Oct

4

More on Fairtrade

October 4, 2007 | Comments Off | Joshua Gans

Looks like Dani Rodrik is getting concerned about Fairtrade. His concerns are similar to ones I have raised here, here and here. John Barrdear summarises Rodrik’s concerns nicely:

    1. “[E]ven though fair trade brands sell as premium products, they often … sell at exactly the same price as the regular one. [T]his is a puzzle because farmers are supposed to get more when they produce the fair trade brand … Here is how the industry explains this: ‘Michael Ellgass, the director of house brands for Sam’s Club, said the company could afford to pay fair trade’s premium because it has reduced the number of middlemen.’ … Come again? So let me get this straight. The company could actually increase profits by cutting out middlemen, but waited to do so until fair trade came around and the increased revenues could be passed on to farmers instead of the bottom line?”
    2. “Fair trade certification requires that growers commit to various farming practices, and often other things too [such as rules on pesticides, farming techniques, recycling and mandating that the children of farmers were were enrolled in school]. Now, which one of us really know what “fair trade” certification is really getting us when we consume a product with that label? The market-based principle animating the movement is based on the idea that consumers are willing to pay something extra for certain social goals they value. But clearly there is an opaqueness in what the transaction is really about. And who gets to decide what the ‘long list of rules’ should be, if not the consumer herself?”
    3. “Isn’t the farmer himself a better judge of how his extra income should be spent? Should these decisions be made by Starbucks instead? (There are of course social assistance programs where cash grants are conditional on things like this, but they are (i) meant to be aid rather than fair payment for work rendered, and (ii) designed and administered by national governments rather than foreign firms.) Is conditonality imposed by multinational companies better than conditionality imposed by the World Bank or the IMF?”

My issue with all of this is that there are questions here. Many aspects of the Fairtrade movement remain a puzzle and it is unclear whether the goals are being met.


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