Fair Trade is a poor answer to global poverty
Fair trade sounds pleasant--after all, what could be wrong with "fairness"?--but it's awful. Especially for the poor.
Alex Singleton - February 29, 2008
I wish I were in Calgary at the moment. Here in London, we Brits are being subjected to Fair Trade Fortnight, the galling two weeks each year when we are browbeaten into overpaying for our coffee, bananas and wine. Sanctimonious campaigners are trying to paint free trade as a tsunami damaging poor country producers, and arguing that consumers should only buy products certified as Fair Trade.
This year, they are trying to grab hold of more taxpayers' money as a "strategic investment" in their scheme. They are demanding CAD$100m from the U.K. aid budget and other state aid agencies. Their agenda is to upscale Fair Trade so that consumers they have decided should know better will be denied the opportunity to make the wrong choice. Already, thanks to their lobbying, at least two major supermarkets have taken non-Fair Trade bananas off the shelves, removing choice for consumers.
The Fair Trade lobby has even attacked the notion that the World Trade Organization should be about creating a level playing field. Britain's chief Fair Trade lobbyist Harriet Lamb says that WTO trade talks "must be about policy interventions and regulations" to promote her confused vision of development. Her sidekick, Ian Bretman, says that "if the antelope and the giraffe are competing for leaves on a level playing field, it doesn't do anything for the antelope." He is hopelessly confused, oblivious to 50 years of evidence that falsifies his analogy. After all, yesterday's Asian antelopes, like Hong Kong, Singapore and South Korea, are now rich countries.
Fortunately, the Adam Smith Institute, an influential think tank, has been doing stellar work, completely discrediting the Fair Trade lobby's position. It has released a report (PDF) saying that Fair Trade causes more harm than good, discouraging efficiency and imposing a top-down, one-size-fits-all mould on very different poor country producers.
Instead of allowing producers to make their own choices, the Fair Trade scheme demands they conform to their utopian vision of co-operatives, seemingly in the belief that these promote development. The truth is that poor country co-operatives often end up being oppressive. Many co-operative leaders win elections time and time again through rigged elections, and then cream money off the top that ought to go to farmers, who are left in the dark. Of course, many producers want no part of co-operatives, preferring to remain organised as small business owners.
Tom Clougherty, policy director at the Adam Smith Institute, claims the Fair Trade lobby fails to grasp how development works: "They make assumptions about agriculture in the developing world--that they must be small farming co-operatives. This is just not sustainable if countries are to develop."
Outside the Fair Trade scheme, Costa Rica's Cafe Britt has understood how to climb the economic ladder. It not only grows green coffee beans, but also processes and roasts them, packages them and sticks its own branding on the packets. While not eligible for Fair Trade status, Cafe Britt's farmers earn more than those on the supposedly ethical scheme. Fair Trade coffee, meanwhile, finds itself roasted and packaged in rich countries, which is bad for the development of poor countries.
Canada may not yet be subjected to the same barrage of Fair Trade lobbying, but Canadian organizers at Transfair Canada have similar ambitions. They say that fair trade should not just be "a nice alternative, but the way." Perhaps, with the help of free-marketeers like the Adam Smith Institute, supporters of real development can make sure that misguided campaigners do not succeed.
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