Fair Trade

Topics: Fair trade, Fairtrade certification, Trade Pages: 5 (1501 words) Published: March 4, 2015
Introduction
Fair trade is an organised social movement which is based on partnership between producers and consumers, with the aim of providing secure and sustainable livelihoods to suppliers, as well as fulfilling their potential. As an alternative approach to free trade which focus on establishing an unrestricted trading relationship, the core goal of fair trade is to aid marginalised producers, promote trading conditions and sustainability (Fairtrade International, 2011). The last decade has witnessed a dramatic growth of fair trade. As this considerable trend has accelerated, there has been a corresponding upswing in the debate over international trading regime, with advocate of fair trade dynamically questioning the integrity of the predominant economic orthodoxy. Although proponents declare that fair trade brings more benefits to suppliers than free trade, it is still debatable whether the benefits claimed by advocates really accrue to the suppliers. The increasing criticism of fair trade in recent years shows that fair trade is not entirely fair. It seems that only free trade without the imposition constraints can bring long-term prosperity. The aim of this essay is to show the weaknesses of fair trade, emphasizing the positive effects of free trade and discussing the extent to which trading regime brings more benefits to suppliers.  

Questioning the benefits of fair trade
Proponents claim that the impacts of fair trade in supplier countries are deep and broad. By producing a fixed guaranteed minimum price, the marginalised producers in developing countries are able to cover their average costs of sustainable production. It also provides a fair trade premium which goes into a communal fund for suppliers to finance wider community projects such as roads, schools, hospitals and other social, environmental services (Fairtrade International, 2011). These benefits, however, may not be as great as the fair trade advocators indicate.  Convincing arguments can be made that fixing guaranteed price does not insulate suppliers from the volatility of market conditions. It is difficult to guarantee the quantity of products bought by consumers especially when a demand shock pulls the market price to a much lower level than fair trade price. Therefore, the guarantee of supplier’s income becomes impractical. Moreover, goods market is notorious for complicacy. Buyers of Fair trade products appear to find it arduous to keep their commitment due to the frequent fluctuation of prices (Mohan, 2010). The real transfer of fair trade premium to suppliers is also queried by opponents. Albeit fair trade’s advocators try to convey the idea that almost all the fair trade premium is used directly to promote supplier’s condition, the reality shows a different story (Mohan, 2010). According to Sidwell (2008), only 10% of the fair trade premiums are passed to producers. Instead of sharing among the members, a large proportion of fair trade premiums are used to expand the cooperative union, which is anomalous.  

Is fair trade really fair?
It is evidently reasonable for critics to argue that fair trade is exclusive and does not benefit all the suppliers. In order to attain the fair trade membership, producers must meet complex requirements which are explained in a 14-page document made by International Fairtrade Labelling Organisation. Moreover, the certification fee tends to be burdensome especially for producers from the poorest countries. According to Booth and Whetstone (2007), the initial cost of achieving fair-trade certification ranges from £1530 to £2400, depending on its size, with an annual renewal fee of at least £867. The poorest producers from Kenyan with an annual income of about £185 will then be excluded from the fair trade system.     The requirements of fair trade have also been challenged by opponents. For instance, fair trade restricts seasonal labour as well as prohibits child labour. This prohibition is argued to...


References: Booth, P. & Whetstone, L., (2007) Half a Cheer for Fair Trade [online]. London: Institute of Economic Affairs. Available at: (Accessed 11th December 2013)
Daniel, J., (2007) Brewing justice fair trade coffee, sustainability and survival. Berkeley: University of California Press
Fairtrade International, (2011) Impact and research [online]. Available at: (Accessed 8th February 2014)
Mohan, S., (2010) Fair Trade Without the Forth: A Dispassionate Economic Analysis of ‘Fair Trade’ [online]. London: Institute of Economic Affairs. Available at: (Accessed 7th February 2014)
Sidwell, M., (2008) Unfair Trade [online]. Adam Smith Institute. Available at: (Accessed 7th February 2014)
Valiente-Riedl, E., (2012) Is Fairtrade Fair? Basingstoke: Palgrave Macmillan.
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