Fair trade really is fair

For a while now the Adam Smith institute has been criticising the Fair Trade movement. In last week's Church Times, Giles Fraser reported the criticisms thus;

The Adam Smith people argue that it is all a con. First, most of the farmers who are helped are in relatively wealthy places such as Mexico rather than in poor places such as Ethiopia. Second, it benefits a few farmers at the expense of their non-Fairtrade neighbours, who then have to compete on unfair terms, and can be left worse off. Worst of all, that “little extra” that kind churchgoers are happy to spend actually works to keep poor people poor. It sustains uncompetitive practices, and discourages farmers from diversifying into areas of more profitable economic activity.

This week, Paul Vallely gives a nice rebuttal which is worth bookmarking when it comes off subscriber only into general release, just to send to the silly s*ds who think that the Adam Smith Institute is the last word.

"The first fairly traded coffee was exported into the Netherlands in 1973 from small Guatemalan co-operatives. Third World goods were first imported into the UK at “fair” prices in 1974. The quality of the products was poor at first, then it became variable, and now most of it is good, and some of it is of gourmet standard. [This is replying to the factual inaccuracy of the ASI claim that fair trade is a 1990's thing]
The idea that Fairtrade benefits a few farmers at the expense of others misunderstands the nature of the arrangement. Fairtrade offers not a fixed price, but a minimum one as a safety net. When prices are above that, as now with coffee, all farmers benefit. When it falls, the safety net ensures that the most vulnerable people in the supply chain can cover their costs in time of crisis. There is no meaningful sense in which others lose.
It is not true that most of the farmers who are helped are in relatively wealthy places such as Mexico rather than in poor places such as Ethiopia. In 2007, from a global total of 63 Fairtrade producers [I think a few noughts are missing in the light of the following figures, I suspect 2 or 3 noughts], just 50 were in Mexico, compared with 242 in Africa. Nor does the system favour middle-income landowners over poor landless labourers. Fairtrade works with smallholders on coffee, cocoa, sugar, nuts, and cotton, but it concentrates on strengthening hired workers’ rights in larger commercial farms in tea, fresh fruit, and flowers, where markets are more diverse."

Sometimes the myth of perfect competition seems to intrude and feed the criticisms, prompting the response.

The idea that Fairtrade prices sustain uncompetitive practices (by discouraging farmers from giving up on poor products and growing something more profitable instead) is fine economic theory. In practice, poor farmers simply do not have the additional resources, knowledge, or markets to diversify instantly.

The real injustice of the ASI position is captured in Paul's remark towards the end of his article, as usual it amounts to the west asking the rest of the world to do what it does not do itself.

free trade is not on offer at present, only trade weighted towards the rich. Fairtrade is a useful corrective in that — and a growing one. Fairtrade projects now touch the lives of seven million poor people. They cannot be abandoned while the ideologues of free trade argue for a truly free system that never seems to arrive.

And of course, let's not forget the irony:

The idea that small vulnerable producers need to be sheltered in their early years from the harsh winds of full competition from big business is not a Fairtrade notion; it was first enunciated by that high priest of free trade, Adam Smith.

Touche.
Church Times - Paul Vallely: It is not perfect, but it helps millions: