Café con leche - Milchkaffee (CC)“Who could be against fairness?” Victor Claar asked this question at Acton University last month. He and Travis Hester gave a talk titled, “Fair Trade Versus Free Trade” with their focus on the coffee industry. They explained what the fair trade movement is, evaluated its effectiveness, and explored ways for caring people to help coffee growers overcome poverty.

Before looking at the fair trade movement, it is important to note that coffee is what economists call an inelastic good. That means that if the price of coffee increases, the quantity demanded will not decrease by a lot. Claar puts it simply: “If coffee prices rise, coffee drinkers will probably buy less coffee, but probably not much less.” Spikes occur frequently in coffee prices due to bad weather and the delicacy of Arabica coffee plants. The price of coffee is volatile and is, according to fair trade advocates, too low.

The fair trade movement began in the mid 20th century and was intended “to improve the lot of the global poor.” Fairtrade International (Formerly known as the Fairtrade Labelling Organization-FLO) sets forth the requirements and certifies growers and goods. FLO oversees the fair trade market of many different goods. Coffee is one of the most common fair trade goods, but it is not the only one. FLO defines “fair trade” as:

fairTradeLogo

[A]n alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping.

Some of the requirements or restrictions set forth by FLO for fair trade coffee producers include: coffee growers may not hire laborers, but should rely on family members; coffee growers may not utilize child labor; and growers interested in fair trade certification must pay an application fee of about $3,200.

Does the fair trade movement work? Unfortunately, there are a plethora of problems with it. In general, while the demand of coffee is inelastic, the supply is elastic. The artificially high price, set by FLO and other fair grade organizations, greatly increases the quantity supplied by incentivizing individuals, who would normally pursue other endeavors, to enter the coffee industry as growers and by incentivizing current coffee suppliers to grow more. This excess of coffee and coffee growers makes everyone in the industry poorer. Growers will produce more coffee than consumers want. Coffee growers that are not fair trade certified become significantly poorer because they will have to charge a much lower price for their coffee than they would in a truly free market.  Claar goes on to explain that the consumer also suffers, but not just because he or she is paying more for a morning brew. Fair trade coffee growers have little to no incentive to grow the best crop as they are guaranteed the highest prices no matter what. In some cases, fair trade growers have been known to sell lower quality crops in the fair trade market and then sell higher quality coffee beans in the non-fair trade market for a competitive price. A guaranteed price means that growers do not have to guarantee quality.

218129_206441316046602_196717_nAnother significant problem with the fair trade movement is the regulation against child labor. This rule may ultimately hurt children. According to Hester, the school year in Honduras is built around the coffee picking season. Families pick coffee together all contributing to the family’s income. Children are not allowed to work under fair trade rules, so if adults own a fair trade farm, their children will look for work down the road at another non fair trade coffee farm. Thus, they will no longer with their parents or older siblings, but will be working on their own. In effect, child labor is not eliminated it is simply displaced.

The well intentioned fair trade movement places coffee growers in “golden handcuffs.” The incentive of slightly higher prices encourages growers to stay in that industry when they might otherwise pursue more productive endeavors. Claar and Hester both pointed out during their presentation at Acton University that “you will never have a middle class lifestyle growing coffee.” Claar also warns that:

The moral shortcomings of the fair trade movement is that it keeps the poor shackled to activities that, while productive, will never lead to poverty reduction on a large scale—or even a modest one. Further, if our purchases of fair trade really do retard the long-term rate of poverty reduction, then buying fair trade might be viewed as causing harm.

In the end, Claar cautions, the fair trade movement is a marketing scheme. When you pay extra for a cup of fair trade coffee, you’re paying to look like a caring person or feel like a caring person, but you’re not necessarily helping coffee growers. Spending more money on a cup of fair trade coffee is seen as an act of social responsibility. Basically, the organizations leading the movement are attempting to bundle charity or social justice with coffee.

What about the free market? It offers valuable information through prices. The low price of coffee is a sign to producers to stop producing so much. Without these valuable tools to connect buyer and seller, there is abundance of unwanted crop and producers are wasting valuable resources on something unproductive. Technology has been an invaluable tool in the coffee growing industry thanks to the advances of the free market. Coffee growers can check the price of coffee on the commodity exchange and can evaluate an appropriate price to charge for their crop, using their cell phones.

How might a caring person respond? Some have suggested that the best way to help coffee growers is by ordering coffee directly from the growers so they receive all of the profit. Unfortunately, this may reduce coffee’s quality and taste. People who have tried coffee sold directly by growers say that is significantly more bitter and tastes very little like coffee. However, at least one group has figured out how to do this successfully.

