Fair Trade Controversies and Theories
Fair trade was supported by people who believed that there were inherent flaws in the capitalistic system and trading system around the world. In essence, this means that people in the geographic North have more resources and access to information, giving them a huge advantage over the people from the “South” of the globe when it comes to commerce. Therefore, the intention behind fair trade is to give cooperatives and independent producers (in the disadvantaged regions of the world) a better chance to participate in world trade.
Some economists believe that, in the long run, fair trade will make producers fail. While they agree that the current system is not perfect, some economists say that advocates of fair trade are replacing an inherent problem with another. They say that putting a price floor on products will encourage more players to enter the market and existing players to over-produce and bring the price of goods down. This will hurt everyone in the market, but it will hit non-certified fair trade farmers the most. This debate took on new popularity when an article against Fair Trade and Organic products was published in The Economist on December 7th, 2006, called “Buy Organic, Destroy the Rainforest”.
However, various organizations such as FLO International and Transfair USA say that, in their experience, the producers don’t increase production. This is because they still depend on the demand from buyers to purchase sustainable and ethical products, regardless of the price, so they know how to manage their production. In addition, the extra money these producers are making is being invested in improving their communities and giving their children a good level of education to break the poverty cycle surrounding them, not to overproduce.
Another controversy surfaced when the Adam Smith Institute published, on February 25, 2008, a report called Un-fair Trade. This report was written by Marc Sidwell, and he argues that Fair Trade distorts local markets by fixing high prices for a small percentage of producers. According to him, this hurts the majority of artisans or farmers who are “excluded” from Fair Trade, or who are not certified. In addition, her argues that Fair Trade keeps the artisans or farmers doing the same work without diversifying or learning new skills, thus not solving their development problems and keeping them in poverty. Finally, he has the audacity to say that Fair Trade only helps “relatively prosperous countries” such as Mexico, while ignoring Africa.
The Fairtrade Foundation responded to these attacks on the movement by saying that, in the experience of thousands of fair traders, none of these claims are true. Many fair trade products are not more expensive than conventionally traded products, and in fact non-fair traders are now improving their products and working conditions to be able to compete with fair trade. Moreover, fair trade encourages wholesalers and retailers who work directly with producers to educate them, help them diversify their products, and foster development projects to alleviate poverty in their communities. This creates a great platform from which artisans and farmers can rise above poverty and become self-sustainable. Finally, they expose that fair trade is a global movement that helps different people in all the corners of the world.
On another extreme, the more liberal people believe that not enough is being done to promote fair trade. This is because less than one one-hundredth of the worldwide commerce involves fair trade. The rest of the global trade is managed by that “invisible hand” Adam Smith talked about. However, that hand is far from invisible, and even farther from “fair”. For example, the US still gives subsidies to its farmers, which “protects” the local farmers but hurts the consumer with poor quality, expensive products. This also keeps producers in the rest of the world from accessing the US market. Billions of dollars, as well as a price floor, are given to large-scale farms in the US as part of Farm Bills. Excess production of agricultural products are then either dumped on other markets, or simply wasted, eliminating many opportunities for small farmers (local or international).
Fair Traders also debate within themselves. One topic of discussion involves stating how far a company must go to be considered fair trade. On one hand, companies try their best to follow the fair trade philosophy, but ultimately know that they cannot monitor everything. Some companies also don’t want to be too transparent, since they want to maintain competitive advantages over other companies. On the other hand, there are people who believe everything they do must be fair trade. For example, every material that an artisan uses to make a product must be inspected, and there must be transparency when it comes to looking at the companies’ finances. For the time being, the rules are not too extreme, since people in charge of fair trade organizations cannot control all the variables that come into play.
Another topic that is up for debate is certification. Many people argue that certification methods are not good enough, and that they exclude other producers who cannot afford to be certified. Again, it is really hard to control every operation of a fair trade organization, so most people just trust Transfair USA, FLO or other certifiers. The problem intensifies when the certification agency’s legitimacy is questioned. For example, some fair trade coffee organizations feel like Transfair USA is more flexible with Starbucks, helping them with their promotional campaign to improve their image, and therefore stop carrying the Fair Trade Certified label in protest.
Economists and marketers also have an opinion on certification. They sometimes think that products that say “green”, “fair trade” or “organic” are only taking advantage of a “yuppie brand” to trick consumers into choosing the “responsible products”. While it is true that many products are indeed branded under these labels, it is actually done to increase awareness and education about these products and create a competitive advantage over “unethical” alternatives. If you think about it, by being certified as organic or fair trade, a product is actually offering real value for the customer and the producer, as opposed to a brand that adds a false sense of value by selling only it’s name (e.g. Dolce & Gabbana, Coca Cola, Nike).
There are many debates regarding the fair trade movement/industry that are ongoing. A good resource to stay updated on many issues is Change.org’s Fair Trade Blog, which is regularly updated by Zara Patriana from Global Exchange.