Podcast: How fair is fair trade?

This article was first published by the Center for Global Development. You can find the original article here.

When you opt to buy fair trade certified coffee at the grocery store instead of uncertified, how much good are you doing? My guest on this week’s Wonkcast, Kimberly Ann Elliott, draws on her recent policy paper, Is My Fair Trade Coffee Really Fair? Trends and Challenges in Fair Trade Certification, to tell me why the answer may be more complicated than you’d think.

Kim, a CGD senior fellow and expert on trade and agriculture, says the benefit of buying fair trade coffee depends on the alternative option and the consumer’s expectations. “Consumers have certain expectations of fair trade coffee,” says Kim. “They may want to see no child labor, but since the international labeling standards are focused on family farms, children are often contributing to the work. While there’s evidence that fair trade efforts are helping small farmers, they may not be helping in the way people think they do.”

Kim tells me the fair trade movement began after World War II with the idea that people from the rich world could help people from the poor world by buying handicrafts directly from poor people and selling them in their home countries. This idea spurred fair trade shops like 10,000 Villages.  In the 1980s fair trade labeling organizations began to certify products – allowing them to be sold through regular retail outlets and thereby vastly increasing the size of the potential market, Kim explains.

For coffee she says, “one of the more important rules is a guaranteed minimum price.” However, this benefit has been less important in recent years because market prices for coffee and other commodities have been high, often higher than the fair trade minimums. Producers also benefit from the relationships formed with fair trade buyers, who may offer improved access to credit and help in improving product quality, she adds.

While fair trade certification offers clear benefits for smallholder producers, Kim tells me some of the requirements for meeting certification can be burdensome. To become fair trade certified, small producers must participate in producers’ cooperative, which requires time and effort that could otherwise be devoted to other activities.

We also discuss whether or not it’s appropriate for fair trade certification organizations to offer certification to plantations, as the US fair trade coffee organization has recently begun to do, and the potential benefits and risks of such an approach.

At the end of the interview, I conclude that it probably makes sense for me to keep on buying fair trade coffee because the participation of fair trade buyers in the coffee market increases competition, which benefits small holders. On the other hand, if I sometimes buy or drink coffee that is not certified as fair trade, I am not necessarily supporting unfair practices—in part because the fair trade movement has raised the bar for all buyers.

Kim agrees:  “What fair trade does is make markets work better,” she says. “And that’s very useful.”

Click on the image below to listen to the podcast:
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About the Author: Lawrence MacDonald is vice president for communications and policy outreach at the Center for Global Development