Fair Trade labels proliferate the last decade. Although Fair Trade grew very fast since 2000, its market share are still small in major developed countries (excluding Switzerland, the average could be between 5 and 15%). Fair Trade focuses on some traditional developing countries tropical exports (notably coffee and cocoa).
Many scholars and stakeholders try to understand if Fair Trade labels can have positive impacts on development, the fight against poverty and succeed to render the international trading system fairer.
My assessment on Fair Trade is not clear-cut. In fact, as often happen, global issues carry both opportunities and problems in terms of sustainable development.
On the positive side, we can underline that Fair Trade increase earnings of some farmers in developing world. It seems to be a solution for low prices that usually these farmers should accept and that trap them into the poverty. Furthermore, these additional resources should be invested in basic services for the community (health, education, etc.). This element is often included in Fair Trade label Term of Reference.
All these Fair Trade effects seem to support sustainable development goals. However, Fair Trade labels bring also a number of issues that reduce their impact on sustainable development. We can summarize them in the following points:
Many scholars and stakeholders try to understand if Fair Trade labels can have positive impacts on development, the fight against poverty and succeed to render the international trading system fairer.
My assessment on Fair Trade is not clear-cut. In fact, as often happen, global issues carry both opportunities and problems in terms of sustainable development.
On the positive side, we can underline that Fair Trade increase earnings of some farmers in developing world. It seems to be a solution for low prices that usually these farmers should accept and that trap them into the poverty. Furthermore, these additional resources should be invested in basic services for the community (health, education, etc.). This element is often included in Fair Trade label Term of Reference.
All these Fair Trade effects seem to support sustainable development goals. However, Fair Trade labels bring also a number of issues that reduce their impact on sustainable development. We can summarize them in the following points:
- Fair Trade concern a minority of developing countries farmers. These labels contribute only to improve the living conditions of a minority of farmers. They create some “islands of wealth in an ocean of misery”. This is true even if Fair Trade start to be adopted also by some Trans-National-Companies. Its impact on “conventional” trade has not yet assessed. My guess is that it is very small. Big companies use Fair Trade only for marketing reasons and to profit of the growth of this market. What is more, in the last couple of years Fair Trade seems to have reached a limit in its market share in many developed countries. These labels will not succeed to change the international trading system.
- Fair Trade products are the traditional developing countries tropical products. This does not solve the overproduction of these kinds of products that is the main cause of low prices. Fair Trade labels choose not to merchandize products that are concurrent with developed countries productions for example, in Fair Trade chocolate only cocoa and sugar are form developing countries, milk is produced in developed countries). This is very damageable for both Fair Trade farmers (that continue to produce the same products with low prices and they are totally dependent of Fair Trade labels) and other developing countries farmers (that are in competition with this labels).
- Fair Trade products are usually transformed in developed countries. Only raw materials are bought in developing countries. These labels did not improve the transformation capabilities of these communities. They do not profit of this opportunity to increase the value added produced by these communities and transfer the needed know-how and technology that after can eventually transferred to the whole country. On this issue too, labels preferred not to enter in competition against developed countries productions and industries.
- Labels constrain Fair Trade farmers to invest additional earning in basic services. This poses an ethical problem. In fact, if Fair Trade is neither a development project nor charity these farmers should take alone their decision on how to spend this money. Furthermore, even if spend money in basic services can have an important living conditions impact in the short term, productive investment can bring a more sustainable communities’ welfare. These kinds of productive investments can also help to improve living conditions beyond the Fair Trade islands to the whole region/country. These investments can also decrease their dependence on Fair Trade labels.
In conclusion, Fair Trade labels are only a second best, or a partial, solution. In fact, even if they can bring come benefits their economic impact on a developing country economy is very tiny. In fact, Fair Trade does not respect the lesson learnt form history that in a previous post we underlined as crucial to increase the positive impacts of trade on sustainable development: diversification, climbing the value chain, technology and products innovations and developing the industrial and advanced services sector.
However, buying Fair Trade products could be better that buying conventional ones. For this reason, in absence of a real alternative I buy Fair Trade products.
I will be very interested to read your comments and discuss more deeply with you on this issue.
economics fair trade trade development agriculture
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