Fairtrade: More than just branding

16 comments on “Fairtrade: More than just branding ”

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1. Chemist Peter 1

   15 March 2008 at 10:30 pm

   In the past fairtrade coffee was of lower quality to other brands. Is this still so?
   As a consumer why would I pay the same/more to something of lower quality? I do not care about the plight of poor nations really. I do help with aid though with my taxes, that is enough for me.
   I beleive in the teach them how to sustain food, not rely on a sack of rice arriving on a truck every week.
2. Robinsod 2

   16 March 2008 at 12:09 am

   Idiot.

   [lprent: enough]
3. libertyscott 3

   16 March 2008 at 2:10 am

   Whereas in fact Fairtrade is, at best a distraction, at worst destructive. Why?

   Read this http://www.adamsmith.org/images/pdf/unfair_trade.pdf

   According to a recent report by the Adam Smith Institute, up to 90% of the “Fairtrade premium” placed on the price of items does not go to the producer. People who buy Fairtrade products are essentially saying price doesn’t matter much, so it gives every opportunity for all those in the supply chain especially retail to place a mark up on the price.

   More fundamentally, it heavily distorts the price signal which encourages overproduction of poor quality produce. The report demonstrated that most producers operate in fairtrade and open markets, and would sell their best quality product on the open market to get the best price for it, and the poor quality to fairtrade which would “buy it anyway”.

   Furthermore, by encouraging further overproduction of an underpriced commodity, it impoverished those producers in places where fairtrade cannot reach – but also produces an environmental and economic conundrum. If all production moves to fairtrade it will be impossible to sell it all as the price is too high, encourages production but discouraging consumption. It locks producers into that commodity, not allowing them to innovate into others or target the quality end of the market – Fairtrade pays to produce.

   The “Fairtrade” brand is also politically driven, not results driven. It doesn’t support owner operator farms or small shareholdings, it supports only collectives. Many innovative producers with different ownership arrangements are ignored.

   I have fisked Fair Trade in several posts here:
   http://libertyscott.blogspot.com/2008/02/fairtrade-fails-and-deceives.html
   http://libertyscott.blogspot.com/2008/02/fairtrade-fails-and-deceives-part-two.html
   http://libertyscott.blogspot.com/2008/02/unfair-trade-download-adam-smith.html
   http://libertyscott.blogspot.com/2008/02/fairtrade-damned-further.html

   at the very least it raises big questions about this fad, which fundamentally doesn’t make economic sense.

   It is likely to be far better to argue for free trade, support targeted aid for infrastructure, health and education through private charities and remove third world country barriers to innovation (some of the biggest problems in some countries are monopoly utilities, or corrupt import licensing regimes that make it too expensive to import high tech equipment that could increase productivity).
4. Chemist Peter 4

   16 March 2008 at 8:31 am

   wanker

   [lprent: enough!]
5. burt 5

   16 March 2008 at 10:39 am

   Air NZ – Fairtrader? yes or no?
6. deemac 6

   16 March 2008 at 11:46 am

   burt – wanker? yes or no?

   [lprent: enough!]
7. Draco TB 7

   16 March 2008 at 12:04 pm

   The “Fairtrade’ brand is also politically driven, not results driven. It doesn’t support owner operator farms or small shareholdings, it supports only collectives. Many innovative producers with different ownership arrangements are ignored.

   Maybe the Fairtrade brand is trying to produce the most benefit for the most people. Collectives do this but singular ownership doesn’t. In fact, singular ownership (the standard capitalist mode) can arguably be said to produce the least benefit for the most people.
8. killinginthenameof 8

   16 March 2008 at 1:53 pm

   Sorry Libertyscott, market fundementalisim has already destroyed Africa, hence why they have no power too get a better deal out of trade. Quite frankly I dont care that only 10% of the additional ammount I pay goes back to the farmer, thats 5 cents (costs about 50 cents per cup here to get freetrade coffee) more than the farmer woudl have otherwise got. I currently dont have another of means of paying what I believe is the proper price for coffee.
9. Chemist Peter 9

   16 March 2008 at 2:41 pm

   Robinsod = wanker.
   Why am I an idiot Robinsod.

   [lprent: enough!]
10. Ruth 10

    16 March 2008 at 3:12 pm

    Quite frankly I dont care that only 10% of the additional ammount I pay goes back to the farmer, thats 5 cents (costs about 50 cents per cup here to get freetrade coffee) more than the farmer woudl have otherwise got.

    Exactly right. Fairtrade is like the Pink Ribbon Breast Cancer Awareness Campaign. People who deserve it get more money than they otherwise would, the corporate makes a profit, and the consumer gets a feel good experience. This is capitalism working to improve lives. One does not have to be purist about it Scott.

