Wednesday, June 13, 2007

Opinions on Fair Trade?

Last week we saw a documentary on Ethiopians coffee growers struggling to sell their product on the world markets, using “fair trade” channels. Until now I only had a scant idea of what Fair Trade was and that movie prompted me to further dwell on the idea. At first glance, it seems to me that Fair Trade is a laudable undertaking, but when I dig deeper, I see it as a Band-Aid that typically addresses the symptom instead of the root causes of economic poverty in developing nations. It’s hard to go Free Trade and ignore the agricultural subsidies that prevail in the rich nations, the widespread overproduction and the fundamental market laws. Would vertical integration work better as an alternative to Fair Trade; i.e. a situation in which the producer would also be the paysant, the exporter and even the marketer, and would thus absorb the huge margins that are made by all the go-betweens piled up between the producer and the end-consumer? Instead of re-inventing the wheel, the current “fair trade” organizations should fine tune their action and aggressively pursue an end to subsidies in the developed world. They could also create and make available market forecasting tools that would direct growers towards goods in high demand and away from overproduction. Likewise, they could help them develop “niche products” as opposed to commodities and finally, whenever it's possible they should facilitate the development of an infrastructure promoting vertical integration.
Now, what’s your thought?

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