Should liberals back Fair Trade: an LDV debate (Part 2)

We’re midway through Fairtrade Fortnight (23rd February – 8th March), and so Lib Dem Voice is running two articles asking the question, ‘Should liberals back Fair Trade?’, putting two opposing viewpoints to our readers. Yesterday, Lib Dem MP John Pugh made the case for fair trade. Today Lib Dem member Julian Harris takes a critical look.

As liberals, we are internationalist in our outlook. I didn’t join the party to moan about a neighbour’s roof extension, and I doubt you did either. If you’ll excuse the clichéd sanctimony—we want to make the world a better place.

Hence many among us instinctively support Fairtrade products, and have been gleefully purchasing them during the current Fairtrade Fortnight. It seems to make perfect sense: we believe that trade is good, and this is even better, giving a helping hand to the world’s poorest people.

This is a noble sentiment, but how about the facts—is Fairtrade really helping the most impoverished and vulnerable?

According to a 2008 report, just one country—Mexico—produces a quarter of all Fairtrade coffee, and has the largest number of Fairtrade producer organisations in the world (over fifty). Mexico’s GDP per capita is around $15,000. Compare this with many African countries where it is under $1,000, such as Ethiopia ($871) and Burundi ($371). Burundi has no Fairtrade-certified producers; Ethiopia has just four, in spite of being home to over 60 million people working in agriculture.

But isn’t Fairtrade at least in theory a good idea that could be expanded beyond middle-income countries, and into the poorest regions?

Economist Tim Harford calculated that only 10 per cent of the Fairtrade premium makes its way to producers, most of it eaten up by retailers. Further, according to the international Fairtrade organisation itself, only one fifth of crops produced on Fairtrade-certified farms actually get sold at Fairtrade rates. And even when this fraction of a fraction is passed on, it benefits only land-owning producers, and not the underprivileged manual labourers who work on farms.

The Fairtrade idea is largely based on price fixing, with a minimum price guaranteed for the producer signed up to the scheme. When farmers can only shift one fifth of their crops into this scheme, it makes sense for them to keep the best produce to sell on the free market, where there are incentives for better quality products. The shoddy produce will end up in the Fairtrade section, which partly explains the brand’s reputation for mediocre goods.

On a grander scale this is why Fairtrade attracts low quality or inefficiently made produce—it guarantees prices irrespective of these factors. An agricultural economist in Costa Rica said in 2007: “Fair Trade directs itself to organisations … and regions which are not competitive”.

Fairtrade is therefore propping up prices for inefficient, labour-intensive cooperatives, providing a disincentive to technological development—or indeed any development, such as changing one’s product or changing one’s entire activity. There is no reason why the poor should be kept working the land yet this seems to be the scheme’s intention. In their own words, Fairtrade aims at “allowing more family members to stay in coffee production”. Widespread agrarian existence is not quaint or charming, it is a poverty trap, and one that people should be allowed to escape from.

One very tangible means of escape could be the processing of crops (such as coffee), but Fairtrade is designed only to pay a fixed price for unprocessed crops. Roasting of coffee beans, for example, occurs in wealthier areas—while the poor stay ‘in their place’, simply working the fields.

Yet it is possible for this part of the chain to develop closer to where the crops grow. A company called Café Britt roasts its coffee in Costa Rica, utilising local expertise to produce high quality coffee. Meanwhile, groups such as Technoserve aid technological development and encourage entrepreneurship among east African farmers.

These groups are just two of many alternatives to the proposed Fairtrade solution, offering alternative ways of assisting development, or sourcing produce by fairer means. In 2007 the Parliamentary International Development Committee noted the importance of competition and the “many other credible certification schemes with social and environmental objectives” [aside from Fairtrade]. Consumers, they said, should be allowed “to make informed choices”. They concluded: “It is important that fair trade organisations do not assume they have a monopoly on this”.

However, we are now witnessing a political entrenchment of Fairtrade that is very much monopolistic and unquestioned. ‘Fairtrade councils’ and even national governments pledge to promote this one brand, adopting targets for how much of its products people must purchase. And via its education programme for children, the state imbeds uncritical support for Fairtrade. For example, a Key Stage 2 assembly pack instructs: “Explain that more and more people are keen to support Fairtrade”. Explain indeed.

Harriet Lamb of Fairtrade Foundation has referred to Fairtrade as a “new tactic” to make a political statement. Fairtrade, she says, “helps give our governments a mandate to take the big, bold steps needed to change world trade rules”.

The origins of the Fairtrade brand were largely born from this anti-free trade section of the political spectrum, which is a shame, given that China’s part-liberalisation of recent decades has allowed 400 million people to lift themselves out of poverty. David Smith, economics editor of the Sunday Times, described China and India’s trade liberalisation as “the most effective anti-poverty programme the world has ever seen”.

Fairtrade, on the other hand, is at best a gimmick, and at worst an obstruction to the fight against poverty. Discerning liberals should challenge reactionary consensus and object to the political enforcement of this brand.

* Julian Harris is a Liberal Democrat activist with the Camden local party in London.

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  • Mark Littlewood 3rd Mar '09 - 7:27pm

    John Pugh’s rather incoherent ramble had already thoroughly persuaded me of the pitfalls of so-called Fairtrade.

    But it’s revealing to see the actual numbers showing that Fairtrade doesn’t get aid to where it’s needed most.

    Middle class guilt – however well-intentioned – has rarely been a useful motor in relieving poverty and I fear that’s really what Fairtrade is based on.

  • Yes, let’s all listen to Mark Littlewood and his entryist pals.

