyond transfering rents to a select group of producers."
Not quite sure I get your point here - haven't you said before that Fairtrade coffee production is difficult to get into because of the certification involved?
"I remain a skeptic of Faitrade and an advocate of free trade."
I honestly don't think there's a contradiction there, aside from those who would make FT compulsory, which I disagree with.
My bottom line, I suppose, is that I think giving coffee farmers a steady and reasonable income is actually the best way to reduce their countries' reliance on coffee farming, because at least then they can afford to send their children to school to learn a better trade - coffee farmers are not to my knowledge in the business for the love of it and are all too aware that there is not much future in it.
Posted by: Jim | March 13, 2006 at 07:55 PM