Fair trade is an organized social movement that promises to pay producers a guaranteed price for their goods and a premium above the market price; the movement has grown in recent years.
United Kingdom consumers spent about $1.27 billion on fair trade products in 2009, more than quadruple the 2005 figure of nearly $310 million.
However, the Institute of Economic Affairs (IEA) described fair trade as “costly, opaque and substantially unproven” in a recent report.
The IEA’s report stated that that the poorest countries did not benefit from fair trade, that it was unclear how much of the additional price actually reached the producers and criticized the costs involved in achieving fair trade status.
The paper advocated open, subsidy-free international trade as the best way of advancing the interests of the world’s poorest regions.
The Fairtrade Foundation rebutted many of the report’s claims. It stated that 100 percent of the fair trade premium goes to the producer organizations and that the movement has highlighted many ways that trade could work better for poor communities and producers.
BMS World Mission, which supports the movement, also hit back. “Free trade has always been the argument that suits the resource-rich,” said director of communications Mark Craig.
“To see that in action, you need only consider the recent panic over the availability of rare earth minerals, in which China holds an immensely strong position globally.
“If China adopts an entirely free trade model on that, then the West may rapidly become the economic victim of that ideology, rather than, as has been traditional, the victor. As it is, there are signs that China is already reducing supply to Japan, in order to force the global price up.
“The truth is that if you’re a poor producer, free trade has harmed you far more than fair trade has helped you. If, as is alleged in this report, fair trade’s effect is minimal, free trade’s is huge and negative, though lucrative for the resource-rich.”
This article appeared originally in The Baptist Times of Great Britain.