Study: “Fair Trade” coffee can actually be the opposite

posted at 8:01 pm on May 21, 2014 by Erika Johnsen

Given the way the word is bandied about by bureaucrats and progressive types claiming that the singular and unquestionably noble goal of their reliably top-down social prescriptions is to look out for the little guy being meanly exploited by the big, bad one percenters of the world, I’ve become pretty wary of the term “fair.” The word is used to cover all manner of ills from the self-congratulatory Robin Hoods of the world, who do not strive to create wealth as much as they do to redistribute it, and unfortunately, even the people who do start out with the sincerest of intentions can end up falling prey to that end result via the law of unintended consequences. In that vein, the “Fair Trade” label that permeates so many of our daily coffee purchases in the West might not deserve the designation.

This is how Fair Trade USA describes its mission when it comes to aiding coffee farmers in the developing world:

Your rich cup of Fair Trade coffee can help farmers escape poverty. Most small-scale family farmers live in remote locations and lack access to credit, so they are vulnerable to middlemen who offer cash for their coffee at a fraction of its value. Fair Trade guarantees farmers a minimum price, and links farmers directly with importers, creating long-term sustainability. Through Fair Trade, farmers earn better incomes, allowing them to hold on to their land and invest in quality.

(Sidebar: “Sustainability” is another deliberately vague and seemingly innocuous word of which I’m highly wary, but that’s a blog post for another day.)

Again, I’d wager that the people who started the “Fair Trade” designation did it with the very best of intentions to try and ease what are some seriously unjust problems with Third World economies, but as so often happens with trying to apply solutions from the top down rather than fixing systemic and fundamental problems from the bottom up, Fair Trade labeling is like a price-fixing scheme fraught with the attendant inefficiencies and unintended consequences. This isn’t by any means a new debate, but The Economist reports on just the latest research from the School of Oriental and African Studies (SOAS) in London comparing living standards in Fair Trade-certified producing areas in Ethiopia and Uganda with similar non-Fair Trade regions — and the economists concluded that Fair Trade agricultural workers often earned lower incomes than their non-Fair Trade counterparts:

After four years of fieldwork in the coffee, tea and flower sectors in Ethiopia and Uganda, where they gathered 1,700 survey responses and conducted more than 100 interviews, the SOAS researchers found people living in ordinary rural communities enjoyed a higher standard of living than seasonal and casual agricultural workers who received an apparently subsidised wage for producing Fair Trade exports. Women’s wages were especially low among producers selling into Fair Trade markets, according to the researchers.

Comparing areas where the same crops were produced by similar, though not Fair Trade-certified employers, they found that workers received higher wages and benefited from better conditions. This was not because the Fair Trade cooperatives were based in areas with higher or particular disadvantages. The rationale of Fair Trade is that producers of commodities subject to price volatility should be protected through payment of a minimum price to cover living and production costs, a price which adjusts whenever the market shifts above the minimum threshold. In addition to this, traders should pay workers a “social premium” of around 5-10% for development and technical assistance.

The SOAS research suggests that Fair Trade has failed to make a positive difference.


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Fair trade is when you buy coffee that you like.

PBH on May 21, 2014 at 8:08 PM

Shockah! Free trade beats fair trade every time.

thebrokenrattle on May 21, 2014 at 8:09 PM

A lot of “organic” is likely merely switch labels.

Just switch the tag and naive yuppies will line up around the block to pay twice as much.

viking01 on May 21, 2014 at 8:10 PM

I remember a department store which promoted a line of women’s clothing supposedly supportive of worker’s rights…..

….until I guess they realized it was the same ChiCom slave labor despite the smiley-face marketing.

viking01 on May 21, 2014 at 8:14 PM

I would like to see a study of the efficacy of government intervention in free markets with respect to changes in consumer and producer surplus vs changes in tax revenue.

Economist on May 21, 2014 at 8:15 PM

Liberal do gooding seldom works out well.

rbj on May 21, 2014 at 8:16 PM

If you like your coffee ….

burrata on May 21, 2014 at 8:19 PM

I’d wager that the people who started the “Fair Trade” designation did it with the very best of intentions to try and ease what are some seriously unjust problems with Third World economies, but as so often happens with trying to apply solutions from the top down rather than fixing systemic and fundamental problems from the bottom up, Fair Trade labeling is like a price-fixing scheme fraught with the attendant inefficiencies and unintended consequences.

