Why do some consumers choose to pay more for their coffee just because it is labeled as “fair trade” merchandise? Have they been assured that more money would reach the growers and laborers at the very start of the production line? Fair trade marketers sell to consumers on this premise.
Fair trade products account for a small segment of the overall sales of any given product, but advocates claim that such programs encourage better relations between the developed and developing worlds. Who could possibly have a problem with that?
Fair trade advocates believe that they are empowering producers and workers at the local level by paying them higher wages, improving their local living conditions, giving them a more powerful position in the marketplace, and even promoting sustainable production. To implement this program, fair trade promoters have attempted to bring changes to the business models behind the marketing of certain products sold in the United States and around the world.
While most American consumers are probably familiar with fair trade coffee, the Fairtrade Labelling Organizations International lists more than a dozen other products (i.e., bananas, cocoa, cotton, flowers, fresh fruit, honey, juices, rice, spices and herbs, sports balls, sugar, tea and wine) for which standards of certification have been established. That’s fine and businesses should have the freedom to offer their branded products at prices consumers find attractive and desirable. Some consumers undoubtedly prefer merchandise with a union label, or will seek out products with a “Made in America” logo. Consumers have wildly different tastes and preferences, and some buyers have a preference for paying producers and workers more regardless of market prices.
But, is fair trade labeling really a viable business model in the field of trade and development, or is it simply another well-intentioned but flawed effort turned into a marketing gimmick aimed at American consumers? Even some of the strongest proponents of the fair trade movement are expressing doubts. Alternet, the left-liberal news and opinion website, recently asked, “Does Fair Trade Coffee Lift Growers Out of Poverty or Simply Ease Our Guilty Conscience?”
Despite the certification program and the often intimate relationship between growers in the Global South and roasters in the Global North, it’s not easy to quantify how the Fair Trade price translates into improved quality of life. Coffee comes from countries on several continents, each with its own currency and economy. Thus, a living wage in Ethiopia may not be a living wage in Peru, or vice versa.
In other words, who decides what is fair? It seems that the fair trade campaign’s positive image relies more on public relations than actual research. Some of the short-term positive impacts of these programs and the humanitarian intentions behind them belie a number of rather serious long-term impacts on global trade and development. One frequent criticism is that fair trade prices artificially inflate consumer prices above a true market value without addressing systemic problems like inefficiency and oversupply. In turn, this encourages underperforming production and manufacturing practices. In the long term, as market forces inevitably move toward equilibrium, such producers will be ill-equipped to compete for business. For example, will consumers purchase fair trade products in the face of a continuing global economic recession when other products are less expensive?
Fair trade programs also discriminate against smaller producers reluctant to become entangled with the various cooperatives at the source of the fair trade movement, many of which receive nominal fair trade proceeds or simply mismanage or divert their funds. In fact, individuals wishing to assist the developing world would likely have more impact in donating directly to charities assisting the developing world. What’s more, the premium paid for fair trade products over other merchandise represents consumer spending that could be utilized more efficiently by markets for other goods.
So what are American consumers getting in return for their fair trade dollars? As a brand, fair trade products include built-in price premiums, which make them seem exclusive or scarce. The purveyors of such merchandise attempt to set themselves apart from competing products by touting their “social responsibility” and influence in the developing world. Unfortunately, much like the recent proliferation of “green,” “eco,” or “sustainable” goods, fair trade products are not so easily attained by everyday consumers and seem to have become little more than a form of conspicuous consumption inflating the ego of the consumer, and doing little for the producers and laborers at the very start of the production line.
John C Kalitka is an international trade attorney, advisor and analyst working in Washington, DC.