    Those producers involved in Fairtrade would be better moving into a collective like Fonterra.
11. RedLogix 11

    16 March 2008 at 4:09 pm

    “It doesn’t support owner operator farms or small shareholdings, it supports only collectives. Many innovative producers with different ownership arrangements are ignored.”

    Yeah right. Tell that to the biggest collectivist union in the country… Fonterra. Try explaining to them how this ownership arrangement makes them all a bunch of inefficient socialist losers.
12. libertyscott 12

    17 March 2008 at 11:45 am

    RedLogix, it is a limited liability company. It is not a collective as defined by Fairtrade.

    Killinginthenameof – If Africa, full of corrupt crony states with import restrictions, domestic utility monopolies working in a trading environment with massive subsidies, trade restriction and export subsides from the EU and the USA is enduring market fundamentalism, then you’re clearly deluded.

    Yes, go on, spend more for coffee which may or may not be good quality. Instead of spending a market price on coffee and buying something ELSE for what you save, which helps others, just waste money on it. Encourage overproduction of a poorly priced commodity to the point that if all coffee was “fairtrade” it couldn’t get sold.

    My main point is that some say this replaces free trade – it doesn’t. It is an economic nonsense to pay over the odds for a commodity which is priced low for a reason – overproduction, or it is good to have keep land growing one crop when it may be more profitable to grow another (but for “Fairtrade” prices).

    Another point is that Fairtrade is a brand, a brand that happens to roast its coffee in Europe NOT the third world, funny that. There are others undertaking so called “ethical trade” that don’t get the Fairtrade brand for ideological and anti-competitive reasons. What I object to the most is the fraud that most people paying Fairtrade prices think the surplus all goes to feed poor families, when most of it goes to the retailers who are laughing all the way to the bank.
13. Phil 13

    17 March 2008 at 1:47 pm

    Liberty makes a good point. The additional funds spent on “Fair Trade” would better service third-world farmers if they were put to use in some of the micro-enterprise developments, or even for ‘seed capital’ to produce alternative crops (where relevant).

    Lunch time diversion;
    http://www.arcadetown.com/3rdworldfarmer/gameonline.asp
14. Chocoholix 14

    17 March 2008 at 9:53 pm

    “90% of the premium paid by consumers for Fairtrade products does not reach the producer”. This statistic is obviously completely made up, and shame on the Adam Smith Institute for pretending otherwise. What IS the premium paid by the consumer? No-one fixes the price of a cup of coffee do they? You go into the shop or the cafe and you look at the prices and you make your choice. I’ve been in plenty of coffee shops and had a Fairtrade coffee for the same price as I would in any other. In the UK, some Fairtrade products are CHEAPER than other mainstream brands – so how does the ‘premium’ work there – do the farmers have to give money to Nescafe? I don’t think so. The ASI is scaremongering with false facts because they are ideologically opposed to anything that doesn’t sound like free trade. They forget that actually fair trade is working in the current market as a supply and demand system – if we demand sustainably produced products, then companies have to supply them.

    The truth is that Fairtrade premiums paid to the growers is paid at the point when THEY sell their coffee onwards, and they must get 100% of it, according to Fairtrade standards. This money then gets invested into all sorts of alternative micro-enterprises, quality improvements, road improvements, schools and health centres, and the evidence is there to prove it, as Gerardo Arias Camacho and thousands of other producers can show you.

    For a think tank, the Adam Smith Institute obviously didn’t think too hard before inventing this nonsense. Only fools would swallow such fake facts. Wise people carry on drinking one of the many excellent brands of quality Fairtrade coffee.
15. Citizen_Tom 15

    18 March 2008 at 11:56 am

    Fair trade is of course partly profit driven! but who cares as long as it does good to everyone!
    I love fair trade, soon everything will be fair trade…Even condoms are now fair trade!
16. Matthew Pilott 16

    18 March 2008 at 12:20 pm

    I notice libertyscott studiously avoids the term ‘monopsony’ in the above posts – when the market determines the price, and the market is distorted by conditions where there are many poor sellers and very vew buyers with great power and wealth, you can’t expect ‘free trade’ to have a jot of influence.

    The market creates these distortions, to pretend that it is overproduction or poor quality is probably a lie invented to disguise the power imbalance that so disadvantages the world’s coffee, chocolate and tobacco producers.

    If the goods are or poor quality, why is the mark-up so exorbitant (i.e. farmer gets half a cent for the raw materials of your $5.00 coffee)? What a trivial and weak argument.

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