Friday, 4 December 2009

Fairtrade is Unfair... but is there really free trade? Yet?

I've finished reading Margaret Lamb's book on the Fairtrade Foundation and their fights in helping to find "a better deal for Third World producers". The book has an inspiring storyline and was informative enough with an ending chapter to suggest ways you can help the "movement", which has been doing considerably well for the past decades.

While Fairtrade gets good support from an increasing number of people (with a demographic that is getting younger and younger)  in developed countries, it doesn't seem to impress as many economists. Being sceptical is part of what makes good ideas work better (of course with the intent of looking at these ideas with constructive criticism). I don't think totally dismissing the Fairtrade movement like a study mentioned in the previous entry is helpful...  In many ways,  the "study" (if it can be called so as it lacks solid evidence of an economic paper) seems like a tactic to attack fair trade from all possible angles to make a case for free trade as the ultimate solution. It doesn't propose a solution to the problem that the Fairtrade organisation wants to solve. Although it made some valid points, all that stuck with me was the statement "Fair trade is unfair, free trade makes you rich" (Why does that sound horrible? Is it because it's true?).

Fairtrade is far from being a perfect system but it raises and temporarily solves certain concerns that economists who are brilliant at macro level may not be able to solve the immediate needs of those at micro level (ability to push changes quickly enough through policies? - I see this as a discrepancy between macro and micro level). I believe Fairtrade is a solution that is working in some ways - there are producers and workers in the third world who have been economically disadvantaged or marginalized by the conventional trading system. We cannot wait for the free market to correct these problems while they suffer, can we? (We certainly didn't wait for that to happen with the recent financial crisis).

A promised minimum fixed price to help them cover at least production costs seems like an idea... its long run effect on free trade is another issue. But how free is trade really? Farmers from developed countries benefit from government subsidies while those in developing countries have no protection whatsoever. Is that really free trade or really the richer gets it all? Freetrade attempts to make life easier for these marginalised farmers, maybe just a bit easier according to some studies -- 0.18 cent/per person/day may not be a lot to us but in the third world every penny counts (source

Despite my support for the cause Fairtrade is fighting for, I believe a lot more work still needs to be done. Fairtrade currently is only able to help 5 million people in 49 developing countries, which isn't yet comparable to the billions living in poverty. Despite that, isn't it still a positive start from nothing? And if they can add something like £10 per annum to every pocket of every man in countries where the average farmer income is appro. £160 then it isn't bad at all? (source -- something must be working.

Moreover, raising awareness is also an important issue. There is nothing wrong with creating a brand, everything that works or sells these days needs a brand. Fairtrade has made people aware of the situation that is so distant from their own problems. And by purchasing the products they are contributing in some ways while waiting for politicians and policymakers who are divided on all major issues at the Doha rounds, struggle to agree on Climate changes and other important issues.

One valid point from a prominent economist, Peter Griffith, is that Fairtrade (and their criticism) needs to back their work with more solid and convincing results -- While they have been very successful at marketing their initiatives, they are not getting an overwhelming support from the mainstream economists and economic publications (not even the Economist nor the Financial Times).  Not only that these criticism is helpful in the process to make Fairtrade even fairer but also being able to convince these guys is a huge credit to the movement.

Also I keep wondering why countries like China, India or those in SE Asia aren't really getting any help from Fairtrade (yet)? (It is suggested that they're benefiting directly from free trade.. free market). I know that in Vietnam in the past decades has been struggling with price war of certain exported products and farmers are definitely affected by that  (a topic to investigate in a later entry perhaps).

 I really don't like to think that "fair trade is more about flattering Western shoppers than transforming the lives of Third World farmers" (source BBC) but without concrete evidence that might be an inconvenience truth.

Here are some links to discussions regarding this topic including a short video by Philip Thomson "A bitter aftertaste"

The title of this entry is quoted from the Adam Smith Institute study "Unfair Trade" by Marc Sidwell
And all the websites stated in this entry

No comments:

Post a Comment