  • Mark Littlewood 3rd Mar '09 - 8:55pm

    “The Cat Says:
    3rd March 2009 at 8:48 pm

    Yes, let’s all listen to Mark Littlewood and his entryist pals.”

    Oh God, how tediously predictable.

    Let’s hope that’s not what passes for argument on here from other contributors.

  • I’ve been worried for a long time that the Fairtrade Foundation with its branding, and its specific political agenda, has come to monopolise the meaning of “fair trade”.

    And you’re absolutely right to point out that the Foundation’s influence has become entrenched even in public procurement policy, with no clear aims other than an uncritical wish on the part of these organisations to feel, and look, pious.

    Great article.

  • David Morton 4th Mar '09 - 7:40am

    This is an absolute shocker of an article. Very well written but a graceless confederation of straw people, conjecture, only partially referenced assertion and non sequetars. I’ve found the site “down” for most of the night and am off now but I will post a much more detailed rebuttal in the next 48 hours. However before i make a couple of general points lets just make an aside about Philosophy.

    Julian Harris and Mark Littlewood. I don’t want to be in the same party as you. About 15 years after we get STV we can have a entirely amicable divorce and you can go off and found your British version of the FDP. I will wish you no ill and buy you a card.

    However in the mean time you are in coalition with tens of thoasands of people whoes view of liberty isn’t entirely negative and that draw on wider notions of justice, fairness and a critique of globalisation. If you think you are taking over with this agenda anytime in the next few decades you are going to have to do better than this.

    Back to the article. Fair Trade has three key elements.

    1. A guarenteed price. You called it fixed. I’ll call it fairer.

    2. Long Term contracts guarenteeing an income and incentiving investment.

    3. A Social Premium. This is invested in community projects and communial facilities.

    However the entire artcile never gets past point one. If you want the Jury to convict you’ll have to at least acknowledge all three lines of defence.

  • “… with baited breath”

    You should probably see a doctor about that …

  • David Allen 4th Mar '09 - 12:32pm

    Let me make a start on the rebuttal for you, David.

    “Economist Tim Harford calculated that only 10 per cent of the Fairtrade premium makes its way to producers”

    Yes, we know that the costs of retailing the product, and paying first world wages to do so, are always much higher than anything the producer gets. For a non-Fairtrade product the producer gets even less than 10% of the total, for a Fairtrade product the producer’s share rises to (say) 10% of the total. But the first world retailing costs are unavoidable, and irrelevant. What would Julian say if the Fairtrade premium were higher, so that the producer was paid something a bit closer to the UK minimum wage? He would say that this was economically even more unjustified, a gross distortion of the market, featherbedding, etc.

    So he’s got a nice little Catch 22 set up here. If Fairtrade offer a small premium, it’s too small to achieve anything. If Fairtrade were to offer a big premium, it would be an insult to free market theory. Either way, Fairtrade is rubbish.

    “Mexico produces a quarter of all Fairtrade coffee” “Burundi has no Fairtrade-certified producers”.

    Just how devastating an indictment is it that you can find, if you look for them, one or two poor countries that have no Fairtrade organisation, and one or two less poor that do?

    “(The Fairtrade premium) benefits only land-owning producers, and not the underprivileged manual labourers”.

    Well, the Fairtrade buyer, inevitably, buys from the farmer who sells his crop. What the farmer does with his receipts is a secondary question. He can pass on a share of the premium to his labourers. I don’t know if Fairtrade tries to ensure that he does so, or not. I’m sure that if they do, Julian will criticise Fairtrade for antimarket pseudomarxist practices. And if they don’t, Julian will criticise Fairtrade as being ineffectual. It’s Catch 22 time again.

    Of course there is a case for globalisation, there are legitimate concerns about whether Fairtrade always operates well, there are bound to be imperfections in practice. Julian’s article avoids the serious analysis that could be offered. It is just a dishonest hatchet job.

    John Pugh talked about slavery. The people in sweat shops who make clothes for our discounters are not far short of slaves. The economically viable wage is a starvation wage. If “Liberal Democrats” oppose all interference with the free market in such circumstances, then they are supporting the exploitation of the poor. They have no business joining a party whose explicit goals are the very opposite.

  • And of course what Julian Harris carefully _doesn’t_ mention is that Burundi is a tiny country with a population of only 3.5 million, and that 90% of its farming industry is at subsistence level.

  • Perennially Bored 4th Mar '09 - 1:06pm

    My big problem with fair trade (among others outlined well in this article) is that fair trade certification status is actually very difficult to get, taking a good couple of years, a lot of forms, assessments, etc. Which is probably why the market is dominated by Mexican agri-business, rather than smallholders from Burundi, becuase most Burundian smallholders don’t have the high levels of literacy, access to internet etc, or time needed to get fairtrade certification.

    Which is why I don’t buy fair trade and instead buy coffee coming from economies I want to support.

  • David Allen 4th Mar '09 - 11:59pm

    Rob Knight,

    Thanks for arguing straight. Pity almost nobody else on your side of the party does likewise.

    But I don’t agree that it would help to create the Virgin Megabrand FairTradeWash (and/or greenwash) type of competitor to Fairtrade. That would get us back to the position we’re in with health foods, where almost any sort of gloopy industrial waste can be passed off as a health food, and the consumer can’t tell what is really healthy and what isn’t. Which suits the multinationals of course. Different suppliers can compete
    with each other to sell Fairtrade products. Isn’t that competition enough?

    If I can sum up McDuff’s excellent post, “The best is the enemy of the good”. Fairtrade is far from perfect, but it does create political momentum for global change. Wrecking it, whatever the motives, would be a step backwards. And if you think that making rhetorical gestures and mobilising popular opinion never gets you anywhere, look at Obama.

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