Madcap Coffee in Grand Rapids, Mich. imports the raw coffee beans and roasts them in house. A representative from Madcap has personally visited 75 percent of the farmers who provide their raw beans. While Madcap is not “fair trade” certified, nor do they only work with fair trade growers, they seem to be moving in the right direction to help coffee growers. Madcap owner and founder Ryan Knapp gave an unpublished interview to PovertyCure and explained why he decided to avoid the fair trade certification: “We have been intentional on the fact that we are not going to have a label to say what our coffee is as much as we are going to be a brand that is committed to great business practices.” He goes on, “Fair trade, a certification doesn’t really tell the whole story…Fair Trade isn’t the best option always for producers.” What is the best option for producers? According to Knapp, “the big piece of it is the transparency aspect and knowing exactly where our dollar is going and being able to trace that down to people that are actually growing the coffee, farming the coffee.” This is one solution to helping poverty-stricken coffee growers outside of the fair trade movement.

Instead of paying a premium to fair trade coffee that does not help coffee growers and may in fact harm them, Claar and Hester suggest that caring consumers should donate that extra cost of fair trade coffee to a microfinancing organization or invest it in more holistic and valuable ventures.

2FairTrade-01_365_600_80The issue of fair trade versus free trade is a vast one and this post barely begins to scratch the surface. To learn more about it, you can download Claar’s presentation from Acton University 2012 or you can read his book, Fair Trade? Its Prospects as a Poverty Solution. Although the fair trade movement is essentially a marketing scheme that possibly does more harm than good, it came from good intentions. There is dignity is almost all types of work and some people are called to spend their lives in the coffee growing industry. As Christians, we should not despair, but innovate and hope. Certainly enjoy your next cup of coffee!

  • Pingback: Is Fair Trade Coffee Curing Poverty?

  • Lia Walsh

    I’m not even totally sure where to start, so I’ll just itemize it. This is going to be a long post.

    1. Just as a general and over-arching comment, I’d like some references for the information contained in this article, especially regarding any numbers you discuss.

    2. “Some of the requirements or restrictions set forth by FLO for fair trade
    coffee producers include: coffee growers may not hire laborers, but should rely
    on family members; coffee growers may not utilize child labor; and growers
    interested in fair trade certification must pay an application fee of about
    $3,200.”

    a) “coffee growers may not hire laborers, but should rely on family members”

    It sounds like you think that hired labour is required. Coffee grown by Fairtrade standards is grown on small farms that are usually part of larger co-operatives, not plantations. The farms are small enough that there isn’t typically any reason to need outside labour. It’s not like you’re clear-cutting great fields for coffee growth (which isn’t allowed, for its environmental implications).

    Here’s the ACTUAL Fairtrade standard:

    “The majority of the members of the organization [here meaning the co-operative] must be smallholders who don’t depend on hired workers all the time, but run their farm mainly by using their own and their family’s labour.”

    Notice the use of “majority” and “mainly” there? Fairtrade isn’t delusional, and regularly takes feedback from producers, so that realities that are unavoidable can be taken into consideration. But it also serves to challenge producers to produce things ethically, and Fairtrade’s job is to provide them with the resources they need to do that (like, say, a fair price).

    b) “coffee growers may not utilize child labour”

    There’s a whole section on this below, following a long and really misinformed quote from your article that appears later on in the article.

    c) “growers interested in fair trade certification must pay an application fee of about $3,200.”

    I’d like a reference for this. What is this number? An average? Each producer’s certification fee will be a little different because each farm is different (especially if we’re talking about a coffee producer versus a banana producer, for instance). And no, they aren’t required to pay the certification fee if they can’t afford it.

    There’s something called the Producer Certification Fund (http://www.fairtrade.net/producer-certification-fund.html), which is specifically designed to support producers who can’t afford the certification fee. They can apply to receive up to 75% of their fee from this fund. At last check, between 10 and 15% of all the money that comes back the FLO (the certifying body) goes directly into this fund, so that they have a lot of resources there for producers.

    And I wouldn’t expect you to know this, because even some people well-versed in Fairtrade don’t, but Fairtrade certification used to be free. And the producers (who are equal owners of the Fairtrade system at 50%) were up in arms. They were saying, “So many people are jumping on the bandwagon just because it’s free and they can, and here we are, farmers that really need to get certified, and you can’t support us properly because there are so many people wanting certification and you guys have no resources. Would you just charge for certification already?” And on the vote, 100% of the producer members voted in favour of charging for certification, so that the certifying body could serve producers better.

