Fair Trade Controversies and Theories

Fair Trade was supported by people who believed that there were inherent flaws in the capitalistic system and trading system around the world. In essence, this means that people in the geographic North have more resources and access to information, giving them a huge advantage over the people from the “South” of the globe when it comes to commerce. Therefore, the intention behind Fair Trade is to give cooperatives and independent producers (in the disadvantaged regions of the world) a better chance to participate in world trade.

Some economists believe that, in the long run, Fair Trade will make producers fail. While they agree that the current system is not perfect, some economists say that advocates of Fair Trade are replacing an inherent problem with another. They say that putting a price floor on products will encourage more players to enter the market and existing players to over-produce and bring the price of goods down. This will hurt everyone in the market, but it will hit non-certified fair trade farmers the most. This debate took on new popularity when an article against Fair Trade and Organic products was published in The Economist on December 7th, 2006, called “Buy Organic, Destroy the Rainforest”.

However, various organizations such as FLO International and Transfair USA say that, in their experience, the producers don’t increase production. This is because they still depend on the demand from buyers to purchase sustainable and ethical products, regardless of the price, so they know how to manage their production. In addition, the extra money these producers are making is being invested in improving their communities and giving their children a good level of education to break the poverty cycle surrounding them, not to over produce.

Another controversy surfaced when the Adam Smith Institute published, on February 25, 2008, a report called Un-fair Trade. This report was written by Marc Sidwell, and he argues that Fair Trade distorts local markets by fixing high prices for a small percentage of producers. According to him, this hurts the majority of artisans or farmers who are “excluded” from Fair Trade, or who are not certified. In addition, her argues that Fair Trade keeps the artisans or farmers doing the same work without diversifying or learning new skills, thus not solving their development problems and keeping them in poverty. Finally, he has the audacity to say that Fair Trade only helps “relatively prosperous countries” such as Mexico, while ignoring Africa.

The FairTrade Foundation responded to these attacks on the movement by saying that, in the experience of thousands of fair traders, none of these claims are true. Many fair trade products are not more expensive than conventionally traded products, and in fact non-fair traders are now improving their products and working conditions to be able to compete with Fair Trade. Moreover, Fair Trade encourages wholesalers and retailers who work directly with producers to educate them, help them diversify their products, and foster development projects to alleviate poverty in their communities. This creates a great platform from which artisans and farmers can rise above poverty and become self-sustainable. Finally, they expose that Fair Trade is a global movement that helps different people in all the corners of the world.