What exactly does it mean for our coffees to be ‘Fair Trade Certified’? Matt Motta ’13 explains the real meaning behind the label.
Tricks of the “Fair” Trade: How the Private Sector Has Turned Good Will into Profit
Most Wesleyan students would be reluctant to turn away a cup of Fair Trade Coffee at Pi Cafe. Sure, a great number of us go out of our way to recycle, look out for the greater community through joining facebook groups donations of service, and read articles in the New York Times about corruption on Wall Street. But how often do we take time out of the day to question where our food comes from? The answer, unfortunately, is not nearly as satisfying as the proverbial ‘pat on the back’ that seemingly goes hand-in-hand with the consumption of Fair Trade Coffee.
The Fair Trade logo is nothing more than a symbol of corporate greed; as the ‘Golden Arch’ is to imperialism, the MACK imprint is to environmental degradation, and the dollar sign is to corporate greed, the Fair Trade logo is… well, all of the above! Fair Trade, on the surface, sounds like a socially responsible practice – what, after all, could possibly be wrong with applying free market concepts to food imports? (Aside from some minor mishaps surrounding subprime mortgages, pyramid schemes, and economic recession, it’s not surprising that consumers are still willing to trust the free market). A deeper look into the industry, however, hints that businesses are willing to subject both consumers and international producers to corrupt logistical burdens, imperialistic permeation of market economics, environmental decay, and economic recession – all under the guise of charity.
Corporate Corruption and the Spread of Imperialism
One major flaw with the Free Trade logo is the corrupt nature of its logistics. The logo itself is slapped on products by the Fair Trade Labeling Organizations International (FLO). The FLO ensures that associated products are sold at market price, and often entails that local producers receive monetary kickbacks from local collection funds in individual communities. The organization, however, pays no mind to the process by which products actually arrive on their desks for approval; their negligence, in fact, allows for corporate corruption to harm international producers.
The most obvious instance of logistical corruption, therefore, can be traced to large corporations overseas. In order to submit a product to the FLO for Fair Trade approval, the corporation must pay a fixed market price for a given product (in hopes of covering production costs). This practice not only fails to guarantee producers with an economic profit, but also opens up a number of loopholes for corporations to abuse smaller markets.
Consider, for example, the certification of farms in the perishable food industry. Large corporations are eager to put the Fair Trade logo on their products but not at an economic loss. Contrary to the spirit of Fair Trade, corporations will seek to buy only from a region’s most robust producers by placing licensing fees and accreditation standards on trade. Only the already robust producers that meet the company’s accreditation standards and can afford to pay an extra fee (which, in it of itself, defeats the purpose of market intervention in a poor region) are rewarded with a business transaction that may do nothing more than cover production costs.
Of course, many corporations that perform these transactions, all in the name of obtaining a Fair Trade label, are from the United States. Their corruption is rewarded with consumption by American consumers on a daily basis. Despite the fact that such practices would likely be downright illegal if transacted between firms in the US, there is a second issue that stems from corporate corruption: the spread of imperialism. In other words, our market based solutions are not only corrupt, but may not even be welcomed in certain communities. Merling Preza, general manager of an independent coffee farmers’ co-op in Nicaragua commented:
“I don’t want to criticize [Nestle] but there are other elements more profound in our fair trade system than in the existing system. For example, the social programs and services to our communities, investment in farmers, democracy. This is all important to tackle poverty, but it is expensive.”
Forcing our way of living, in the United States, down the throats of other communities (with the hope of making a quick buck) is not a novel idea. Though free market failures have taken away some potency from the phrase “laughing all the way to the bank,” it may be time to consider putting an end to the exploitation of workers around the globe.
Have you ever thrown a cup of Pi Café’s Fair Trade coffee in a recycle bin? As a Wesleyan student, the answer is likely ‘yes.’ Fair Trade, however, actually poses a number of environmental concerns. Even though small international producers may not be rewarded by large corporations for their work, Fair Trade’s incentive is ecological homogeneity; in other words, ecologically diverse land is sacrificed for farming, even if the farmer’s hard work is not met with monetary reward.
Even worse, the practice condones importing foreign products instead of growing domestically. Instead of allowing markets to develop independently in given communities, large corporations exploit international producers and their land in order to import goods. Encouraging farming in ecologically diverse regions, as well as adding to the planet’s climate concerns by transporting goods across the globe on a regular basis, seems to be a lose-lose situation for everyone… excluding, perhaps, a few CEO’s.
The final issue attached to Fair Trade is its ability to encourage market inefficiency. That’s right – the logo that prides itself on introducing market economics to developing firms across the world not only exploits producers, but even encourages market failures at times!
Small international producers, thanks to Fair Trade, have to meet the demands of a global market. Corporations who compensate international producers with above-market prices for goods, therefore, artificially raise the price consumers have to pay (who, predictably, buy less). As pointed out in an article by The Economist in 2006 (yes – even a fiscally conservative magazine finds issues with Fair Trade) the act of artificially raising prices allows corporations to meet a smaller demand. This causes overproduction within the small firms who act as suppliers and therefore creates market inefficiency.
The phrase “Wall Street vs. Main Street,” has become a part of every American’s vocabulary during the recent domestic economic meltdown. The Fair Trade industry, however, begs us to consider those who live on neither Wall Street nor Main Street: those whose roads are paved with dirt, or simply don’t exist. While Fair Trade may be a perfect money-making scam for soulless corporations (and, as the previously mentioned article from The Economist suggested, perhaps even mindless) its costs to society are much higher than the private benefits enjoyed by exploiters.
If the old adage, “no good deed goes unpunished,” is correct, it may be time to start cracking down on the Fair Trade industry.
Further Reading (A good introduction to Fair Trade policies) :