    I wonder–what percentage of the decision-making members at the World Trade Organization consists of producers from the developing world? Perhaps something to consider before deciding that we know what’s best for producers when we operate in the “free” trade system.

    3. “The artificially high price, set by FLO and other fair grade organizations, greatly increases the quantity supplied by incentivizing individuals, who would normally pursue other endeavors, to enter the coffee industry as growers and by incentivizing current coffee suppliers to grow more. This excess of coffee and coffee growers makes everyone in the industry poorer. Growers will produce more coffee than consumers want. Coffee growers that are not fair trade certified become significantly poorer because they will have to charge a much lower price for their coffee than they would in a truly free market.”

    There are just so many things off about this. It shows a complete and utter lack of understanding of farming in general and coffee farming specifically. Here are all the reasons why it’s incredibly rare for producers to wake up one morning and decide to switch crops, much less head into farming as a career in the first place:

    - Farming is a lot of hard, thankless work. Farmers really struggle to even keep their kids seeing the value in participating in the farming trade. Most of them end up going to the city to find work, because they see how their parents have broken their backs to make a living, and it’s far from alluring.

    - Farming is not some mindless, simple thing to do. If you’re a cocoa farmer, you don’t just wake up one morning, after your family has farmed cocoa for generations, and decide, “Hey, you know what? I’d like to grow coffee instead!” Their land is set up for cocoa-growing conditions, and they’ve been following family practices for years and years. Where are they going to get all this valuable information to grow a totally new crop? (Poor producers don’t have the same access to information we have, where we can decide we want to grow tomatoes in our back yard and we can just Google it to learn everything we need to know in an hour.)

    - Once Fairtrade co-operatives enter areas, more and more small producers join the co-operative when they see the success of it. It’s not that they weren’t already growing coffee; it’s that they’re interested in being a part of the Fairtrade system.

    - Most producers in the developing world don’t have the kind of access to information that you’re assuming. The cocoa producer isn’t going to wake up one day and turn on his television and see that the coffee-growing people in the next town are making a killing. Most of his information about trade comes from the “buyer” (which more often is better described as a vulture), in whose best interests it is to convince the producer that he can’t do any better, so he’ll keep selling cheap cocoa to the buyer.

    And can we talk about what a “truly free market” is? It surely is not the non-Fairtrade market we’re operating in. Have you heard of subsidies (http://www.marketwatch.com/story/us-subsidies-lead-to-poverty-and-death-2010-04-09)? How about speculation (http://www.justmeans.com/Hungry-for-Profit-Ethics-of-Speculating-on-Food-Prices/56020.html)? These things are heavily influencing the market prices that producers are able to receive for their produce. It’s not like the non-Fairtrade people are already getting enough money to cover the cost of production, or at least the kind of production that we’d like to think happens (sure, they cover the cost of production. They traffick children as labourers to do it and destroy the environment because they have to cut so many corners). They’re receiving so little they can’t make ends meet. Fairtrade prices aren’t “artificially high,” as you claim. They are the amount that a farmer needs to cover the cost of production and also feed his family. You make it sound like non-Fairtrade farmers are scraping by just fine and Fairtrade farmers are just rolling in money. It’s simply not true.

    4. “Fair trade coffee growers have little to no incentive to grow the best crop as they are guaranteed the highest prices no matter what. In some cases, fair trade growers have been known to sell lower quality crops in the fair trade market and then sell higher quality coffee beans in the non-fair trade market for a competitive price. A guaranteed price means that growers do not have to guarantee quality.”

    I can describe this whole paragraph with one word: misinformed. If you check out this document (from the international certifying body), you’ll see that quality is something that has to be specified in the contract between buyer and producer: http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-09-25_CP_EN.pdf (Check out section 2.3 for this info.) Buyer AND seller have to enter into a contract that they’re happy with, making sure that neither is sacrificing his or her needs. What’s more, that kind of guarantee of a long-term contract specifying quality and quantity isn’t available under “free” trade anyway. The best you can do if you’re not happy is take a gamble and go elsewhere, where it may not be any better. I think you just shot yourself in the foot with this argument.

    And as a personal anecdote: I have never received the kind of praise for “free” trade coffee that my Fairtrade coffee gets when I serve it to guests. My roommate permanently converted to Fairtrade coffee after trying the Kicking Horse brand (http://www.kickinghorsecoffee.com).

