Fair Trade: Using Poverty To Sell... More

I've written before here at CK about the highly questionable value of "Fair Trade" products. Apparently the subject hasn't just been on my mind: The Economist tackled the subject recently too.

And their conclusions are damning. Some choice quotes:

"Sales of produce carrying a fair-trade label have soared in recent years, from an estimated $1.1 billion in 2004 to $6.5 billion seven years later. Yet this is largely a marketing success..."

"...there is little evidence that fair trade has lifted many producers out of poverty, not least because most of the organisations that are certified tend to come from richer, more diversified developing countries, such as Mexico and South Africa, rather than the poorer ones that are mostly dependent on exporting one crop."

"And why the focus on agricultural produce, when a booming fair trade manufacturing sector potentially would help far more countries?"

"...so far, the fair-trade labelling movement has been more about easing consciences in rich countries than making serious inroads in to poverty in the developing world."

"...for each dollar paid by an American consumer for a fair-trade product, only three cents more are transferred to the country it came from than for the unlabeled alternative."

Three cents. Think about that for a moment. Three cents is all that finds its way to a poorer country, despite you, the consumer, paying price premiums as much as 100% for Fair Trade labeled products. So wait: Who do you think really captures the profits here?

There's one effect, of course, that Fair Trade products are guaranteed to have: they make us feel better about ourselves. And, needless to say, the companies selling to us want us to have these warm and fuzzy feelings because of an important knock-on effect: they encourage us to buy.

This is why fair trade revenues have gone up nearly sixfold in seven years. This is what they call "a marketing success." This, I would argue, is the central reason consumer products companies embraced this idea in the first place.

Rather interesting, isn't it? So who is it, then, who really benefits from Fair Trade products? Hint: it's not those who should.

Readers, what do you think?

Related Posts:
Who Gains From Fair Trade Certified Products?
More Questions On Fair Trade

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Anonymous said...

I've always been skeptical of the fair trade concept. There is no way for an independent consumer to verify that more money is in fact being transferred to the grower of these products.

Daniel said...

Yes, exactly. The whole point is the differential in "profit to the grower" is de minimus, yet the product carries a retail price that's far higher than the "normal" product. This nothing more than aspirational marketing.


chacha1 said...

So sad. :-(

I'll confess that I am purely a convenience shopper - I buy what I want when I want it, choosing organic and/or local when I can. That I rarely go after heavily-marketed designations like "fair trade" is not due to some inner virtue but to the fact that these products are typically not on my list. I won't buy something marked "fair trade" just because it says "fair trade," in other words.

Would much rather send the resulting accumulation of extra dollars to Heifer.org.

Anonymous said...

Not unlike the pink ribbon emblazoned items.

I've read that the pink stuff doesn't even have to give to breast cancer research. (There aren't prohibitions against making a pink casserole, nor is there any thing that can be done about buy a pink casserole to support breast cancer research.)

I wonder is the fair trade label can be slapped onto products willy-nilly too. (Meaning they don't even provide 3 cents...)