Fair trade evokes pictures of hard-working farmers harvesting their crop and consumers smiling over their expensive, organic, responsibly sourced coffee.
Fair trade practices refer to the certification from the Fairtrade Foundation, which seeks to improve the livelihoods of commodity-producing farmers in developing countries. In order to reach this goal, the organization works to guarantee better prices, working conditions and access to global markets for their producers.
Eventually, as fair trade grew from charity organizations to what we recognize as fair trade today, different organizations branded themselves and their conglomerates of producers as fair trade by establishing minimum prices and standards.
Labeling fair trade products helped increase sales across multiple industries, as the meaning of the brand became better known to consumers.
More people each year buy into the fair trade business model, and they feel good about consciously choosing fair trade products.
This is not a mistake on the part of the advertising teams for fair trade products. A simple search, “why fair trade?” yields pages of results produced by fair trade organizations.
The most prevalent reasons to buy fair trade are that these products promote and ensure better working conditions, living wages and higher quality of products; they sustain local communities and connect the consumer to the communities that produce the fair trade products.
These are remarkable claims, supported by growing sales of fair trade products each year. If these were all true, I wouldn’t be writing this article, and I might be drinking some fair trade coffee.
However, there are some striking economic and social arguments that raise doubts about the promises of fair trade organizations.
Fair trade promises that producers in their system will receive higher prices. This claim is easily substantiated — the main component of the business model is a price floor that producers are guaranteed. For example, a cocoa farmer may be promised $1.00 for every pound of cocoa he or she produces. The price floor is generally higher than the market price, and, because it is set, it is automatically more stable than the global market price.
This may seem like a benefit, but studies such as a 2014 study conducted by the Center for National Interest found fair trade producers to make a greater profit, yet they did not see those benefits at the lowest level of unskilled workers. Therefore, the benefit is trapped at the top and does not reach every level of production. The promise of a living wage, or at least higher wage, is not true for all involved in the fair trade system.
In conjunction with wages, the working conditions among fair trade conglomerates have not been proven to be better than free trade producers. A study focused on fair trade producers in Uganda and Ethiopia, conducted in 2014 by the Department for International Development, revealed that issues of sexual harassment, child labor and exploited labor are still present in fair trade organizations.
Given these failures of the fair trade model, why do people still buy in?
I am compelled to believe people genuinely believe they are doing something good for poorer communities by buying fair trade. They may, to some degree, be outraged or saddened by working conditions in factories that engage in free trade.
This is the danger of fair trade. While it does not evoke the saddening images of a sweatshop, it still may not be a good business model. It does not deliver what it promises, and it perpetuates a system that still disadvantages those at the bottom.
By increasing support for fair trade products — buying the coffee and chocolate and handmade crafts — the consumer props up a system that has flaws just as a free trade system does.
I do not have any grand economic solution to the problems that fair trade tries to address. Workers deserve a living wage, economic opportunity, social mobility, access to education and good working conditions.
Fair trade is not the system by which we achieve those ends. Instead, becoming more conscious consumers and making an educated choice between free trade and fair trade products is a better standard by which to judge ourselves than a simple label on a product.