All entries for Tuesday 18 January 2005

January 18, 2005

"Fair Trade" – Beneficial?

That people are in the regions concerned are willing to work for the meagre market wage is an indication that is the best option available to them given the alternatives. That these wages may leave workers able to consume only the bear minimum for survival is a great shame. The movement towards ‘fair trade’ products, whilst improving conditions for some, necessarily leaves other workers in an even more precarious position, with demand for their produce reduced and the looming sceptre of unemployment. This is because the market size for the ‘fair trade’ commodities hasn’t changed and could in fact fall as some firms pass their higher costs of production onto the consumer.

For commodity goods such as coffee, the primary problem faced by producers is rapidly expanding supply, which necessitates a lower market place. More effective solutions would be the restriction of supply, the movement towards strains/new products which command higher prices and an increase in demand worldwide. These solutions are by no means easy to achieve, but they make more sense than introducing market distortions which history has shown to rarely have the desired effect.

Notes:
The Fair Trade Foundation
“Fair Trade” As Market Failure from Café Hayek
Coffee Glut Brews Crisis for Farmers from National Geographic


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