    5. “Another significant problem with the fair trade movement is the regulation against child labor. This rule may ultimately hurt children. According to Hester, the school year in Honduras is built around the coffee picking season. Families pick coffee together all contributing to the family’s income. Children are not allowed to work under fair trade rules, so if adults own a fair trade farm, their children will look for work down the road at another non fair trade coffee farm. Thus, they will no longer with their parents or older siblings, but will be working on their own. In effect, child labor is not eliminated it is simply displaced.”

    And, from earlier: “coffee growers may not utilize child labour”

    Actually, this is not true. Here’s what’s actually required:

    “In the case of child-headed households a child’s right approach should be used to interpret these requirements, giving priority to the best interest of the child. [...] In all circumstances child rights should be given primary consideration, as reflected in the guiding principles of the UN Convention of the Rights of the Child (UNCRC).” Here’s the UNCRC: http://www.un.org/cyberschoolbus/humanrights/resources/child.asp

    Items 6 & 7 of the convention are especially difficult to observe if the child is working in someone else’s field. Children are allowed to work with their families once they’ve, for instance, come home from school and if it’s not interfering with their chances of a positive future.

    You probably don’t realize this, but there are also premiums specifically paid to the co-operatives to invest in social programs, like schooling and health care (which are the two most common ones), which is especially helpful if their community is lacking infrastructure. The same is not true of the free trade system. In fact, it’s the low “free” market prices (below cost of production) that end up inspiring practices like forced child labour and human trafficking in agriculture in the first place.

    6. “The incentive of slightly higher prices encourages growers to stay in that industry when they might otherwise pursue more productive endeavors. Claar and Hester both pointed out during their presentation at Acton University that “you will never have a middle class lifestyle growing coffee.””

    I’m going to just assume this was meant to be tongue-in-cheek. You can’t really expect everyone to want to give up farming entirely. I mean, food isn’t optional. Someone has to feed our lazy butts, considering most people in developed countries aren’t jumping up and down to do the dirty work themselves.

    7. “The moral shortcomings of the fair trade movement is that it keeps the poor shackled to activities that, while productive, will never lead to poverty reduction on a large scale—or even a modest one. Further, if our purchases of fair trade really do retard the long-term rate of poverty reduction, then buying fair trade might be viewed as causing harm.”

    Now I’m going to say something that I thought was obvious, but apparently needs saying. Just because Fairtrade doesn’t solve every problem doesn’t mean that “free” trade does. And it certainly doesn’t mean that “free” trade does it BETTER than Fairtrade. If Fairtrade is a 6 on 10 (which I would argue is less generous than it deserves), “free” trade is a 2 on 10. Unless, you know, you’re already wealthy in the developed world. Then it’s a 10 on 10 for you. (Until we collapse the entire system, or someone gets fed up with being walked all over and retaliates. It’ll serve us right.)

    8. “In the end, Claar cautions, the fair trade movement is a marketing scheme.”

    See everything written above. All of your arguments are based on misinformation, which renders this conclusion invalid.

    9. “What about the free market? It offers valuable information through prices. The low price of coffee is a sign to producers to stop producing so much.”

    First, I’m glad you think the “free” market offers SOME kind of valuable information. If you call up a random coffee company and ask for details on how their beans were grown, they’ll fumble and feed you some really generic, vague bit about social responsibility. Ask them if they use forced child labour, and they’ll say no. Ask for documentation and they’ll stop communication. Here’s a similar story related to chocolate: http://salsa3.salsalabs.com/o/50409/p/salsa/web/common/public/signup?signup_page_KEY=6778

    If you call up a Fairtrade company and ask how their beans were grown, the answer will look something like this: “There’s this co-operative in Guatemala that we’re working closely with. Jorge (the manager) is really happy with the yields this year in the co-op, even though they got very little rain. The farmers are really glad to have a sense of empowerment and security through their workers’ union. Oh yeah, and their kids are going to school now before they come home and help husk the beans with their parents. Jorge tells us that families seem happier, knowing their kids have a brighter future than their parents did.” I’ll take the latter any day, thank you very much, even if it costs me extra money. (If you don’t believe me, call up Camino, who makes the top-selling Fairtrade chocolate in Canada, and ask where their chocolate comes from. Then call up Hershey.)

    And second, if you’re a coffee producer that’s always getting ripped off (know what a “coyote” is? http://www.thecrimson.com/article/2002/4/5/coyote-free-coffee-yesterday-the-university/), you don’t notice that the price has dropped. You just notice that people are the same jerks they’ve always been to you.

