-Martin Luther King Jr.
Consumers in the developed world today enjoy an unprecedented access to goods of different quality and variety, many from the developing world. Without realizing, these consumers wield huge influence and power just by choosing to purchase some brands over others. Wealthy consumers from the capitalist North purchase abstract goods “from the shelves at Walmart and Starbucks” without considering the different hands around the world that were all a part of creating those goods. In order to erode away this "fetishism of commodities," people must comprehend the power of their purchases.
Fair Trade is a niche market and a trading partnership between ethical consumers and marginalized small-scale producers from developing countries.
What makes Fair Trade different from other products?
1. Guaranteeing a fair and livable wage to producers, meaning setting a price floor
2. Supplying them with technical and financial assistance
3. Ensuring environmental sustainability and safe working conditions
4. Respecting cultural identity and educating consumers.
Look for these labels:
What can you find Fair Trade Certified?
Coffee, chocolate, sugar, tea, bananas & other fruits, flowers, honey, vanilla, herbs, and artisan handicrafts. Although this list is expanding.
What about Free Trade?
The current development paradigm proposed by industrial countries is increased privatization, fiscal austerity, trade and financial liberalization—proponents of free trade— in order to increase market efficiency and profits for both developing and developed countries. While even Fair Trade federations support free trade in theory, in practice, certain assumptions under neoliberal trade theories such as perfect market information, perfect access to markets and credit, and the ability to switch production techniques or industries in response to market information, are inherently false and misleading.
This is particularly true for rural agricultural producers in developing countries especially in the case of coffee. Coffee is not just a drink, it's a global commodity second only to oil. Although small scale farmers produce the majority of our coffee, the profits are spread amongst the roasters, retailers, and middle men leaving only pennies per kilo of beans for the farmers, who are at the bottom of the supply chain.
Additionally, it takes three to four years for a coffee plant to mature. Although many economists wonder why farmers don't just stop producing if they are producing at a loss, in reality, they cannot possibly predict market prices in the future, especially volatile coffee prices, if they must begin planting coffee crops years in advance. At one point, arabica coffee beans dropped to $.45/pound. But under Fair Trade, the price is maintained at at least $1.25/pound.
But isn't that distortionary?
Critics accuse Fair Trade’s minimum price provision of being like any other distortionary farm subsidy; Fair Trade, by setting a price floor higher than the market price, it is not only guilty of price fixing but also leads to overproduction and excess supply, thereby further exasperating the coffee crisis.
In response to this claim, we must first remember that the market price itself is a distortion; current coffee prices do not reflect producers’ productivity but rather their limited market power--limited means to negotiate. Additionally, this argument does not take into account that the Fair Trade niche market is a specialty market that differentiates itself from the conventional coffee market. Fair Trade offers a completely different good— higher quality coffee with a social aspect; therefore, its prices are not distortionary. Instead of fixing prices, the minimum price is just a starting point for cooperatives to begin market-based negotiations; often, Fair Trade producers earn more depending on the type and quality of coffee bean.
In addition, empirical studies have shown that under Fair Trade, farmers still do not overproduce (leading to more supply than demand) and it doesn't harm surrounding farmers who are not Fair Trade. In fact, it helps the community overall by forming cooperatives and teaching farmers how to gain the upper-hand on the negotiating floor.
Essentially, this movement utilizes consumers to protect small-scale farmers from exploitation and encourage growth in developing countries through awareness and certification of Fair Trade goods.
The number one goal has always been to make the Fair Trade model, considered a niche market today, the universal “norm” of the future.
For more Info:
Black Gold. A film directed by Marc Francis and Nick Francis. Fulcrum Productions, 2006.
Goodman, David. “The International Coffee Crisis: A Review of the Issues.” Confronting the Coffee Crisis: Fair Trade, Sustainable Livelihoods and Ecosystems in Mexico and Central America 2008.
Hayes, Mark and Geoff Moore. “The Economics of Fair Trade: A Guide in Plain English.” Review of Social Economy 2005.
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