Defend Truth


Fair trade, unfair trade-off

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Last Friday was World Fair Trade Day and this week is, locally, Fairtrade Coffee Week. Sure, a spoonful of sugar makes the medicine go down, but is it more about superficially soothing one’s conscience or genuinely supporting fair trade? How do consumers know fair trade is really all that fair? IVO VEGTER does some digging – and decides fair trade coffee just isn’t his cup of tea. 

“Coffee with a conscience”, states a recent headline over an article about Fairtrade Coffee Week. The implication is clear: if you don’t buy coffee with a fair trade label, you don’t have a conscience.

But what if “fair” trade isn’t that fair? The idea behind it is to certify small producers and co-operatives in terms of how well they pay employees and follow “sustainable” production standards. Once they qualify for the label, consumers in the developed world are informed by means of a fair trade label that their purchase decisions don’t exploit third-world workers or harm the environment.

But what if I want to support small farmers who are not part of the protectionist cartel dreamed up by Western do-gooders? What if I believe that competition is good for society as a whole, and choose to do business with the supplier that can meet my needs at the lowest possible price? What if I prefer to do business with a large corporation that employs thousands, rather than an inefficient co-operative that only employs a few people?

Does this reflect badly on my conscience? Is this a moral failing on my part?

I reject the implication that I’m somehow evil for consciously avoiding “fair trade” labels, no matter the packaging.

“The FAIRTRADE Label is recognised and trusted,” claims the website of Fairtrade Label South Africa, which appears to be the nascent local chapter of the global movement.

Really? Then why did Fair Trade USA publicly split from Fairtrade International last year, claiming that the global group was hampering the growth of sales and unfairly excluding larger producers that did meet ethical business standards?

Why have critics of fair trade labelling been complaining for years that very few producers in fact benefit from the practice? At the last count, according to Fairtrade International itself, there were fewer than 1,000 qualifying producers worldwide. Why do critics such as Marc Sidwell and Peter Griffiths note that most of the premium charged for fair trade products actually ends up in the pockets of corporate retailers, and only a small fraction – if any at all – even reaches developing countries, let alone the poor producers who consumers are told they’re supporting? Why do critics maintain that truly poor farmers are systematically excluded from the programme in favour of fairly well-established, sophisticated producers? Why would they say those who are not part of the cartel are the victims of a protection-racket style marketing offensive against their products? Why do some researchers claim that meeting mandatory standards raises costs to the point of unprofitability for small-scale producers? Why does the movement face allegations of running an opaque, inefficient marketing system that is prone to corruption and waste?

Why do sporadic newspaper reports surface in which workers on fair-trade-certified farms are paid below minimum wage, or crops grown on land reclaimed from protected rain forests?

Why would it come as a surprise that the largest fair trade product is not coffee, but bananas, when the movement was founded as a supposed solution to a coffee price collapse created by over-production as a result of ill-advised government subsidies and protectionism? Why, when government intervention was the cause of this crisis, does fair trade set itself up against free trade, instead of against protectionism and trade barriers?

Why is there a fair trade debate at all, if it is so clear that paying more for so-called sustainable farming and better working conditions is truly fair?

People used to rile against corporate “trusts”, or cartels. Manipulating the market and colluding to fix prices was once deemed anti-competitive and harmful to the interests of consumers. Threatening those who aren’t members of a cartel with exclusion from major markets was once thought to be a protection racket employed by the criminal underworld.

This is the world of producers of products that fall within the scope of fair trade labelling. Either they pay protection money to the cartel and the bureaucrats that audit and certify fair trade, or they get squeezed out of business, as economist Tyler Cowen argues. The result? More poor farmers who can’t afford to break into the global market, and higher prices for consumers worldwide.

Trade is only fair when every competitive producer is able to sell their product at their best possible price to distributors and retailers, without the costly intervention of a protectionist cartel or marketing board. Production is only fair when unemployed workers are free to offer their services for a price that an employer is willing to pay, instead of being kept out of work in the interest of propping up wages for those who are already employed.

Trade can only contribute to economic development when excess profit is available to producers for reinvestment into growth or more competitive ventures that better meet demand, rather than being wasted on vague compliance measures and ill-enforced auditing rules. Producers are only free from exploitation when they don’t have to pay a form of kickback to retailers just so they’ll agree to carry their products.

Fair trade is not fair. It is a protection cartel.

The only fair trade is free trade. DM


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