Is Fair Trade good or bad?

[Adebisi]

I'm sure you've noticed that a lot of products are marked "fair trade" nowdays. Fair trade are certificates that ensure that the workers involved in manufacturing a product have gotten a decent pay. More specifically, the point is that market prices are often too low to give for example farmers wages they can live on.

Buying fair trade is seen as a way of being aware of the poverty in some parts of the world, and relieving that poverty. Many people even claim that it's immoral not to buy fair trade-products.

But what will this lead to in the long run? If we pay a higher price than the market price, then wont the market prices just go down even more? It's of course always good to give to charity, but this charity seems like it could possible cause even more poverty. If market prices are too low then the reason must also be on the supply side and not on the demand side. What do the economists on the forum say about this? I'm not saying that a certificate is necesserily bad, I just doubt the "market prices are too low"-argument.

It seems a bit to me like how did things in Finland a few decades ago. Finland has traditionally been very dependant on forest products, and only recently has the economy been diversified. But in the past, when the prices of forest products dropped, we simply devalued our currency to get a more competitive market price. But that does not help us at all in the long run, quite on the contrary, since a few years back we have had a massive crisis in the forest products industry.

The concept of small farms also failed in Finland. Around the second world war, poor people and later war refugees were made to be small farmers, but they ended up broke and large part of the population moved to Sweden. It seems to me a bit like we are now forcing such failed ideas on poor countries.

 

[amadeus]

It's fine when implemented on a small scale... however, if you tried to do it everywhere, it would crush the global economy because of those high labor costs.

 

[Princeps]

It's fine when implemented on a small scale... however, if you tried to do it everywhere, it would crush the global economy because of those high labor costs.

That's just the typical nonsensical zero-sum mentality, or a variation of it, I should say.

 

[potatokiosk]

I'm willing to pay extra if it means the people producing the stuff get paid decently.

 

[BSmith1068]

It's fine when implemented on a small scale... however, if you tried to do it everywhere, it would crush the global economy because of those high labor costs.

One could argue that if every worker was paid more, they would have more buying power and would actually stimulate economic activity. Overall – I am of a similar opinion that fair trade is positive when it is small in scale. If it were to become large in scale (globally) it could have other ramifications that may or may not be positive.

Some thoughts on Fair Trade (positive):

http://www.globalexchange.org/campaigns/fairtrade/coffee/1299.html

In recent years, it has become apparent that the new system of globalization and free trade has too often degenerated into one of crude exploitation of people and the environment in the developing world.
Workers typically make scandalously low wages and work long hours under unhealthy, demeaning conditions, all in a political climate that makes it impossible, even dangerous, for them to organize to improve their lot.
Poor countries are locked in a vicious Catch-22 situation, what has been dubbed the "global race to the bottom" because they must use low wages, cheap natural resources and lax environmental standards to compete for foreign investment.
...

This is more than a politically correct marketing strategy. It really works. For example, millions of small- to medium-scale coffee growers all over the world have been devastated by plummeting prices in the last couple of years; fair trade farmers are thriving.

http://greenliving.about.com/od/basics/a/FairTrade101_2.htm

Farmers and laborers in developing countries benefit greatly from fair trade in large part from the wages they earn.
By earning appropriate wages, they not only raise their standards of living, they also feed more money into their communities. This allows producers to help establish better healthcare and education, and a wider variety of skill sets among community members.
Additionally, farmers can move beyond making the bare minimum, and further their production by purchasing more advanced equipment.

Some thoughts on Fair Trade (maybe not so positive):

http://www.marginalrevolution.com/marginalrevolution/2005/12/who_benefits_fr.html
...conservative commentator Philip Oppenheim...argued recently that in Britain, it's supermarkets that profit most from fair trade sales. They charge a premium for fair trade bananas, for example, while a "minuscule sliver ends up with the people the movement is designed to help"...
Here is more. In case you don't know, fair trade sells a product at a premium price, under the promise that the workers are treated better and paid more. But will that improve living standards? Hmm...this sounds like a problem in tax incidence theory. To make the best possible case for fair trade, I will assume the promise of good treatment is credible.