    And third, Fairtrade makes sure producers are actually connected to a large network of people who can provide information to them in ways that being a single, smallholder farmer in the middle of the forest in the mountains doesn’t allow. If your information is coming from the guy in the truck who gives you less for your coffee than it took to grow it (which it usually does in the areas where you find smallholders), it should be pretty clear that this information isn’t so much information as persuasion.

    10. “According to Knapp, “the big piece of it is the transparency aspect and knowing exactly where our dollar is going and being able to trace that down to people that are actually growing the coffee, farming the coffee.” This is one solution to helping poverty-stricken coffee growers outside of the fair trade movement.”

    Transparency is not standard, unless there is direct trade, which Fairtrade encourages. (See the above example about information.) Through extensive auditing, the Fairtrade system holds people accountable in ways that “free” trade does not. Once a coyote collects beans from a farmer, they just get tossed in a pot with everything else, and there isn’t even a reasonable way to trace where they came from. Fairtrade requires that beans be traceable.

    Please read the standards before making these assertions: http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-09-25_CP_EN.pdf (Section

    4.2 is entirely dedicated to making sure information about the product is available.)

    11. “Instead of paying a premium to fair trade coffee that does not help coffee growers and may in fact harm them, Claar and Hester suggest that caring consumers should donate that extra cost of fair trade coffee to a microfinancing organization or invest it in more holistic and valuable ventures.”

    If Fairtrade “may in fact harm [producers]” I wonder–what does “free” trade do, where they get considerably less money for their crop, don’t have any kind of security because long-term contracts aren’t required, don’t have any reason to keep their kids out of the fields long enough to get an education, don’t have a premium paid to them to invest in their communities, don’t have access to information and have no bargaining power because they’re a tiny guy, not part of a co-operative, and a middleman can take advantage of him in any way he sees fit because the producer has limited information?

    Of course it’s always more comfortable and less controversial to stick with the status quo than to examine it. It takes courage to challenge your own behaviours and admit you might be doing things that aren’t ethical. What this world needs right now is more courage and less believing whatever we want to, all so that our privileged worlds are not rocked. We are privileged, and we have a responsibility to those less privileged to make choices that don’t oppress them even further.

    In short, please, please figure out what you’re talking about before you post this stuff. You’re making claims that aren’t even true, and not looking especially compassionate for it, either.

    • Sarah Stanley

      This post is a summary of a lecture I attended given by two fair trade coffee experts: Victor Claar, a professor of economics, and Travis Hester, a coordinator for the Growers First Foundation. You can download Claar’s 2012 lecture on fair trade coffee at http://www.povertycure.org/library/product/fair-trade-vs.-free-trade-victor-v.-claar/ or read his monograph that goes into a great deal more detail about this movement (it is available at http://www.fairtradeandfreetrade.com/)

      • Lia Walsh

        Yes, I have seen these links, as you already linked them above. And if I’m being honest, I do find it very troubling that you call these men “fair trade experts”. Claar says he knows Fairtrade coffee best, and listening to the talk, it seems to me like he knows very little about it, so I shudder to think where he’s getting his information from. His talk and your article show a complete lack of understanding of the Fairtrade standards, let alone the realities of coffee production.

        More to the point, I’ve presented a plethora of reasons above why the information you’ve included in this article is not accurate, and your response is that someone else said it. Maybe this is not as common-knowledge as I thought, so I’ll say it: something that is not true is still not true, even if someone else says it. I hope your readers have the sense to challenge what they hear, instead of just accepting it because someone calls him or herself an expert. Blindly believing what we’re told without any supporting evidence makes fools of us all.

        • http://www.acton.org/ John Couretas

          Have you actually listened to the lecture that was reported in the post or read the Acton monograph on fair trade, as suggested? You demand references but don’t seem to want to trouble yourself with the sources of the reporting. What’s more, your tendentious link farming on behalf of your fair trade organization doesn’t exactly make your argument persuasive or “true.”

          • Lia Walsh

            Of course I’ve listened to the talk. If you had read my comment above you would see that I mentioned I’ve familiarized myself with the links–twice now.

            And the fact remains: all of your information comes from one guy, who is an economist, not someone who’s worked in social justice fields as his specialization. I have met countless Fairtrade producers and heard their stories, and what Claar is saying simply isn’t true. You say that my sources don’t make it “true” but what, exactly, makes your single source “true”?

