The Badger Herald: Opinion: “Fair” trade favors large corporations

Opinion

“Fair” trade favors large corporations

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Also by Wasim Salman:

China deserves to act in its best interests (April 16, 2008)
Putting race into perspective (April 3, 2008)
True democracies should not practice torture (March 12, 2008)
American faith not going anywhere (February 27, 2008)
Moral boundaries needed in research (February 13, 2008)

Tuesday, February 27, 2007 12:00 a.m.

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As consumers in America, we are bombarded every day with different logos from the Nike "Swoosh" to Microsoft's "Window." These signs are omnipresent, but there is one to which we are all exposed to whether we are a part of mainstream culture or counterculture. It is a sign recognizable to anyone in Madison who drinks coffee — "Fair Trade Certified." It is present everywhere, from the bags of coffee we buy at the grocery store to our favorite coffee shop touting its own coffee as "fairly traded," but the question must be asked: Is fair trade really fair?

The modern fair trade movement began in 1960s Europe as a response to fears of exploitation of the Third World by large corporations. It was recognized internationally in 1968 when UNCTAD (United Nations Conference on Trade and Development) adopted it as a means to establish a fair economic (non-exploitive) relation with producers in the Third World. This led to the rise of what were called "worldshops," shops in which only fair trade products were bought and sold. These stores began to wane when it was no longer considered fashionable to buy handcrafted goods from the Third World and therefore forced organizers to rethink about how best to expand fair trade. This led to the creation of labeling initiatives in 1988. Where, before, a consumer had to go to specialty shops to purchase fairly traded goods, now the consumer would have access to fairly traded products in the stores they already purchase from.

Given this illustrious history battling exploitation and traditional business models, it is remarkable as to how horribly fair trade practices are failing producers on a global scale. First of all, fair trade creates a large amount of market inefficiency because fair trade is essentially a system of agricultural subsidies and therefore attempts to set a price floor well above the price of the free market encouraging new producers to enter the market and already existing producers to produce more. This leads to excess in supply, which then drastically reduces the price in the non-fair trade market and costs non-fair trade farmers profits.

This begs the question: "Why don't all farmers become fair trade certified?" The answer is simple: Because they cannot. To gain fair trade certification, a person can only be part of a co-op of small producers, leaving large coffee plantations, family plantations and lone farmers un-certifiable. Also, to become fair trade certified, one must pay roughly $2,600 for initial certification and about $650 to maintain certification each year. So not only will a producer have to find many other like-minded producers to form a co-op, but will then also be charged around $2,600 initially and roughly $650 each year merely to remain certified, while importer certification remains deceptive.

Where producer certification is limited and expensive, importer certification is broad and inexpensive. Corporations like Starbucks and Proctor and Gamble have been labeled as fair trade certified importers even though they only import a small portion of coffee from the fair trade market — where the amount these corporations import and the prices they pay are not public information. This loose interpretation of "fair trade certified importer" means there is no distinction between smaller importers who bring in 100 percent fair trade goods and those who bring in much, much less.

The modern state of fair trade is shameful. What began as an honest attempt to fight Third World exploitation has become an exploitive and inefficient system where, again, major corporations and first world governments rule completely. Fair trade creates extreme inefficiency and hurts anyone who is outside the fair trade market by making it ridiculously difficult and expensive to get in. To improve, this system needs to support all Third World producers, stricter guidelines for the certification of importers and drastically reduced fees if it is to really become fair again.

Wasim Salman (salman@wisc.edu) is a senior majoring in international relations.

4 Comments | Leave a comment

Anonymous | February 27, 2007 1:26 AM | Reply
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Sadly, morals are economically inefficient. Where does that leave us? Should we ditch morals or capitalism?

Anonymous | February 27, 2007 3:16 AM | Reply
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there is no international relations major on campus, it’s called interational studies.

Anonymous | February 27, 2007 4:47 PM | Reply
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Wasim, you rule. Thank you.

1:26, this is not about ‘ditching morals.’ It is about ditching an immoral system that is designed to look moral so we can all mentally jack off and forget about the actual concerns of poor people. We need to use capitalism to pressure morality. Do it. Stop buying fair trade coffee. It won’t be that hard.

3:16, who cares? That’s not what’s being talked about. Ad hominem-tastic.

Anonymous | February 28, 2007 12:50 AM | Reply
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Rock and roll. One dirty secret of fair trade you’ll rarely hear is how much the price differential between fair trade and free trade actually makes it to the farmer. I’ve heard less than 10%, the rest goes to retailers and the Fair Trade organizations that fly around the world making sure each and every farmer is picking their coffee correctly. If coffee growing is really so profitable, why can’t these groups save money on certifying and just buy and sell coffee at a decent price?