Fair Trade?

At one of our evening discussions, the topic of "Fair Trade" coffee came up. There were some who knew a bit about it, but most who knew next to nothing. I have a friend in Guatemala and I am waiting for him to give me a more detailed and "on-the-scene" perspective.

Until then, there is this helpful piece from Acton Institute, a free-market minded organization. Basically, "fair trade" is not all that fair nor is it what is best for all involved or affected by it.

Strange Brew: Churches push for “fair trade” coffee

by Jordan Ballor, Associate Editor

The “fair trade” coffee campaign (not to be confused with “free trade” coffee) is gaining traction beyond its early beachhead on college campuses and grungy latté shops. Increasingly, the campaign is finding new adherents in religious organizations, which are busily issuing guidelines for consumers. In churches and synagogues all over America, the once ideologically innocent coffee klatch has become a forum for international trade policy.

Prominent religious advocates of fair trade include the Interfaith Fair Trade Initiative, an outreach of Lutheran World Relief, and the Presbyterian Coffee Project of the Presbyterian Church (USA). The Presbyterian Coffee Project, among other things, advises its churches to “offer gift baskets of fairly traded coffee and tea for new members, as Christmas presents, or on other occasions.” And in December, Catholic Relief Services announced the launch of an effort to boost fair trade coffee consumption among the nation’s 65 million Catholics.

People of faith are working with groups like Global Exchange, a San Francisco human rights organization, which claims, “Agriculture workers in the coffee industry often toil in what can be described as ‘sweatshops in the fields.’” The fair trade movement, encouraged by victories among the religious and in corporate America, has ambitions that range all over America’s supermarket. TransFair USA, the only third-party certifier of fair trade commodities in the United States, announced on Jan. 22 that fresh fruit is its “Newest Fair Trade Certified™ Product Offering.” Soon, even the purchase of a bunch of bananas will force shoppers to make a political statement.

But let’s be fair to the fair traders. Their techniques are based on convincing the consuming public and working through the market to achieve their goals. This approach is vastly superior to relying solely on governmental subsidies, which has historically been the chosen means of influencing agriculture policy for many like-minded activists.

The main difficulty with this lies in the fact that these campaigns rely on guilt-tripping people who drink coffee, rather than arguing from sound economic principles. The rhetoric of the fair trade movement attacks “big business” coffee companies, and favors smaller, cooperative farms.

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And corporate America is caving in. Last September, Proctor & Gamble announced it would begin offering Fair Trade Certified coffee though its specialty coffee division, Millstone. The fair traders’ answer to the “sweatshop on the fields” situation is simple: fix the price of coffee at a level that will provide an adequate standard of living for the farmer. Currently they affirm that this fair level is a minimum of $1.26 per pound (compared to the current 50 cents per pound prices in the actual marketplace).

Such artificial and arbitrary measures fly in the face of economic reality. The law of supply and demand is a major player in regulating the price of coffee, which is bought and sold like any other commodity. The economic price mechanism takes into account a variety of factors that an artificial price standard cannot hope to deal with justly.

Fair traders also ignore one of the main reasons coffee growers face price drops: worldwide production has greatly expanded, especially in Southeast Asia. Increased supply equals lower prices given a static demand.

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Most troubling is the fact that the fair trade movement effectively pits the poor against the poor. It’s a case of coffee farmers in the fair trade co-ops versus conventional farmers. Those who sell coffee in the traditional commercial manner are forced to compete with those who are artificially enabled by the fair trade movement to maintain production through such guilt-driven, market-based subsidies.

.... The fair trade movement needs to take into consideration the poor who are left out of their arbitrarily constructed system of privilege.

The fair trade movement’s only response to this disparity is to argue for a complete standardization of its price-fixing methods. Global Exchange calls for “a total transformation of the coffee industry, so that all coffee sold in this country should be Fair Trade Certified.” The success of this sort of endeavor will never be comprehensively effective, especially in a free economy like the United States. As Global Exchange admits, “despite the growing popularity of Fair Trade coffee, demand has not yet matched supply: Last year about 200 million lbs. of certified Fair Trade coffee was sold at normal market prices because of insufficient demand.”

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