Fairtrade

I have always felt people getting the Fairtrade coffee announce their order in an especially loud voice.

And I’ve wondered if Fairtrade chocolate is conspicuous consumption for people whose politics don’t let them buy a Mercedes. My scepticism is layered with crunchy apathy and covered in a rich creamy coating of cycnicism.

I was pretty sceptical of Fairtrade. I read that book ‘Do travel writers go to hell?’ about the drug-dealing Lonely Planet writer who traded good reviews for free drinks, sex and accommodation. I figured Fairtrade would be much the same. I had my doubts about the control. What could a few well-intentioned skinny-jean wearers in central office do to manage a handful of inspectors dealing with legions of Central American hill farmers?

Plus, in a global economy of $59 trillion, fairtrade accounted for $4 billion of goods bought and sold in 2008. So if the global economy is a 100 metre race, Fairtrade is about 7 millimetres of that. It’s hard to see how this is changing the world.

But. In March this year, Cadbury in Britain announced their goal to have Cadbury Dairy Milk fairtrade-certified by late 2009. This is not fancy, niche-market chocolate. This is what zillions of snaggle-toothed Britons are scoffing as they watch Neighbours on ITV and breathe that grey council-flat air you see on The Bill. What’s going on?

Cadbury’s goal is to improve farmers communities’ living conditions. They’re not on their own there, because Fairtrade has expanded ferociously. The international Fairtrade logo was only developed in 2002, and that before 1988, options for buying ‘fair trade’ were limited to a handful of Oxfam shops. Now they’re taking over the supermarkets, one aisle at a time.

So what does the logo do? The producers must meet certain standards, and in return they get a guaranteed minimum price (as in the chart below), plus a ‘Fairtrade premium’ to spend on development projects that will benefit the community.

The producers are certified to make sure they adhere to labour standards (‘decent’ wages, no child or bonded labour; the right to organise), and protect the environment by using sustainable farming techniques.

What makes it credible to me is that Fairtrade are themselves the first social organisation to certified by the International Organisation for Standardisation, with ISO 65. They charge farmers for the certifications. There is an application fee of 500 euros. Then an annual certification fee of 400-3100 euros, depending on size and products. This makes it different to the Lonely Planet. There’s a contract between certifier and certified that burdens each side to the other.

Could Fairtrade be a force for evil?

Other than it substituting for better ways of helping the third world (e.g. disaster relief aid), there is one main complaint that economists generally bring up. They say that a guaranteed minimum price prevents signals that would tell producers to produce less when coffee prices fall.

This sounds plausible, but I’m not convinced. Fairtrade-certified farmers already sell only part of their crop to Fairtrade. When the general market price drops, their fairtrade sales will drop, and their average price will fall.

So, on balance, am I going to stop mumbling my coffee order to my barista, and join the wanker ranks? The research shows it has positive benefits. So, YES!

… (sometimes).

;)

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

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