 

[Bill3000]

It's an economic niche, towards the specific people that care about it, much like organic food.

 

[El_Machinae]

I get my coffee fair trade.

 

[mrt144]

Fair trade is great when the goods manufactured and purchased are done so voluntarily like with my morning coffee. The downside is in tracking whether something is or is not fair trade and whether the premium is passed to the producer not the retailer.

 

[Formaldehyde]

I get my coffee fair trade.

Interesting idea. If I didn't roast my own I'd give it a shot, but there doesn't appear to be and fair trade green beans available. which also makes me suspicious about where the money actually goes.

EDIT: NM. Just found some fair trade green beans...

 

[Formaldehyde]

Looks like Sweet Marias goes one step further.

http://sweetmarias.com/farmgatecoffee.html

I may go back to them for my green beans even though the shipping costs to the opposite coast are substantial.

 

[amadeus]

That's just the typical nonsensical zero-sum mentality, or a variation of it, I should say.

Slow down there, partner... are you accusing me of having a zero-sum mentality?

If you're going to pay foreign laborers the same as if the goods were produced domestically, why build factories overseas at all?

Or, why even pay a living wage? Why not pay all your employees $150,000 plus benefits? That way, your employees can afford your product and a comfortable lifestyle. Sure, you'll have to sell your shoes for $1,000 a pair... but who cares, right?

 

[luiz]

I see nothing wrong with it, morally or economically, except the name. It implies that other forms of trade are not fair, which is BS. Free trade is fair trade.

"Fair Trade", as they call it, is a mix of charity and PR stunt.

 

[El_Machinae]

Well, it's a decent description, in that it leaves 'free trade' available as a label, even though there's really little actual free trade.

 

[Formaldehyde]

Let me ask you this. Would you prefer the coffee growers get $1.50-$2 a pound for their green coffee beans, which sells for $5 a pound (or more) in this country, or less than 50 cents?

http://www.equalexchange.coop/fair-trade

http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf

 

[Newbunkle]

Price fixing su><orz.

 

[jessiecat]

I see nothing wrong with it, morally or economically, except the name. It implies that other forms of trade are not fair, which is BS. Free trade is fair trade.

"Fair Trade", as they call it, is a mix of charity and PR stunt.

As said before, "fair trade" is merely the attempt to reward primary producers with a higher percentage of profit. That seems reasonable to me. Hardly charity or a stunt but if it pleases some people to support that goal, what is the harm?
"Free Trade" is no more than an aspiration that trading conditions could be unrestricted without conveying any unnatural advantage in the market. In practice, however, it is myth. All nations esp. the most developed ones have put up tariff barriers against imports and subsidized their own producers. Until all taxes and preferential trade barriers between nations are abolished, "free trade" will remain a mere slogan, not reality.

 

[lovett]

As said before, "fair trade" is merely the attempt to reward primary producers with a higher percentage of profit. That seems reasonable to me. Hardly charity or a stunt but if it pleases some people to support that goal, what is the harm?

It seems kind of the very definition of charity...

I.e- giving people money that you don't have to give them

People being primary producers and money being the surcharge one pays on fair trade items.

 

[Fifty]

fair trade is good, Fair Trade is bad

 

[jessiecat]

It seems kind of the very definition of charity...

I.e- giving people money that you don't have to give them

People being primary producers and money being the surcharge one pays on fair trade items.

So if the primary producer asks the middleman a higher price for his goods and the middleman agrees to pay it and then passes that cost on to the retailer and then the customer, how is that charity?

 

[El_Machinae]

It seems kind of the very definition of charity...

I.e- giving people money that you don't have to give them

That happens every time a person purchases a brandname product. I just look at Fair Trade as a type of branding.

fair trade is good, Fair Trade is bad

That's very cryptic. You seem to be quite knowledgable about this topic. What do you mean?