Study: "Fair Trade" coffee can actually be the opposite

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.