Thursday, 3 December 2009

FairTrade vs. Free Trade

I have heard of the "Fairtrade" movement for a long time but even as a student of economics I'm sure I don't totally understand its economic impacts...

When I was working at the Warwick Arts Centre coffee shop during my time at Warwick University, fairtrade coffee was on offer though you have to request it to actually get it. I thought that was weird but I paid little attention to the movement, partly because I had problems of my own to worry about. Later on I heard rumours saying that Fair Trade didn't really work, what customers paid extra didn't really get back to the hand of the workers. This disencouraged me even more and I thought no further about the subject... But slowly I started to recognize the amount of exposure Fairtrade products were getting in supermarkets, coffee shops and charity shops.

... And until recently. I came across Harriet Lamb's book "Fighting the Banana Wars"  as I was rummaging through stocks of the liquidating Books Etc. company, I thought I'd give it a try learning more about Fairtrade or at least attempt to understand what a difference this movement would make to farmers around the world. After all coming from a developing country where 80% of the population still works in agricultural, I should be able to decide for myself whether "Fair Trade" is a good idea. It sounded good. I have heard so many stories about the hardship of farmers in developing countries so Fairtrade must be doing something right, like helping the voices of these farmers be heard in some way.

I am half way through the book. What I have understood so far is that Fairtrade helps to protect the farmers and agricultural workers in developing countries, who are getting paid poorly and are literally unprotected from the harms that modern agricultural techniques and what today's market economy (more-or-less free trade) have exposed them to, to have a fairer price for their produce.  I have just finished chapter 3 " To hell and back" in which Lamb discusses the volatility of commodities prices in recent times and how farmers in the developing world are suffering from these low prices due to subsidies introduced by government of developed countries to help their "local" farmers. This in turn have pushed prices of commodities like coffee and cotton to a level that farmers in poor countries cannot compete with and are struggling to make profits...

I have yet to form a strong opinion on the topic, but I am keen on understanding both sides of the argument as any student of economics would do. I turned to the Adam Smith Institute's for  opposing view of Fair Trade. So far, I am not too impressed with it... Make be it's because Harriet's book was more persuasive? I hope to make my own case soon...

For those of you who are interested please follow the links below to the study by Adam Smith Institute and the response of Fairtrade Organisation in the United Kingdom to their published "study".

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