From coffee at our favorite coffee shops to bananas at the grocery store, most of us have seen the "Fair Trade" label on products we use regularly. With its noble aims of providing farmers with higher prices, setting high production standards, and reducing poverty (Fairtrade International, n.d.), the Fair Trade movement has blossomed over the last couple decades. As excellent as the Fair Trade movement's goals are, some of its unintended consequences have led some to wonder if Fair Trade is as fair as it intends to be.
For instance, one key component of the Fair Trade movement is that it seeks to attain a minimum price for members' produce. While it is honorable to ensure that farmers receive fair wages, as Nunn (2019) notes, Fair Trade prices for coffee (just one example) are typically higher than the global average market price for coffee (Fig. 2). This is problematic since it serves as a type of price floor, reducing incentives for farmers to compete for higher quality (possibly even higher standards than set by fair trade, if competition were good enough) and creating the possibility of surpluses (unemployment of resources) (Cowen & Tabarrok 2018, p. 154). Thus, while Fair Trade may help increase wages for some farmers, its price floor disrupts the delicate balance between supply and demand. A second problematic aspect of Fair Trade price floors is that they crowd producers out of the market—while Fair Trade's aims are wonderful, there is simply not enough resources to ensure that every producer can participate in the program. This means that smaller producers who might have had a chance without Fair Trade may not have the opportunity to enter the market.
Thus, in conclusion, while Fair Trade has noble intentions and has benefitted many farmers, its broader economic implications suggest that perhaps an alternative method could accomplish these goals in a more effective way with more widespread benefits.
References
Cowen, T., & Tabarrok, A. (2018). Modern principles of economics (4th edition). Worth Publishers.
Fairtrade International. (n.d). "Aims of the Fairtrade standards." Fairtrade International. https://www.fairtrade.net/standard/aims.
Nunn, N. (2019). The economics of Fair Trade. The Reporter, 2, National Bureau of Economic Research. https://www.nber.org/reporter/2019number2/economics-fair-trade#4.
Wow, I enjoyed reading your post. Fairtrade is something we can all talk about for days. Fairtrade gives the ability for people to build their company and expand as they desire. With everyone loving coffee I believe it would be easy to expand as long as there is a successful model generating a large amount of revenue. The price between supply and demand Definity has to be considered. I believe understanding if fair trade is fair has everything to do with how you look at it. I believe the products we use should have checks and balances to protect the consumer. Therefore labels, instructions, ingredients, etc. are all necessary to consider the product fair to the consumer seeking a product.
cited source Karjalainen, K., & Moxham, C. (2013;2012;). Focus on fairtrade: Propositions for integrating fairtrade and supply chain management research. Journal of Business Ethics, 116(2), 267-282. https://doi.org/10.1007/s10551-012-1469-1
Hello Gabrielle,
I really liked the insights you bring up in your post. Fairtrade is something that many individuals don’t realize or think about. However, you bring up how important it is for individuals to care about and understand. Showing how fair trade products affect the economy. I like how you bring incentives into the mix. How incentives for farmers are to not act in the best fair trade interest. As you state fairtrade is very important and it is sad to see how fairtrade tries to do its job, but it lacks in certain aspects.
I really enjoyed reading your post. I've only heard about Fair Trade because major franchises such as Starbucks and other small coffee companies were supporting the use of Fair Trade. As someone who supports job equity in the global job market, I had considered Fair Trade to be good since it valued a farmer's harvest at a higher price and put more money in their pockets, but I wasn't aware of its negative effects of disrupting supply and demand, and even providing farmers a perverse incentive not to produce high quality produce in the market. I'll keep that in mind the next time I go to Starbucks!
Thank so much for your insight! In the wise words of Professor Baugus, "If Everyone's Fair Trade, then no one is!" This shows how the idealism of international foreign aid will, and far too often does, fall short of its fair intentions. Without the right aid principles, well- meaning aid groups will often cause negative side affects and lead to dependency, instead of long-term positive results such as self-sustainability.
Hi, I really enjoyed reading your thoughts and research concerning the topic and concept of fair trade. I never considered the implications and affects that pricing could have on a product and how its produced, before I engaged and started learning about the process of economics taught from these classes. There is so much that takes place before a product is produces, created, shaped, labeled, shipped and distributed that goes unnoticed but it is also the determining factor that drives the consumer. I just wonder if the application of fair trade could be reevaluated, readjusted to benefit both the producer and the consumer in a way that is open to all and beneficially to all without causing economic deficiency but creates stability and development of the economy. I don't even know if that is even an option, but it is something to think about as we continue to find balance that leads to prosperity and human flourishing from one generation to the next. Thanks for your insight and the initial conversation, it's greatly appreciated!
Hi Gabby! I loved your post. I did not realize how much of a negative impact fair trade has on the economy. It is so sad to see an idea that was meant to be helpful have such harmful end results. Price floors are not always bad but when it is set above the equilibrium price, then the supply exceeds the demand as seen in this situation, which leads to negative results.
Gabrielle,
I enjoyed reading your post. I have seen so many fair trade products before, but I did not know much about the negative affects of it. I thought the point about incentives you brought up was really interesting, as that affects how many farmers want to work. I definitely agree with you that the aims of Fair Trade are really good. However, after reading your post, I can see how there can be changes to the movement as well.