How in the world is fair trade a top-down solution?

Also, Fairtrade International issued a response:

One factor that may partly explain the report’s findings is that in several places it compares wages and working conditions of workers in areas where small-scale Fairtrade certified tea and coffee farmer were present with those on large scale plantations in the same regions. The report itself identifies farm size, scale and integration into global trade chains as major factors influencing conditions for wage workers, but then its conclusions appear to be based on unfair and distorted comparisons between farms and organisations of dramatically different size, nature and means.

In contrast, we note that when comparisons are based more on like-for-like situations, such as the study’s own analysis of Ugandan coffee in small scale coffee production set-ups, it finds key areas where workers in areas with Fairtrade certified farmer organisations in fact had better conditions compared with those in non-certified, such as free meals, overtime payments and loans and wage advances for workers (Chart 3.10, p. 83-4). This is in sharp contrast to the more generalised conclusions being presented by the SOAS team.

themuppet on May 21, 2014 at 8:25 PM

The definition of “fair” will NEVER be objective.

listens2glenn on May 21, 2014 at 8:32 PM

I demand Fair Trade ammunition.

Bishop on May 21, 2014 at 8:35 PM

If you like your coffee ….

burrata on May 21, 2014 at 8:19 PM

.
. . . : )
.
.
Those first four words will never grow old. They’ll haunt him the rest of his natural life.

listens2glenn on May 21, 2014 at 8:35 PM

Liberals throw certain words around so much they stop meaning anything. I think we should start a drinking game everytime they use the words fair and sustainable.

crankyoldlady on May 21, 2014 at 8:41 PM

I demand Fair Trade ammunition.

Bishop on May 21, 2014 at 8:35 PM

.
Yeah, right….
.
Next you’ll be demanding “fair” elections (photo ID required), and “fair” taxes (either ‘flat’, or ‘single rate’).
.

listens2glenn on May 21, 2014 at 8:41 PM

Liberals throw certain words around so much they stop meaning anything. I think we should start a drinking game everytime they use the words fair and sustainable.

crankyoldlady on May 21, 2014 at 8:41 PM

.
RACIST !

listens2glenn on May 21, 2014 at 8:42 PM

I demand Fair Trade ammunition.

Bishop on May 21, 2014 at 8:35 PM

I’ll second that!

Mini-14 on May 21, 2014 at 8:42 PM

RACIST !

listens2glenn on May 21, 2014 at 8:42 PM

That too.

crankyoldlady on May 21, 2014 at 8:43 PM

Next you’ll be demanding “fair” elections (photo ID required), and “fair” taxes (either ‘flat’, or ‘single rate’).
.

listens2glenn on May 21, 2014 at 8:41 PM

Count me in on the I.D. elections and single rate tax plan.

astonerii on May 21, 2014 at 8:45 PM

Generally speaking people within the coffee industry do not think too highly of Fair Trade. While good intentioned it never has guaranteed the farmer a good return but rather the co-op that processes the coffee. It is then incumbent upon the co-op to do the right thing by passing the higher dollars earned onto the small farmer but often that doesn’t occur.

The next rip is Fair Trade charges per sticker on a bag.. last I heard .10 so they can fund their gig.

The other issue within the coffee industry is “organic”.. small farmers while adhering to all the standards set forth to be labeled organic can’t because it is so expensive they couldn’t certify with all earnings from years of labor.

Being in the business look for small artisan roasters who do buy direct using terms such as “Farm Gate”, “Fair Crack” (aussie term) ands similar where that group buys directly from farmers for higher prices for coffee that is superb.

