Fair Trade: The Basics

Many people have seen the Fair Trade logo on coffee or tea in the grocery store and many people look at it and think what a great thing it is without thinking much further. I decided to look into it and report back on what I found.

Again, I started my search at Wikipedia and found this definition of Fair Trade (which is, according to the article, the most widely accepted definition):

Fair trade is a trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers - especially in the South. Fair trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.

The basic idea is that producers of such items as coffee and tea (though definitely not limited to these) are paid prices which are above market value so that they can make profit and promote economic growth (instead of richer nations exploiting them). There are more aspects to Fair Trade and you can read about them in the wikipedia article I linked above. There is also more information at the International Fair Trade Association (also known as IFAT).

The most interesting thing I discovered was the criticism of Fair Trade. Wikipedia devoted a whole article to this. There are several arguments about Fair Trade the way it is (some argue it should go further), but I will focus on one. There is an argument that by paying higher prices for these goods, you encourage the producers to produce more goods than demand would suggest. This creates a large supply without changing the demand and thus lowers the price of the goods for those producers who are not being paid the Fair Trade price. Though this argument has some merit, I hesitate to buy into it fully. It sounds just like my university economics class where they explained to me that minimum wage was a bad thing (because it caused unemployment). If you read the article there are two arguments against this particular criticism.

I buy tea (I'm not a coffee drinker) that is Fair Trade and I have not done Fair Trade justice in this short post. If you are teetering on the edge I suggest to read more and decide for yourself and not just base your decisions on what I say.