The Fair Trade Scandal: Marketing Poverty to Benefit the Rich

V., Claar Victor
http://www.europe-solidaire.org/spip.php?article43192

Publisher:  Europe Solidaire Sans Frontieres
Date Written:  05/03/2014
Year Published:  2014  
Resource Type:  Article
Cx Number:  CX22010

This new book by Ndongo Sylla is an insider's critique of the fair trade model as practiced by Fairtrade International (FLO, or Fairtrade Labelling Organizations). (The book has been translated from French, and I found the translation to be quite readable and engaging.) Based on his own experiences working for FLO, Sylla seeks to point out the flaws in the fair trade system. As with most research about fair trade, Sylla's focuses primarily on the fair trade coffee initiative. In the fair trade coffee system, cooperatives of small coffee growers pay thousands of dollars to FLO to join the network and for compliance fees. In exchange for ethical production, the growers receive a guaranteed minimum price for each pound of their coffee sold as "fair trade."

Abstract: 
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Excerpt:

Instead they are rather arbitrarily determined, as evidenced by FLO's recent doubling of the social premium paid per pound from 10 to 20 cents. The social premium is intended to be used for projects in villages and is paid regardless of whether the market price of coffee is above or below the minimum price per pound guaranteed for fair trade coffee. At the same time, fair trade prices and premiums cannot be so high that they significantly reduce the willingness of northern consumers to purchase those coffees at retail. Thus the viability of the fair trade system demands that it appear generous to the poor, but it cannot afford to be too generous.

Beyond this, Sylla brings the dirtiest secrets of the fair trade movement into the light. For example, and as I also point out in Fair Trade?, there is no guarantee made to certified growers that they will be able to sell 100 percent of their fair trade harvests to their partner buyer(s) on the other side of the market. Fair trade importers are under no such obligation. Consequently, growers in the fair trade network dump vast quantities of their coffees each year into the conventional coffee market. Under such circumstances a cooperative’s significant investment in joining the fair trade network must be viewed as a speculative investment opportunity and, like any other, it may or may not pay off over the long term.
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