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Acton University: Why Fair Trade isn’t fair

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Imagine: You are in the grocery store, searching for the perfect bag of coffee- not too expensive, but still rich in flavor and good quality. As you are turning away with the coffee you have just chosen, there on the shelf is a bag of coffee with the Fair Trade logo. After an intense internal debate, you return the first bag of coffee to its shelf and take the Fair Trade coffee with a sense of contentment. The coffee farmers in third world countries are a little better off today because of your purchase. Right?

Economist Victor Claar shed light on this question in his talk at Acton University. He analyzed the stated purposes of Fair Trade, the state of Fair Trade today, and the results of the Fair Trade initiative. He began the lecture by explaining the coffee market to a classroom that included economists, an African coffee farmer, and other good-hearted citizens.

The economic decision associated with choosing coffee plants requires considerations of risk and reward, particularly for farmers of third world nations. As Claar explained, arabica coffee beans brew the best coffee and are thus favored by customers. Although they are more profitable for farmers to grow, they represent an economic risk, particularly for third world farmers. Arabica plants take several years to mature and are delicate and easily damaged.

In addition, coffee farmers face an even higher element of risk, one they cannot control: the wrath of Mother Nature. Claar explained in his lecture that “there are four reasons for a spike in the coffee market: One, bad weather in South America. Two, bad weather in South America.  Three, bad weather in South America. And four, you guessed it, bad weather in South America.”  The volatility of the coffee market means that many third world farmers rely heavily on a steady climate to determine the success or destruction of that year’s crop.

Given these factors, the Fair Trade initiative, which provides small-scale coffee farmers with direct access to the world market, seems to be a productive and charitable idea. Yet the World Fair Trade Organization is not all it seems to be.

Prior to the second half of the twentieth century, Brazil was the only major producer of coffee beans. The country used valorization to make a greater profit: the Brazilian government would burn a percentage of the crop in order to raise the prices of the heavily-demanded product. In the 1950s, Colombia emerged as a legitimate competitor in the coffee market. By the 1960s, enough nations were entering the coffee market, and employing destructive measures to make economic profit, that the United Nations intervened with the International Coffee Agreement of 1962. The ICA introduced maximum production ceiling for coffee for each participant country.  Although the ICA has been ratified six times since its conception, Claar argued that, the Agreement essentially collapsed in the 1990s.

In the wake of the ICA, the World Fair Trade Organization appeared. Under the guise of a benevolent savior of the poverty-stricken coffee famers of the world, Fair Trade has been, in reality, a series of attempts to keep the poor farmers of third world nations in poverty.

There are several Fair Trade secrets that Claar employed to support this claim. Even “unfair” coffee may originate from Fair Trade farms. Some coffee bags and products that come from Fair Trade farms do not have the logo to identify them.

Ironically, majority of Fair Trade coffee comes from wealthy nations, because they are able to pay the fees and make a profit to grow their farms. Fair Trade gives their suppliers an average of an extra $0.20 on the global average purchase price, but it is costly to join, and remain a member of, the Fair Trade network.  The Fair Trade minimum that kicks in when the market bottoms out is just barely enough to pay the dues, but not enough to bring families out of poverty. This is where the World Fair Trade Organization truly does the opposite of what it is meant to do. Farmers on the poverty line make just enough money to remain a part of the network, but the annual Fair Trade fees keep the poor in poverty.

The initiative also utilizes social capital to further their profit. Fair Trade recognizes that, if they portray themselves as a charitable organization that helps pluck poor farmers out of destitution, the charity of the human heart will encourage coffee drinkers to buy products with the Fair Trade logo. The consumers will see this purchase as more than a cup of coffee, but an act of justice or charity aiding the poor farmers.

So what can we possibly do? Claar’s solution for the Acton University attendees is simple: when you find yourself in the coffee aisle, buy the brew you like best and that fits your budget. This conclusion was supported by an African coffee farmer who was an attendee of the lecture. The gentleman thanked Claar for revealing the truths about Fair Trade, stating that the hard working farmers of the world need the support of individuals around the world to buy their products. Organizations like Fair Trade do more harm than good for hard working farmers around the globe. So the next time you find yourself at the store for your next cuppa’ joe, follow both your heart and your wallet to find your favorite brew.

 

(Photo source: unsplash.com)

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Cora Saftner is an intern and a part of the Emerging Leaders Program at Acton. She is currently pursuing a History degree at Ave Maria University.

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