Friday, September 17, 2010

Is fair trade unfair?

US colleges make big money from the sale of all sorts of items imprinted with their logo, in particular clothes. Of course, to maximize the margins on these goods, their production has been mostly outsourced off-shore, to factories that were often likened to sweatshops. Whether a large portion of those factories were indeed providing substandard working conditions is a debate I do not want to enter for now. The fact is that student activists demanded that those factories should not be retained for production. As universities and their suppliers complied, the poorest workers were out of a job, and the university gift stores are making less of a profit. Unintended consequences.

Aurélie Carimentrand and Jérôme Ballet explore a similar story with fair trade. Their case study is about quinoa from Bolivia. The goal of fair trade is to give local producers in developing countries a larger share of the retail price of their product. But beneficiaries need to get certified, and this process does not necessarily favor the most needy, in particular as they need to obey some rules. In the case of Bolivian quinoa, this works through the membership in a growers' association which markets crops to fair trade networks. As associations typically are, this one is dominated by the big producers. The latter are located in the big plains, where they could get the full advantage of mechanization. The small producers are on steep terrain and cannot use tractors. The latter are the poorest, but, as the authors argue, they benefit the least from fair trade, often even skipping membership. Indeed, the association pays the same unit price to all members, and given the differences in production costs, this exacerbates inequalities.

The authors claim that fair trade has failed here. It made inequities among producers worse. But was domestic income equality really the primary role? Isn't it really about world income inequality? There, clearly fair trade is transferring some rents to developing economies. Whether they are large enough to be worth the trouble is another question.

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