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Is Fair Trade Really Fair?

Like many other aspects of international development (microfinance, I’m looking at you), there is a wealth of literature on the value and outcomes of fair trade and for the most part, the results have been inconclusive. That’s not to say that there haven’t been some positive impacts, but like microfinance there are some definite drawbacks and perverse incentives and ultimately the success is not as widespread as some might like us to believe.

As far as fair trade goes, many of the Least Developed Countries (LDCs), most of which happen to be in Sub-Saharan Africa and are the ones that policies such as fair trade are intended to help, are not doing much to raise local incomes. According to IPS News, while the market for fair trade goods on the consumer end is growing (almost 40% year over the last five years), this growth has done little to benefit LDCs in Africa.

Although the article is somewhat scant in its analysis, it does mention that while fair trade seems to have faired better in Asia and Latin America, there was a specific program in Mali that failed due to lack of production expertise. This failure is similar to that of why microfinance often fails, and that is based not on a lack of financing but a lack of training (or any number of other difficult to control, variables).

Also mentioned in the article is that fair trade is often just looked at as issue regarding producers but in fact it impacts (or should impact) the entire supply chain, which is much more complicated than simply targeting growers of an agricultural product.

While I am not a die-hard free market proponent I do wonder about the sustainability in the long run about the role of subsidies in developing markets, particularly (and inevitably) when those “subsidies” are taken away. I’d like to think that business should do what’s good for them and their suppliers. Although Starbucks gets a lot of press for their coffee sourcing (often negative) they have set up a “fair trade” type scheme that works within their mission and business plan, rather than fully outsourcing to a fair trade certification organization (or company…for profit one’s do exist) that has rigid guidelines but does not understand the nuances of the businesses with whom they are working.

This is a simple analysis of a very complex and somewhat contentious issue. I hope to bring more depth to this conversation in near future.

Image Credit by via Flickr under a CC license

Written by Jonathan Banco

Jonathan has worked in both journalism and various facets of small business development over the past eight years. Most recently, he graduated from the Monterey Institute of International Studies (graduate school of Middlebury College) in 2010 with an MBA and an MA in International Development Policy. His interests include SME development and its role in economic growth, particularly in Sub-Saharan Africa as well as how CSR/Sustainability measures impact both business operations and the communities in which businesses operate. While at MIIS he worked as a summer fellow involved in small business consulting in Accra, Ghana and was an active member of the MIIS Net Impact chapter. As a life long traveler, Jonathan has been fortunate to have lived in, worked in or visited over 20 countries on 5 continents and he truly hopes that he will be able to continue this trend.


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