            I’m still waiting for another reliable source of information that actually supports what Claar is saying, and what Stanley posts here. If Fairtrade is just a marketing ploy and doesn’t help lift producers out of poverty, why are all the Fairtrade producers I know really, really excited to have been part of the system anywhere from 5 to 20 years?

            And I wonder–when I cite the actual Fairtrade standards (which Stanley says are something they’re not), am I supposed to head to the CNN website to get that information? Better from the horse’s mouth, wouldn’t you say?

            This is ridiculous, and I’m done with this whole thing until you have something that even approaches the well-researched and documented response that I’ve provided. It’s like Claar says it, it’s the gospel, and you have to defend it to the death. Remember that courage I mentioned? What you’re doing right now is the exact opposite of it.

          • Marc Vander Maas

            So, just to be clear: you’re saying that an economist has no business commenting on the question of whether the fair trade coffee model actually lifts people out of poverty? Is there some sort of official “social justice” credential that an economist must have before you will take them seriously? Also, does Travis Hester’s work in Honduras and Peru and the perspective he brings to this presentation factor at all in your analysis?

            I guess I find the vehemence of your response sort of curious. You seem to operate from the assumption that Claar and Hester simply must be misinformed, and that no reasonable person could actually find fault with the fair trade model.

          • Lia Walsh

            It almost seems as though you’re intentionally misunderstanding me. Please re-read if you think that A) I think ANYONE has no business commenting on something (the complaint was that there had been no sources provided, aside from a guy, which is not in itself any more than one source, much as I am one source, unless I provide further sources), and B) I think that no reasonable person could find fault with the Fairtrade model. I have myself admitted it is imperfect, right here on this thread. Your response is making huge logical leaps, and attributing ideas to me that I don’t hold.

          • Marc Vander Maas

            “And the fact remains: all of your information comes from one guy, who is an economist, not someone who’s worked in social justice fields as his specialization. ”

            I think a fair-minded person might interpret that remark as calling into question whether or not Claar has any business commenting on Fair Trade coffee. I don’t consider that a huge logical leap.

            “the complaint was that there had been no sources provided, aside from a guy, which is not in itself any more than one source, much as I am one source, unless I provide further sources”

            The “guy” that you were complaining about is a professor of economics at a state university, and just happens to be the author of a monograph on the subject at hand. That was mentioned in the original article. Additionally, if you’re concerned that the first guy doesn’t have proper “social justice” credentials, there’s an additional guy mentioned in the story who actually had boots on the ground with the people you’re concerned about. Considering that this is a blog post recap of a lecture and not a comprehensive report on Claar and Hester’s work, you might consider checking that out before getting out the rhetorical flamethrower and accusing people of having no sources. I wasn’t attempting to attribute ideas to you, and any misinterpretation of your comments was certainly not intentional.

            Regardless, I hope you take Dr. Claar up on his book offer.

    • mwkruse

      Lia, I don’t hold myself out as an expert but I have tried to be informed about the pros and cons of fair trade. You rightly point out that the status quo, with all the subsidies to corporate agriculture, is not fair trade. But the point is that it is not fair because it is not free trade (i.e., it is distorted by subsidies, etc.) Free trade is fair trade. Advanced nations should be exposed to agricultural free trade.

      I don’t have time to enter into a detailed response to your lengthy epistle. ;-) My principle concern is this: People locked into crop production at subsistence levels. People in emerging nations will never be able to achieve something like middle class affluence while trapped in this mode of production. Small farm commodity crop production is near the bottom of the ladder on the global economic production chain. Having wide swathes of nation’s population should be seen as transitory situation as economic growth is fostered, not an ideal to be preserved.

      We also know that economically advanced nations have a wide distribution of small (one person or a family), medium, and large size firms. Emerging nations tend to have nearly all small firms, a number of multinational corporations, and very few midsized firms. Prosperity and job growth are heavily dependent on dynamism of these mid-sized firms. That is the economic development that needs to occur.

      You point out that most folks in emerging nations don’t have adequate access to info about alternative crops. I’ll add that they also are without the financial instruments (checking, savings, credit, etc.) that would allow them to save and manage cash flow. (See “Portfolios of the Poor” by Daryl Collins, et al) There are frequently byzantine governmental structures, if small businesses are even in the formal economy at all. I am far more interested in partnering with people in emerging nations to address these issues than locking people into subsistence farming with fair trade subsidies and incentives.

      But the problem is that initiatives like these don’t lend themselves to trendy displays of personal morality by sporting my fair trade coffee mug at work. My sense is that corporations (like Starbucks) benefit FAR more by fair trade than do farmers in emerging nations. Fair trade coffee looks to me more like an attempt to lock in a subsistence existence (whether tightly enforced or not, the clear intent is to keep the firms small) rather than asking what are the best things we do know that facilitate movement up the next rung of economic productivity and prosperity.