Like all industries the coffee industry has it’s scum bags so much so a small producer (10-20 bags annually) can’t afford sample roasters to “cup” (sample/taste)so they’ll send some to a co-op and incases switch the product for a lessor grade to buy from the farmer at a lower price… My company donated $30,000 worth of roasters last year and have committed to $50,000 so this year with goals for $150,000 to prevent this thievery. They are being located in small training centers throughout coffee growing countries so any farmer can access..

psst don’t tell anyone, I’m a conservative may give us bad names

theblacksheepwasright on May 21, 2014 at 9:04 PM

After four years of fieldwork in the coffee, tea and flower sectors in Ethiopia and Uganda, where they gathered 1,700 survey responses and conducted more than 100 interviews, the SOAS researchers found people living in ordinary rural communities enjoyed a higher standard of living than seasonal and casual agricultural workers who received an apparently subsidised wage for producing Fair Trade exports.

It’s quite amusing the Fair Traders complain about the pocket-lining capitalists in the feeble attempt to insulate themselves from criticism while they stuff their own pockets.

Standards.

rukiddingme on May 21, 2014 at 9:09 PM

themuppet on May 21, 2014 at 8:25 PM

It’s a shame that the paper isn’t yet publicly available and neither the Economist or the FLO provide details about it, but their response is weaksauce.

One of the problems with the Fair Trade marketing gimmick is that it discourages the large scale, high productivity, producing entities (with full time workers, mechanisation, crop diversification, etc) that ultimately lead to economic growth and higher wages.

This is one of the most common criticism of the FairTrade: it promises the poor some marginal charity as long as they keep doing the same that locked them into poverty.

Their response is akin to some communist regime defending their economic system by claiming that if you compare their low-productivity, state-owned, capital deprived, companies with the low-productivity, capital deprived, public companies in a capitalist regime, they fare about the same.

joana on May 21, 2014 at 9:12 PM

I recall reading an article, a couple of years back, that said corruption was rampant in the “fair-trade” business. Farmers were paying huge kickbacks to their buyers in order to obtain the fair-trade label, and somewhat higher prices for their goods.

Fair-trade is a great idea, but is rife with opportunities for corrupt exploitation. So much for the liberal idea that, down deep, everyone wants to play nice and share the opportunities to get a larger slice of the pie.

DaveK on May 21, 2014 at 9:14 PM

I buy green coffee and I roast it myself. I buy varieties that I like at the most reasonable price I can find. I don’t care if it’s fair trade or organic. I buy it at the best price. That’s fair, right?

Oldnuke on May 21, 2014 at 9:31 PM

Fair-trade is a great idea, but is rife with opportunities for corrupt exploitation. So much for the liberal idea that, down deep, everyone wants to play nice and share the opportunities to get a larger slice of the pie.

DaveK on May 21, 2014 at 9:14 PM

Fair trade isn’t a great idea if the purpose is helping the poor. The end result will inevitably be this: fair trade areas will be less prosperous than others, ceteris paribus, because it discourages innovation and productivity growth. Reduces the incentives to use modern farming techniques and economies of scale while increasing them for the use of marginal land. It also encourages market oversupply, depressing global prices, impoverishing even those farmers out of the FairTrade mechanism.

It is a great idea as a mean to offer conspicuous consumption and status signalling. By definition and design, FairTrade products have in-built scarcity and premium price. That allows Westerners to pat their conscience and, more importantly, signal their status, by paying those higher prices.

joana on May 21, 2014 at 9:32 PM

I would really like to try some Kopi Luwak. Is it fair trade? One of the best coffees I’ve ever found is from Galapagos. Unfortunately the rest of the world found out about it too apparently. Haven’t been able to find a source for green now for a couple of years. Very limited production.

Oldnuke on May 21, 2014 at 9:35 PM

You mean my snotty feel good coffee doesn’t actually do good? For women even less?

J.B. Say on May 21, 2014 at 9:40 PM

I hear the rodents / marsupials / whatever which excrete that pee-berry coffee (in more ways than one) are grossly (in more ways than one) underpaid.

viking01 on May 21, 2014 at 9:49 PM

I fully support this fair trade movement. It’s a racket designed to separate gullible American liberals from their money. Who could possibly be against that?

LukeinNE on May 21, 2014 at 9:57 PM

Sort of like Apple. Lots of brand recognition, but scummy practices deep below.

unclesmrgol on May 21, 2014 at 10:01 PM

A lot of “organic” is likely merely switch labels.

