Is Fairtrade the best way to help farmers in the third world?
Tom Clougherty, policy director of the Adam Smith Institute
IT IS great that so many consumers want to help the developing world, but Fairtrade is not the only option, and it is not the best option. "Fairtrade" does not mean anyone who gives is guaranteeing better terms for poor farmers. It is a particular label that competes vigorously with other ethical brands and charities for people's money. And for all its undoubtedly good intentions, there are some serious flaws with the Fairtrade system.
Firstly, Fairtrade only helps a relatively small number of farmers by guaranteeing them a minimum price for their goods. Fine, you might think, but unfortunately this can distort local markets leaving other farmers, who are unable to qualify for Fairtrade certification but probably no less deserving, even worse off than before.
Secondly, only about 10 per cent of the premium paid by consumers actually makes it back to the farmer. The rest gets swallowed up further along the retail chain. This makes Fairtrade a rather inefficient way of helping someone.
Thirdly, Fairtrade does little to aid economic development, focusing instead on sustaining farmers in their current state. Although helpful to some in the short term, this holds back mechanisation, diversification, and moves up the value chain. Future generations lose out. And by requiring farmers to form co-operatives, Fairtrade rules reduce opportunities for labourers to get full-time, permanent jobs and can foster corruption. So yes, by distorting markets and by enticing people away from better alternatives, Fairtrade can indeed do more harm than good.
Ian Bretman, deputy director, Fairtrade Foundation
I HAVE just returned from the South Bank in London where thousands of people attended a wonderful event to kick off this year's Fairtrade Fortnight, sampling Fairtrade food and drink, meeting growers face-to-face and sharing the stories of how people are fighting – and winning the battle – for fairer trade. People of all ages and all backgrounds had a great time, so it's very sad that while so many are trying to do what they can through the choices they make as consumers, that the Adam Smith Institute chooses this very weekend to publish a report claiming that Fairtrade actually does more harm than good.
Fairtrade Fortnight acts like a red rag to a bull to these fundamentalist free-market economists because what they really can't stand is ordinary people acting from motives other than simple selfishness and in ways that disprove the wild excesses of free-market dogma. And make no mistake, this is not an argument about free trade versus fair trade; it's a struggle between people who refuse to contemplate any departure from classical economic theories and those who are guided by the practical experience of listening to people in the developing world about what they need from international trade.
The next two weeks will give people opportunities to hear from producers how Fairtrade helps fight poverty by talking to the farmers and workers who are visiting Britain this year. Ask them if they think consumers should just rely on the free market to put the world to rights and then make up your own minds whether to believe free trade dogma or Fairtrade pragmatism.