8.1 About business @
wuy fair trade
IS A BAD DEAL
INTHE NAME of far trad,
1d to pay more for everythi
bars
from cups of coflee and chocola
to cosmetics and eut lowers, Fora
product 10 be certified as fair trade, the
importer sellin st py a
minimum prige to proiucers.\ voluntary
price support sch ly
‘compatible with free trade there is no
conic between slrvisen and the market
‘economy. But while filling the shopping
trolley with fair trade goods may rel
the guilt of middleclass consumers,
its wider effects may not really be 50
positive. A combination of economic
iltericy and misguided good intentions
Inas created a monster that sresiens the
prosperity of the poorest producers.
Povey relief would be much beter
sevved by fi
na. Fait rade policies, whether
soxemnient-enforeed of applied theo
trade and nota fir wade
cthical consumer schemes, distort the
mirket, Producers in some counties
may choese to prluce certain eva
only because they ea
Kicks ay
producers who have no choive but to
say in the market. Take the example of
Mexico, which produces a quarter of fait
ide from the poorest
trade coffee, Because ofthe incentive
of fair trade, Mexican producers have
decided t keep producing colfee even
expanding production. Without this
ive, Mexico could he producing
‘other erops more
distorting effect i unfair on poorer
‘countries such as Ethiopia where
producing other erops is not an option
Asa result of fir trade policies they are
Faced with gr
Fair trade also punishes producers
who are less good at quality ~ generally
the poorest Seiting @ minimum price
for praduets encourages retailers 10
buy only from more
that can invest in higher quality. Poorer
producers may be able to supply lower
{quality products more cheaply. but dere
iso incentive to buy these, because
the rears cannot allt fie trade
By simply pronouncing it “unfit
pay below a certain price, fair trade
supporters seem to believe they can
‘snore market realities, wave a asic
wand and make everything better. But
fair trade i ike all at
prices: the pores are cut out of the
market.
ciently, This
xer competition,
Tlvent producers
3s to conteol
Pree marke
have lifted hundreds of millions of
people out of poverty over the lst
‘quarter century. They work because they
1d more open trade
encourage producers to purse higher
living standards by becoming more
productive through mechanization and
‘modernization, By contrast, fair trade
supports romantic view of peasant
Farmers (oiling i the fields day in day
‘out, rater than helping producers buy
‘machinery and move into processing
products, The
Fairtrade Foundation, which peomotes
the selime in the UK, adits it has no
policy on mechanization, It has even
heen encourauing producers to become
less efficient by growing other erops
inbetween coffee plants. Ths limits
producers ability 19 mechnize, locking
{them into poverty
In stark comtast, Starbucks has be
running community projeets to help
producers construct coffe mills and
limb up the economic ladder. Shops
Tike Starbucks, Caffé Nero and Coffee
Republic have encouraged consumers 10
‘a premium product
sre dropping the cheap
this logic,
fare now commanding higher prices. This
isnot because of fair tad hat
they are responding o the d
the market
Despite attacks from
globalization activist, the trath is
that Starbucks
tnyone else in exp
raising incomes for coffee producers
in developing countries. Iti the eotee
chains that are the real superheroes of the
coffe market, not fair trade camps