Just switch the tag and naive yuppies will line up around the block to pay twice as much.

viking01 on May 21, 2014 at 8:10 PM

That’s my theory with ‘organic’ fruits and vegetables. Someone sorts through them and takes out the smaller and/or blemished ones, and relabels them ‘organic’. There’s a left-wing sucker born every minute.

slickwillie2001 on May 21, 2014 at 10:39 PM

…I’ve become pretty wary of the term “fair.” The word is used to cover all manner of ills from the self-congratulatory Robin Hoods of the world, who do not strive to create wealth as much as they do to redistribute it….

…wary, as well you might be…as well we might all be. The denizens of the left use the word “fair” the way schoolyard kids use the word…when they don’t get what they want, it isn’t “fair”….

…and, redistribute? Indeed, they seek to do that very thing. They rob from those whom they think beneath them, and distribute the swag they accumulate to safe constituencies, pet projects, academic apologists and to pressure groups who do their bidding…in short, they rob from the rich and give to their friends.

…as to 1%’ers…I’ve never cashed a check from the Sierra Club, the SPLC, the Ford Foundation or from Media Matters…on the other hand, I’ve cashed paychecks from Wal*Mart. Go figger….

Puritan1648 on May 21, 2014 at 10:52 PM

1) The Economist would rather not highlight liberal failures, but they do these reports for the sake of truth; American “journalists” don’t do that.
2) This is my shocked face. See?
3) Comparative advantage by one party benefits BOTH parties. Even if all they sell is coffee beans, they still get to buy computers made somewhere else by someone else who has comparative advantage in computers. It’s been that way for about 4,000 years of trade so far, evidence it actually started before the Obamessiah came and even before the EU.
4) Those who have appointed themselves to “fix” the world’s problems never seem to understand economics – see #2
5) Comparative advantage benefits BOTH parties – but it does not make their incomes equal. Upon finding out their ever-so-wonderful theories don’t work, they go see #2
6) They will then loudly proclaim their good intentions and never learn that results, not intentions, buy computers for coffee sellers.
7) Having not learned anything because it never costs them anything, they will rinse and repeat on the next emo cause that comes along.
8) See #2.

/rant

DublOh7 on May 21, 2014 at 11:35 PM

conditions compared with those in non-certified, such as free meals

There ain’t no such thing as a free lunch. So I call BS right there.

When it comes down to it, this is a price-fixing scheme. It fixes prices at the wage-level, then fixes prices again at the consumer level. All the extra in-between is going to the folks in the “Fair Trade” organizations. Whenever you get price-fixing, you get corruption (and/or shortages).

Oldnuke – you should buy extra beans and feed a small bit to your dog (or rat or snake or something), then roast and sell them at the local farmer’s market. You could probably pay for the rest of your coffee with the profits.

GWB on May 22, 2014 at 1:06 AM

It’s “feel good” marketing program for liberals.
As in, “I only buy ‘Fair Trade’ products to help the people of 3rd World countries”.

albill on May 22, 2014 at 7:13 AM

Isn’t this a minimum wage law wearing different clothing?

The exact same arguments apply to both and prove both are bankrupt ideas.

{^_^}

herself on May 22, 2014 at 7:55 AM

Liberals do not recognize the law of supply & demand. They think it is a vague concept they can mold, much like the US Constitution.

Econ101: If you raise the price you sell less. If you sell less you employ less people to produce it. An artificially high fair trade price “might” help some people but it will be at the expense of others who fail to gain employment because of the fair trade price.

bpard on May 22, 2014 at 10:05 AM

Well, to damn the “Fair Trade” program with faint praise – at least it’s voluntary on the part of the coffee drinkers and not a government subsidy. I’d like to see domestic government price support programs for sugar etc. eliminated and replaced with similar “Fair Trade” programs; i.e. you can pay 10 cents more for that soda, the fructose comes from fair trade corn etc. Then all the people that want to support the poor corn farmers, on their multimillion dollar farms, could buy the more expensive soda.

Over50 on May 22, 2014 at 10:58 AM

No surprise here.

superdave on May 22, 2014 at 12:19 PM

Like the bumper sticker says:

Free trade IS fair trade

BVM on May 22, 2014 at 1:52 PM