We need a balanced discussion about the merits of Fairtrade
From Prof Philip Booth, editorial and programme director of the Institute of Economic Affairs SIR – In his very constructive letter (March 6), Paul Chandler, CEO of Traidcraft, suggests that I have not fully grasped the processes involved in granting Fairtrade status. Unfortunately, I have.
As far as coffee is concerned, Fairtrade status can be granted if a cooperative pays the labelling organisation a sum which amounts to about 10 times average income for a country such as Kenya. Wholesalers are then charged about two per cent of turnover – this provides the main source of income for the Fairtrade Foundation. Furthermore, producers have to meet a number of guidelines relating to their production processes and corporate form – which may or may not be appropriate for producers in particular circumstances in under-developed countries. Producers also have to jump through a number of administrative hoops. Why would producers want to bear these costs? The answer is that they hope to pass them on to consumers who are eager to buy certified products. This is generally possible, of course, and consumers will normally pay other increments to the price to finance social projects, the price floor, additional profits to retailers who benefit from consumers of Fairtrade products being relatively price insensitive etc.
All well and good. But what if the Fairtrade model is not convenient for the producer? It is a matter of what the French Catholic economist Frederic Bastiat, described as the “seen and the unseen”. The poor producer will have to bear the costs or lose the trade of the “ethical” consumer. We have all seen the Fairtrade posters showing the benefits we bring to particular communities from buying Fairtrade produce. But what happens if I, for example, switch out of a non-Fairtrade brand of Ethiopian speciality coffee, for whom the Fairtrade administrative requirements are not appropriate or too expensive, and into a Fairtrade brand? There are no posters showing the dilemma of the farmers for whom demand has fallen.
The fact is that there are many busi ness mechanisms for achieving some of the aims of the fair trade movement that have been used for centuries. There has also never been any serious in-depth study of the general costs and benefits of fair trade. The anecdotes used by its supporters paint pictures that inform one side of the debate. The anecdotes used by its detractors suggest problems with aspects of the model and inform the other side of the debate.
My simple point is that the fair trade movement overstates its case – often dramatically; and it is highly defensive, even under mild criticism. It does not provide the answer, as Paul Chandler implies in his last full paragraph, to the problems caused by the mismanagement of monetary policy, of regulation and of the handling of risk in the banking system; and I am not, as he suggests, perversely attacking the movement. Fairtrade gets more than a fair ride, and it is reasonable to promote a balanced discussion.
Yours faithfully, PHILIP BOOTH London SW1