Fair Trade: Providing Good Feelings (But Not Much Else)
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As consumers in this day and age, it is not uncommon to take a closer look at the ethics of what we buy. Who made the shirt you are wearing? Does it come form a place with good business practices? Such questions lead to wanting to do something about your habits to try to lessen your guilt. One such way people lessen this guilt is through buying products under the Fair Trade label. The alleged purpose is to make the deal between product producers and distributers much fairer, but does the theory do what it says in practice?
How does Fair Trade work? According to the Fair Trade Foundation, the foundation works to make relationships with farms and distributors. To be able to receive fair trade certification, farms must follow certain environmental and wage guidelines in attempt to make these farms more ethical and sustainable (Fair Trade Foundation). In exchange, farms receive a fixed premium for their goods, presumably allowing more cash to flow into these farming communities (The Guardian). As a result, consumers pay a higher premium on the products to offset the expenses. Part of the reason why Fair Trade is seen as important is that agriculture makes up a large subset of economies in the developing world, including those of Honduras and Guatemala (Stanford).
However, does the Fair Trade Program do what it intends to do? There are good testimonials in favor of Fair Trade certification (The Guardian). For instance, according to Tomy Mathew, a farmer from India, the price stability of Fair Trade adds a lot more security and peace of mind. During an economic crisis, Fair Trade price levels allow farmers to get a higher than normal market price. While there are plenty of stories in favor of Fair Trade product certification, how does it stack up on a larger scale? According to researchers at places such as Harvard, the University of Wisconsin, and the University of California, the results are mixed at best. For example, because farmers need to pay for their Fair Trade certification, the farmers do not end up making any more money than they would than if they were not Fair Trade certified; the long-run benefit of their transaction is actually zero (Huffington Post). Also, according to a Harvard study, only the farm owners ended up getting any benefits from Fair Trade, and there was no positive impact on coffee laborers. The Fair Trade program never really ends up getting to the root of the problem of poverty, which is a matter of education and infrastructure (Huffington Post). Solely throwing money at a problem won’t make it go away. While Fair Trade sounds good (it’s even in the name), it actually doesn’t do the good that it intends on doing.
While the consumer is not directly benefiting the people they intend to help, the consumers also will not be getting as high quality than other comparably priced products such as coffee (Stanford). Because farmers are paid a fixed price for a product regardless of quality, farmers will sell the lower quality goods at the Fair Trade fixed price, then they will sell the higher quality goods at a higher price in the normal market. One of the problems is that the model of Fair Trade is simply outdated. Before the age of information, it was possible that isolated farmers could be swindled into selling their coffee for an abnormally low price, but with the growing accessibility of the internet, farmers can easily find out whether or not they are getting swindled into a bad price deal.
The Fair Trade program comes from a place of good intention but unfortunately lands in the world of unintended consequences. While it is a noble cause to make sure that the producers and laborers of the products we know and love are getting a fair shake, the Fair Trade program as it stands is ineffective and outdated. Not only does it not help lessen poverty or provide assistance to developing countries, it also makes consumers pay for coffee that is likely worth way below its normal market price. Part of the reason this happens is because farmers will simply sell their high quality products at the higher normal market price and sell their low value products at the fixed Fair Trade price, and the farmers who do only put stock in the Fair Trade program will not really benefit in the long run due to the high cost of certifying a Fair Trade farm. To take steps forward in the right direction, we must provide solutions that will actually benefit farmers, their workers, and consumers effectively.