Pros and Cons - Debbie Newman, Ben Woolgar 2014

Fairtrade, we should not support
Section D. Economics

Fairtrade is a movement that is undoubtedly noble in motive, namely to help farmers in the developing world receive a fair price for their goods. However, economists are deeply divided as to whether the specific prescriptions of fair trade are effective in alleviating poverty; or whether, conversely, they do more harm than good. This debate is rarely so prescriptive as to involve banning fair trade outright, but can take the form either of a policy (such as limiting its labelling) or individual choice (not buying its products). Fairtrade products are many and varied, including chocolate, coffee, wine and fruit, and also come from many different countries. So a more nuanced approach that pays attention to differences between Fairtrade products may be called for.

Pros

[1] There is considerable doubt about the economic merits of Fairtrade, and it may simply be ’too soon to tell’ whether or not it is beneficial. But given that, it is certainly not the most efficient form of charity we can give (and that is what Fairtrade is, given that it involves paying more for a product in order to help the poor). So we should donate our money elsewhere, and Fairtrade charities certainly should not benefit from the false moral high ground that their name gives them.

[2] Fairtrade requires farms to be run as co-operatives; it requires those who work on them to have some prior assets, which means that the very poorest are left out. This is particularly problematic, as they now have fewer potential employers in their area, and so their wages are driven down.

[3] Fairtrade is used by Western companies and supermarkets as a means of price discrimination; that is, they make its products more expensive, and also trade them as luxury goods, while keeping a non-Fairtrade range. This simply allows them to reduce consumer welfare, without in fact paying more to those who produce the goods.

[4] By demanding a minimum wage, Fairtrade creates a category of workers who are employable when paid a wage below the full-time minimum, but not at or above it; this is because it is not profitable to employ them at the full-time minimum wage. When the minimum wage is introduced, therefore, they lose their jobs. While the data on minimum wages in advanced economies are mixed, that is because these economies are fastgrowing so jobs may not actually be lost. That is not the case here.

Cons

[1] While there may be doubt about Fairtrade, the assumption that we should choose alternative forms of charity makes little sense. Most people do not think in this way; they have no time to consider the efficiency of charities, but might spend a few extra pennies when given a choice in the supermarket.

[2] Joining a Fairtrade co-operative is incredibly cheap. In Rwanda, for instance, it costs about US$0.60 per head. That is not beyond anybody’s reach. Once in the co-operative, workers reap the benefits of a share of profits, labour rights and minimum wages, which are all hugely beneficial.

[3] It is unacceptable for firms to hijack moral consumerism for their own ends, but we should legislate against that, not do away with Fairtrade altogether; as it grows as a movement, so will scrutiny of it, which will prevent these practices.

[4] Minimum wages will have little, if any impact, in this context, where wages are tiny relative to huge farm profits. Moreover, even if they do,a small number being unemployed in a context where Fairtrade provides large amounts of employment is an acceptable cost.

Possible motions

This House would boycott Fairtrade.

This House would not allow Fairtrade labelling.

This House believes that Fairtrade is no such thing.

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