Does fair trade actually work?

Question

Does fair trade actually work?

Answer 1

No, actually it depresses prices. An artificially high price will just cause more producers to enter the market, causing a surplus of goods. Since fair trade buyers will only buy at a "fair price", many commodities won't be bought.

Answer 2

most 'fair trade' is said to occur when the middleman is by-passed and the final producer deals directly with the first ones engages especially in farming or extraction. For example, a chocolate manufacturer deals directly with the farmers who grow cocoa.

The middleman is not useless, very often, esp in Less Developed Countries (LDCs) farmers have small holdings, and the middleman's job is to collect the output of many farmers, grade them, then sell them on.

Who is doing that function now? Unless say a co-operative of farmers is set up to engage in collection and grading, the final producer does it.

You will note that in most cases, 'fair trade' products are not cheaper than 'normal' products. Where did the savings from cutting the profits the middleman used to make go to?

Some are lost to inefficiencies - co-operatives might gather from one region when the middleman gathered over the whole country and had scale advantages as well as expertise. transportation doesn't take place in as huge volumes... Some are redistributed.

The emotional argument for 'fair trade' is that farmers get more than before. So some of the profits from the middleman go to the farmer. Some probably go to the final producer too. Afterall, most companies wouldn't do something that lowers their profits unless there is a compelling reason.

One question many people don't ask is, what happened to the middlemen? Were they only huge MNCs who did the job, or were there organisations in the LDC itself doing it? If the latter, the 'fair trade' just redistributes some funds from the middleman to the farmers, and from the farmers to the final developed country producer.

So, we as consumers need to learn more about each type of 'fair trade' label, and how they are given.

Also, note that administering, checking and maintaining the 'fair trade label' costs money too.

In sum I'd say: read the labels. Not all fair trade is as what you might think.

Answer 3

In certain contexts it makes sense, like when a country is being outright exploited.  In economic theory not really, because greed is good and that's what makes free trade work.  Where in many cases low cost labor is the only thing of value a country has to work with.  Which is proven in the cases of of many south east asian countries as an effective tool for development.  As long as the government is adequately investing in education and further stages of industrialization.  What fair trade proponents are often reacting against is how much the competition for foreign investment becomes a race to the bottom.  Which ever country offers to the lowest cost production wins.  Which is usually whoever has the least stringent environmental regulations and lowest wages.

Answer 4

They say that in some cases, the farmer's income from producing coffee has gone up by as much as 40% from fair trade.

Answer 5

No as crude oil prices clearly indicate.The Sheiks who own the oil fields are raking in many billions of $ per month on top of the untold billions thay already have. Their fortunes make Bill Gates look like a minimum-wage earner.