Tuesday, June 7, 2011

Does fair trade promote economic development and lessen the burdens of poverty?

 The Problem with Fair Trade Coffee
By Colleen Haight.  Stanford Social Innovation Review Summer 2011 link

My field and analytical research has found that there are distinct limitations to the Fair Trade model.7 Perhaps the most serious challenge is the extraordinarily high price of coffee. “The market today is five times higher than when FLO entered the United States. The market’s at $2.50 (per pound for commodity coffee) today vs. the 40 cents or 50 cents (per pound) it was at in 2001,” says Dennis Macray, former director of global sustainability at Starbucks Coffee Co. This price shift dampens farmers’ desire to sell their high-quality coffee at the Fair Trade price. Many co-ops, according to Macray, are choosing to default on the Fair Trade contracts, so that they can do better for their members by selling on the open market.

 Fair Trade without the Froth: A Dispassionate Economic Analysis of “Fair Trade” by Sushil Mohan

 Institute of Economic Affairs Nov 4, 2010. link

-research shows that fair trade is not a strategy for long-term development – conventional trade is often more effective.

- analysts sympathetic to the movement have suggested that only 25% of the premium reaches producers.

-Fair Trade does not focus on the poorest countries. Fair Trade penetration is greater in middle income countries, rather than in poor ones. The top four nations by Fair Trade certified producers in 2007 were Mexico, Colombia, Peru and South Africa. These nations had an average GDP per capita of $4,790 in 2007. The thirteen nations with only one Fair Trade certified producer had average GDP per capita of just $2,807 in 2007. Coffee-producing countries with no Fair Trade producers have an even lower average GDP per head. Most significantly, using data from 2005–07 for Fair Trade exports to the USA, it is not possible to find any significant negative relationship between national income per head or poverty and Fair Trade penetration.

Unfair Trade Marc Sidwell. Adam Smith Institute  2008- link

"Economic development throughfree market reform actively favours the poor. Because free markets reduce prices while improving quality, they serve the interests of the poor consumer. Poor nations that open their markets and pursue economic development grow at much faster rates than developed economies, for the latter have already introduced the changes that make the most difference – explaining how Hong Kong could overtake the UK economically despite our head start. Moreover, within nations, economic growth improves life for the poor at least as much as the rest of the population, if not more so the long-term objective of the Fair Trade movement seems to be to create a broad-based constituency with which to achieve radical restrictions on free trade... Rather than emphasising individual consumer choices, the pattern of Fairtrade growth is increasingly corporatist, concentrating on persuading large organizations to declare themselves Fairtrade: Fairtrade schools, towns, and even potentially nations in Scotland and Wales. Choice is steadily removed from the consumer, either because a decision to source only Fairtrade products has been taken on their behalf.."

Absolution in Your Cup - Reason 2006 - link

"Yet given its size, Starbucks likely has done far more than the Fair Trade movement to improve the lot of coffee growers in the 25 countries from which it purchases coffee. Starbucks buys 2.2 percent of the world's coffee production, and its infamous growth fuels demand for high-priced specialty coffees. In 2004 it bought that coffee at an average price of $1.20 a pound, slightly below the $1.26 Fair Trade pays but more than twice the average price for beans on the global commodity market."