Does Fair Trade Help the Poor

Deciphering the Benefits of Fair Trade

Recently I wrote an article about advertising deceptions used by the health food industry.

One of the items listed was the use of “Fair Trade” labeling to create a perception of health benefits that aren’t there. The Fair Trade label all by itself does not confer information about the quality of ingredients used, though many people assume it does.

Upon reading more about the issue, the task of assessing the validity of Fair Trade networks has a common denominator: everything is a little bit different.

And to my disappointment, there’s really not a whole lot of good research on how it does or doesn’t affect the growers it’s intended to help.

However, to the best of my knowledge, here’s the best overview on the state of the Fair Trade Industry:

We found 46 relevant studies, most of which focused on coffee and forest products and examined fair-trade and Forest Stewardship Council certification. The methods used in 11 studies likely generated credible results. Of these 11 studies, nine examined the economic effects and two the environmental effects of certification. The results of four of the 11 studies, all of which examined economic effects, showed that certification has producer-level benefits. Hence, the evidence to support the hypothesis that certification benefits the environment or producers is limited.

Overall, that’s scanty evidence. Of the 46 studies done, 35 had to be discarded because their results were not valid. Of the 11 that remained, 4 showed tangibly positive results for growers, and the other 7 showed no effect.

Eco-consumers should hope for better results in the future. One of the better studies done in this area had this as a result:

According to the analysis, the economic effects of fair-trade participation are unassailable; the effects on educational and health outcomes are uneven. However, TF cooperative participation positively affects educational attainment and the likelihood that a child is currently studying.

Uncertain benefits for health and income, but positive results for child educational attainment.

Here are a few more thoughts:

1). We’re probably a long way from consistent standards of quality. If nothing else, the results don’t lend themselves very well to measurement, and differences between industries and local conditions of farmers make it very, very difficult to attain a consistent link between consumer intent and producer outcomes, even for well-run organizations.

2). The success of the Fair Trade movement has made it an attractive marketing portal for large organizations who have public relations issues, and standardization of the industry could tilt the deck towards large companies moreso than local growers. Like other venues of food politics.

3). Often the best way to get out of poverty is not by doing what you’ve always been doing, but having new doors opened to you that make your existing choices irrelevant. In this context, Fair Trade certification programs act as a subsidy for the status quo, which can delay transitions to more modern economies which naturally have a higher wage due to higher productivity.

4). The latter point is especially true when you consider the importance of female rights in developing countries. Most of the time they’re not very good, and many Fair Trade industries like coffee are labor intensive, and thus favor male labor participation and subsidizing them can suppress meaningful development opportunities for women in other areas.

5). Fair Trade is always going to be a 3rd, 4th, or 5th best option for helping the poor. Why? Because the link between a consumer price and labor situations for bottom-level producers has many gaps in the supply chain, each of which can soften the relationship between intent and outcome, even if people mean well.

You might actually be better off living as frugally as possible (which includes buying corporate food), pocketing the difference, and giving intelligently to charity that aid the poor directly.

Overall, I probably sound like a Debbie-downer for Fair Trade.  But the tone of this post probably overstates my pessimism about the movement, because by and large the process of shining a light on local farming conditions has widespread benefits, even if Fair Trade doesn’t do a great job of capitalizing on many (most?) of them.

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