Is fair trade coffee fair?

Posted by: 

The conventional view is that the premium paid for fair trade coffee results in higher wages and better living standards for coffee farmers in the developing world. A new study published in Ecological Economics this month challenges that view. The study finds that the effects of certified fair trade coffee production on poverty levels are not so clear cut. Over a period of ten years, "organic and organic-fairtrade farmers have become poorer relative to conventional producers."

The results did not surprise Lawrence Solomon, the president of Green Beanery, who has worked with such coffee producers. Solomon writes:

The fair-trade business is filled with contradictions.

For starters, it discriminates against the very poorest of the world's coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees--one of the factors that the German study cites as contributing to the farmers' impoverishment--are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they're also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.

Their coffee is organic by default, but because the farmers can't provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.

To add to the perversity, it's an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honour system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations--another source of inefficiency the German study notes in its analysis--lose out.

The results are also consistent with a 2010 study from the Institute of Economic Affairs which argues that the fair trade movement's claims are "seriously exaggerated."
Tags: 
Shawn Regan is a research fellow at PERC. He holds a M.S. in Applied Economics from Montana State University and degrees in economics and environmental science from Berry College. He is also a visiting fellow at the Breakthrough Institute. His work has appeared in the Wall Street Journal, Quartz, High Country News, Reason, Regulation, Grist, and...
Read More > More Articles by Shawn Regan >