      I suspect you genuinely care about the poor in emerging nations just as much as I do. All I can tell you is that I have an advanced degree in economic development and there are several aspects of fair trade that just don’t seem to add up. I have seen plenty of suspicions raised about the efficacy of fair trade but I can’t recall seeing a solid economic analysis by a qualified economist that verifies the claims fair trade makes. My reticence about fair trade is not grounded in a “right vs left” culture war inclination but out of wanting to truly contribute to the common good. I know Claar’s is too. All efforts to realize justice for the poor must come from warm hearts AND cool heads, processing our actions through the lens of technical economic analysis.

    • Anthony Bradley

      Lisa’s response is a textbook example of “Confirmation bias (also called confirmatory bias or myside bias).” This is a tendency for people to favor information that confirms their preconceptions or hypotheses regardless of whether the information is true. As a result, people gather evidence and recall information from memory selectively, and interpret it in a biased way. The biases appear in particular for emotionally significant issues and for established beliefs. Even though there is no evidence in the data that suggests that FTC helps the poor Lisa wonders why people keep doing it, as if that has anything to do with the data.

  • Victor V. Claar

    This has been quite an intriguing discussion so far. Sarah, I congratulate you on your initial post. You can tell that you are doing interesting work when it garners attention–especially from people you have never met. Ms. Walsh has obviously taken considerable time–out of more than one day–to comment on your efforts here.

    And I congratulate you also, Ms. Walsh, for your genuine interest in the essential human dignity and long-term flourishing of the poorest among us: a goal we both share. I am always pleased to encounter enthusiastic young people who care deeply about the world’s most pressing needs.

    I’d like to respond to a few of the comments Ms. Walsh has made that insinuate that my research monograph lacks documentation. Let me begin with a disclaimer regarding my short book: When I began my research about fair trade I had no personal stake in the fair-trade game. Unlike Ms. Walsh, who is a charter member of the Board of Directors for the Canadian Fair Trade Network (CFTN), I really had no prior opinion about fair trade goods. I was aware of fair trade, but I knew quite little about its specific operations. So my disclaimer is simply that I had no ideological stake in writing the book.

    Because I really had no opinion about fair trade–merely an awareness–I read literally everything I could get my hands and eyes on. For starters I downloaded every single research article about fair trade that was indexed in EconLit, the premier research database in my profession.

    I also ordered many books from Amazon including Fair Trade Coffee, an immensely helpful–and meticulously referenced–book written by Gavin Fridell. I found it intriguing that someone with such a different view of the world from mine would be such a vocal critic of the modern fair trade movement. Fridell is a political scientist with a strong Socialist bent, and I am a mere economist. Yet Fridell points out many of the unfortunate realities of the fair trade model.

    My eventual short book, “Fair Trade? Its Prospects as a Poverty Solution,” is the product of my far-reaching research. The monograph is dutifully and lovingly documented: In its mere 65 pages it includes nearly 100 footnotes. If anyone wants to take issue with any of the information or data included in Sarah’s post, I suggest they consult the monograph directly.

    Ms. Walsh, if you provide a mailing address I will happily send you a copy of the book so that you can track down every claim.

    Ms. Walsh writes as though I am the only caring person who has well-reasoned reservations about jumping on the emotional bandwagon of fair trade. But I am far from alone. Paul Collier criticizes fair trade in his book The Bottom Billion. Tim Harford hammers fair trade in The Undercover Economist.

    And the word is getting out that fair trade cannot deliver lasting, significant gains for the global poor:
    –Colleen Haight has a nice piece in the Stanford Social Innovation Review (http://www.ssireview.org/articles/entry/the_problem_with_fair_trade_coffee),
    –Lawrence Solomon summarizes the unintended consequences of fair trade coffee in the Financial Post (http://opinion.financialpost.com/2011/05/14/lawrence-solomon-fair-trade-coffee-producers-often-end-up-poorer/),
    –And those snarky humorists at Cracked.com say that “Fair Trade Coffee is a Scam,” and they even cite the Journal of Business Ethics along the way (http://www.cracked.com/quick-fixes/4-reasons-why-fair-trade-coffee-scam/).

