Letter to the Editor: Misunderstanding Fair Trade

To the Editor: The Phillipian recently published an article branding Fair Trade as a “disastrous and counter productive idea.” The author, Adam Giansiracusa, does raise some astute points in his article about the corruption that hinders African nations, yet seems to misunderstand the point of Fair Trade. First of all, what is it? Fair Trade is a way of conducting business that is beneficial to the farmers who grow the product, their community, and the environment. Core components of the Fair Trade are good labor conditions, direct trade between producers and importers, a fair price, environmentally sustainable practices, support for the community, and democratic organization. Fair Trade is not an attempt to fix all of Africa’s economic problems; rather, it is an attempt to correct market failures. In a healthy and efficient market, the firms earn enough profit to stay in the business and the consumers should buy up the entire quantity of the product. The problem for many Fair Trade products (for example: coffee, tea, chocolate, sugar, vanilla, rice) is that the farmers’ needs are not being met. Many farmers are not earning enough to survive. There are various methods to fix this problem, such as multi-cropping or subsidizing, but smaller farmers are generally unable to benefit from these measures. These are the farmers that Fair Trade targets. By charging a higher price, Fair Trade can pay these small, suffering farmers a living wage. Mr. Giansiracusa adds an interesting statistic in response to this. He said that only 10% of the markup for such goods ends up going to the farmers. What Mr. Giansiracusa fails to mention is that for all products, the retailers reap the bulk of the revenues. We would not have gigantic chain stores like Wal-Mart and Home Depot if these stores were not taking the large part of the revenue. Though the entire markup for Fair Trade does not go to the farmers, enough does that they earn enough to feed and house themselves and their family. For example, a small, independent farmer might typically be paid about 25 cents for a pound of coffee. With this measly earning, farmers cannot support their families and as a result they live in extreme poverty. Many farmers’ children thus have to quit school in order to work and survive. Fair Trade guarantees farmers at least $1.26 for a pound of coffee; this substantially higher wage allows farmers to better provide for their families and keeps the children in school. Fair Trade organizations also help improve the community by teaching farmers business techniques and new farming methods, as well as providing scholarship funds for their children. The second argument that Mr. Giansiracusa’s article brings up is that Fair Trade provides incentive for farmers to produce more when they should do the exact opposite. Part of this statement is somewhat correct. The market failure of these products is probably due to overproduction, and a significant cut in the quantity produced would cause an increase in prices. The problem is that, once again, this would spell ruin for the smaller farmers, and moreover, agriculture production is not easily changed. Certain regions are suited for making coffee and certain regions are suited for making bananas. Just because it makes sense economically to lower coffee production and increase banana production does not mean that coffee farmers will be able to plant banana trees instead of coffee trees; the plants themselves take a long time to mature and bear fruit. Agriculture is not instantly changeable and requires years to switch products, so changing production as the market dictates is unfeasible. Farmers will have to take whatever price the market dictates in order to sell their entire crop yield. Currently, for some products, that price is not enough for small farmers to live off. The final point is plain wrong – that Fair Trade would result in production of a certain crop increasing to the point that it lowers prices for everyone else. Fair Trade will not greatly affect production for two reasons. The first is that the proportion of Fair Trade products to non-Fair Trade is small, too much to have any real effect on the industry. Secondly, the bulk of consumers look for the best products at the lowest price, which is not Fair Trade. Fair Trade sells the same product at a higher price for humanitarian reasons, so the bulk of consumers, sadly, will not buy it. Fair Trade is in essence an expensive brand. It is similar to expensive clothing brands. The average consumer does not buy Armani suits. The people who buy Armani are those who can afford it or like the brand so much that they are willing to pay the premium. Fair Trade works in a similar manner. People who buy Fair Trade are those who can either afford it or care enough about the cause that they will be willing to pay the markup. The fact that Fair Trade is more expensive means that it will always be on the fringes of markets and not a major player in any industry. One key question in many people’s minds is: how effective is Fair Trade? The Center for Global Justice recently hosted the second annual Fair Trade Coffee House and sold Fair Trade chocolate for exam week. We believe that Fair Trade is important and effective because it improves the quality of farmers live and gives them and their families opportunities. Fair Trade products may be a little more expensive, but by purchasing Fair Trade products, you, the consumer, can make a conscious effort to help struggling farmers. Does Fair Trade chocolate taste sweeter? We’ll let you decide that for yourself, but Fair Trade is helping to improve the lives of farmers all over the world. Thanks, Victoria Wilmarth and Nikhil Sabharwal on behalf of the Center for Global Justice. The Phillipian welcomes all letters to the Editor. We try to print all letters, but because of space limitations, we recommend brevity and conciseness. We reserve the right to edit all submitted letters to conform with print restraints and proper syntax. We will not publish any anonymous letters. Please submit letters by the Monday of each week to The Phillipian mailbox in G.W. or to The Phillipian newsroom in the basement of Morse Hall, or send an e-mail to