Fair Trade Is Unfair

Monday 25 February 2008

According to the Adam Smith Institute's latest report, Unfair Trade by Marc Sidwell, Fairtrade Fortnight is little more than a marketing exercise intended to maintain Fairtrade's predominance in an increasingly competitive marketplace for ethically-branded products. The hype is necessary, because there is every reason for the shrewd consumer to make other choices.

The report highlights the inconvenient truths about 'Fair' trade:

  • Fair trade is unfair. It offers only a very small number of farmers a higher, fixed price for their goods. These higher prices come at the expense of the great majority of farmers, who – unable to qualify for Fairtrade certification – are left even worse off.

  • Many of the farmers helped by Fairtrade are in Mexico, a relatively developed country. Few are in places like Ethiopia, as people commonly assume.

  • Fair trade does not aid economic development. It keeps the poor in their place, sustaining uncompetitive farmers on their land and holding back diversification, mechanization, and moves up the value chain. This denies future generations the chance of a better life.

  • Fair trade helps landowners, rather than the agricultural labourers who suffer the severest poverty. Fairtrade rules actually make it harder for labourers to gain permanent, full-time employment.

  • Just 10% of the premium consumers pay for Fairtrade actually goes to the producer. People further along the retail chain take the rest.

  • Four-fifths of the produce sold by Fairtrade-certified farmers ends up in non-Fairtrade goods. At the same time, it is possible that many goods sold as Fairtrade might not actually be Fairtrade at all.

  • The consumer now has a wide variety of ethical alternatives to Fairtrade, many of which represent more effective ways to fight poverty, increase the poor's standard of living and aid economic development.

As the ASI's policy director, Tom Clougherty, says:

"At best, fair trade is a marketing device that does the poor little good. At worst, it may inadvertently be harming some of the planet's most vulnerable people. If we really want to aid international development we should instead work to abolish barriers to trade in the rich world, and help the developing world to do the same. Free trade is the most effective poverty reduction strategy the world has ever seen."

You can download the report as a PDF here: http://www.adamsmith.org/images/pdf/unfair_trade.pdf

Slug path