Tuesday

“The right to undercut is the privilege of the poor – of poor individuals, poor countries, poor businesses. It should not be undermined.”

For those of us who have long been suspicious about ‘fair trade’, here is at least part of the argument for being so (slightly edited) :

…the Fair Trade doctrine is pernicious, for all its genuinely good intentions
….it is positively harmful to the world’s poorest.
FT producer acquires his label by showing he is paying a “fair” wage, is treating his workforce well and ensuring that the children get education and medicines. Obviously, this favours those who have already moved out of the most basic poverty.
The prospects for the very poor are thus made worse since they cannot compete on such terms. The right to undercut is the privilege of the poor – of poor individuals, poor countries, poor businesses. It should not be undermined.
Moreover, to obtain a Fair Trade label, a producer must buy a licence and submit to inspection – in countries where corruption is notorious. To impose a licensing cost, a tax and a powerful bureaucracy on any producer hardly seems a natural way to help the poor. It is also a barrier to those wanting to start up on their own.
Coffee production provides useful examples of cost. For coffee production co-operatives of under 100 workers, the Fair Trade people charge £1,500 for certification and annual renewal costs of well over £800. Since the average Kenyan income is under £200 a year, this is not negligible. The system also creates a significant travelling inspectorate.
Whole British cities have been persuaded to declare themselves Fair Trade zones. Apart from concentrating on these products in their schools and so on, they say they will “encourage” such practices. We should always be suspicious about councils which talk about “encouragement”. It usually means campaigns with, of course, the employment of officials to promote the message. Guess who pays.

This is from an article by the Daily Mail columnist Andrew Alexander last year. It brings home the point, in theory at least, that fair trade can hurt the poorest. They do not qualify for the fair trade label. They are thus excluded from being able to take the most direct way to get themselves out of their poverty.
I have another, less important objection to the phrase ‘fair trade’. It is the implication – not unintentional, I believe – that other trade is ‘unfair’ and therefore bad or even immoral. On the contrary, to buy produce from the poorest in the world is not immoral. What is immoral, is only to buy from the well off – to prefer products that boast of being ‘British made’ for example – and thus take away from the poorest in the world the chance to become better off.
The full article by Alexander is here.

  1. “Fair trade favours those who have already moved out of the most basic poverty”
  2. ‘This letter is granted to the applicant in being poor. Its acceptance therefore by anyone not really poor constitutes an abuse of charity.’
  3. Are the world’s rich countries turning Africa into the biggest welfare dependant in history?
  4. Why has the proportion of relatively poor increased?
  5. Mr Brown taxes the poor (another angle)
This entry was posted in Foreign aid. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>