    The global poor lead fragile lives. Addressing their needs effectively demands action, but it also requires great care. Ms. Walsh, you seem like a reasonable person who wants to transform the lives of the global poor–not simply settle for improvements in their plight that may be temporary and slight. I hope you — and your colleagues like our mutual friend Michael Zelmer (who makes his living promoting fair trade ideas) — will take me up on my offer to share my book with you as a gift.

    • http://www.acton.org/ John Couretas

      Thank you, Victor.

    • Lia Walsh

      Thank you, Mr. Claar. Finally, a rational and at least reasonably well-documented answer. (Although there is a lot of talk of Fair Trade USA in these articles you link, linking it to FLO, and that isn’t the same as the international system. The international system has no flex over Fair Trade USA, so to hold them responsible for FTUSA’s behaviours/standards/existence is unfair, to say the least. It’s like holding the American government responsible for every muck-up that happens in Cuba. And on a personal note, FTUSA is something I wholeheartedly refuse to support, even as a Fairtrade advocate. They have gone against some core principles of Fairtrade.)

      Mr. Claar, you say that you won’t go through my very lengthy answer, but I am interested in hearing what you have to say to my points. After all, as you mentioned, I did spend quite a lot of time crafting my response and if you actually have accurate ways to refute my information, I’d be interested in hearing it.

      What still concerns me (and what has concerned me from the get-go) about this whole conversation is the lack of producer voices. This was an angle that I was very much interested in including, but that I’ve found has held no weight at all in this conversation. (Whether Santiago Paz, my friend in Peru who runs the Cepicafé co-operative, has a degree in economics or not, anyone on this Earth will be hard-pressed to convince me that even a well-educated American knows more about producer realities than he does.)

      And I do thank you, Mr. Claar, for your response, but I think you have made an unfair assumption about my former participation in the CFTN. Assuming that my participation in such an organization means I’ve never looked at the other side of the coin is unfair, to say the least. In fact, a huge chunk of Fairtrade advocates are actually the toughest critics of it, because they get to deal with all of the criticisms every day of their lives, and because they want to challenge the system to be the best it can be. (The system has changed drastically since it started decades ago, and that was through producer and activist input. Conversations surrounding Fairtrade tend to assume that it’s a stagnant entity that was set up forever ago and thinks it can stay relevant without adapting, which is total nonsense.) What’s more, to assume that because I support it, I always supported it (was I put on this earth already loving Fairtrade, while you had to research it?) is really flawed logic. Just like you, I had to enter into the field of Fairtrade, and as someone who constantly pushes herself to challenge ideas and think critically (especially about the status quo), I assure you, I went through very much the same journey as you did to arrive where I am. I might argue that I know more about certain elements of Fairtrade than you do, in that while economics is your specialty, Fairtrade is something of a specialty for me, if informally and through a passion for social justice rather than pay. Please understand that for you to assume and assert that I’ve done less research than you is very condescending and not the kind of tone I typically respond well to.

      And finally, the question still remains: what viable option do we have right now that will help–rather than harm–the situation? Certainly not the conventional trade system, which is deeply flawed. Is Fairtrade perfect? Of course not, and I’ll be the first one to tell you that. But it’s still miles ahead of the system where the main goal is to get as much as we can for as little as we can. These people keep us alive. These people literally keep us alive. And our response is to silence their voices because of some statistics in a spreadsheet, so that we can remain comfortable and defend our privilege. It’s not right. Period.

      • kmmw

        “Combating Global Poverty with a Cup of Coffee” | LearnLiberty

        Fair-trade coffee sells at a higher price and helps the farmer—a small landowner—receive more profit for his product. Unfortunately, fair-trade products do nothing to help impoverished migrant workers. Is there a better way to help the poorest of the poor? Prof. Colleen Haight has researched fair-trade coffee for over 10 years and has visited several Central American coffee farms. She suggests that while fair trade has done much to increase consumer awareness, it is not the best way to help the poor. Instead, she recommends buying premium coffees. As premium coffee beans fetch higher prices in the market, migrant workers who work on premium coffee farms earn higher pay. What do you drink?

        https://www.youtube.com/watch?v=7zvSO43SOtk

    • Lia Walsh

      I’m sorry, I’ve forgotten to include something very important. When you say, “I had no ideological stake in writing the book,” as an academic, surely you know that this is an impossibility. Ideologies are unavoidable in everything we produce. If we didn’t want our ideologies to be spread, maintained and validated, why on Earth would we believe so deeply in them?

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  • pana wiya

    I’m from a coffee growing region and I TOTALLY support Lia Walsh’s stand on this whole fair trade monster. I have yet to see my people coming out of poverty because of fair trade.

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