Why Fairtrade isn't fair

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Fairtrade is extraordinarily successful at making wealthy westerners feel that they are warm, caring people. However there are a lot of reasons to doubt whether it is of much benefit to farmers in the Third World. It is argued, in fact, that it harms far more farmers than it helps.

'Ethical Objections to Fairtrade' is based on the knowledge that if aid is diverted from the poorest and most needy, it causes death and destitution. This paper shows the damage Fairtrade does to the vast majority of farmers, those who do not belong to Fairtrade. It also shows that most of the extra money that charitable people pay for Fairtrade never gets to the intended recipients. There are no impact studies showing that Fairtrade farmers in general benefit, let along other farmers. Much of the trade is a criminal offence under EU law. Published in the Journal of Business Ethics

Fairtrade Comment. Generous consumers pay £1 billion a year extra for Fairtrade products. Nearly all this extra money is pocketed by firms in the rich countries. Most of what is left is spent on extra operating costs incurred in producing Fairtrade, and some Fairtrade cooperatives make a loss from their Fairtrade membership. Any money left over is spent on social products which may have no economic impact. The farmers do not receive a higher price for Fairtrade  and may receive a lower price. Their costs when producing Fairtrade  are, however, higher, so their net income is lower. All these established facts contradict the assumptions in the recent paper by Tedeschi and Carlson, so their argument is incorrect. Published in the Journal of International Development

BBC World Business Report My criticisms lead. Fairtrade Foundation UK will not appear on a platform with me because I produce hard research evidence. So they got someone from the Netherlands. Note that he does not give figures for extra amount paid by consumers, amount going to the Third World, or any extra amount paid to farmers. Nor does he suggest that there is any impact study meeting the standards of the development agencies (there are not). And he does not mention that the Chief Executive of Fairtrade International, as well as researchers have said that the auditing and monitoring of the system is woeful.

'Lack of Rigour in Defending Fairtrade' (published in Economic Affairs) shows some of the mistakes and lack of logic of the Fairtrade proponents, using the example of Alastair Smith.

Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade, (summarized in Economic Affairs) shows some of the very poor scholarship that sometimes appears.

Refutation: Does Fair Trade deliver on its Core Value Proposition? shows some more very poor scholarship, by Arnould, Plastina and Ball (2009).

 

 

Peter has spoken on Fairtrade

Why Fairtrade isn't fair

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Some articles on Fairtrade

In a wide-ranging review of research on Fair Trade, Laura Raynolds of Colorado State University found that ‘there is surprisingly little research that documents how individual producers, producer organizations, grower households and communities benefit.’ Raynolds, Laura T. (2002) ‘Poverty alleviation through participation in Fair Trade Coffee Networks: existing research and critical issues. Eight years later she still can come up with no hard evidence.

Marc Sidwell, Unfair Trade, Adam Smith Institute, London 2008. http://www.adamsmith.org/publications/economy/unfair-trade-20080225961/ 

Philip Booth, The Economics of Fairtrade: a Christian perspective. http://www.iea.org.uk/record.jsp?type=book&ID=437

Colleen Berndt, Is Fairtrade in Coffee Production Fair and Useful? – Evidence from Costa Rica and Guatemala and Implications for Policy. George Mason University. http://www.chaight.com/Research.htm [now Colleen Haight].

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