The Great Fair Trade Debate

As consumers increasingly choose ethically sourced brands from developing countries one wonders whether that choice has any impact on producers in those countries.

The popularity of Fair Trade products has seen some big brand names vying to be stamped with the instantly recognisable yin yang style blue and green mark. However the increasing demand for Fair Trade goods has created polarisation equalled only by the climate change debate. So does the consumer’s choice benefit the developing countries that source our favourite food and beverages? One of the country’s top political magazines New Statesman decided to team up with Starbucks and host a Question Time style debate. Free tickets were offered to New Statesman readers via its website.

Attendees were offered a complimentary cup, or four, of fair-trade coffee and a slice of decadent fair trade chocolate brownie, before posing tough questions to the handpicked panel. With hot coffee and dessert in the hands of attendees, BBC reporter Justin Rowlatt introduced the panel and began by asking the first question to the panel member with perhaps the most unpopular view of ethical consumerism.

Free Trade vs. Fair Trade

The question of whether or not Fair Trade actually works was put to Mark Littlewood, the Director General of the Institute of Economic Affairs, a free market think-thank that champions liberalisation of trade and removal of trade restrictions and regulations including Fair Trade. 

“The best that can be said  is that it brings about a fairly modest amount of good. Even on the most optimistic measures the impacts are microscopic for those we are supposedly helping.” 

He explained that for every extra 10p that is paid for a Fair Trade certified product only 0.01p goes direct to the farmer. Mr Littlewood went on to argue that ethical consumerism allowed affluent middle-class westerners to salvage their conscience in the same way that people buy charity singles assuming the money raised go to worthy causes, especially in light of recent scandal surrounding the Band Aid single. Mr Littlewood and his institute are adversaries not only to fair trade but any restrictions on trade that looks to provide an advantage for some over others, but supporter initiatives designed to increase free trade such as The Doha Round.

So the answer to helping developing countries is free trade and serious liberalisation. Mr Littlewood explained how free trade allowed Hong Kong, after the Second World War, to rise from extreme poverty to become one of the world’s richest cities. The gains from free trade for developing countries are significantly higher than fair trade. Using chocolate as an example it was interesting to learn that although 90% of cocoa is produced by developing countries they only produce 4% of chocolate. This is due to their being no EU Tariff on cocoa but one on processed chocolate which is twice the average profit at 18%. There is also the issue of cotton for which Mr Littlewood has called for an end to the subsidisation of western cotton farmers thus allowing cotton from these developing countries to be traded on an equal footing.

Despite hearing many arguments to the contrary, including coffee growers boasting of the benefits to their business and communities, Mr Littlewood remained sceptical and asked if fair trade was helping the poor or the very poor, and that maybe the very poor are being disadvantaged. If the need to salvage one’s conscience is great it would be better to buy a product irrespective of its Fair Trade status and make up the difference donating to a charity.

Fair trade is not Mark Littlewood's cup of tea

Creating Change within Business

The benefits of consumers choosing Fair Trade goods have a direct impact on one and half million farmers and their families of developing countries. This is not nothing, Harriet Lamb, Executive Director for the Fair Trade Foundation proudly exclaimed. For Ms Lamb, choosing Fair Trade goods is not just ticking the box to appease ones conscience but a means to allow ordinary people bogged down with the pressures of their own lives to play a part in helping a developing country trade fairly out of poverty. So many people get involved on various levels from making responsible purchases to visiting developing countries and involving themselves in various development projects.

Fair trade, argues Ms Lamb, also creates an atmosphere for businesses to act responsibly, and that the public can in fact create such a change within business and has found it inspiring when supermarkets change their practices towards stocking more ethically sourced goods. Ms Lamb point to with great pride the recent announcement by premium retail outlet Marks and Spencer that ever single product they sell will have an aspect of sustainability towards fair trade. This bold move on the part of Marks and Spencer supports Price Waterhouse Coopers conclusion that fair trade is very much like the internet in that everybody will have to do it in the end but only the ones who adopt it earlier will gain the most.

Harriet Lamb fighting for a fair deal

“Doing nothing is no longer an option” says Ms Lamb re-emphasising the extent of the social aspects of fair trade. The Doha Round is not just about making trade freer but also making it fairer, in contrast to Mr Littlewood's argument. She continued to stress the need to intervene in trade by developing countries which should be allowed to protect their economies, build their industries, and subsidise farmers to tackle poverty and also intervene in the same way we do nationally in matters such as minimum wage, health & safety etc.

The Fair Trade movement is growing rapidly, Ms Lamb contends. This is evident in securing bigger companies who now produce and distribute certified Fair Trade products such as Cadbury’s and Nestle. Yet however there is still a long road ahead as the foundation holds everyone, regardless of the size of their operation to a strict standard of production and welfare, yet this will still open the door to more farmers to benefit from fair trade.The debate continues here.