Recently I’ve been asked this question a lot after casually mentioning in conversation that fair trade is actually worse than free trade. I decided to write out my thoughts here in full so I can refer back to it in the future. Feel free to use this to do the same!

Full credit for the original work is to Will MacAskill – many of the points here are originally from his book Doing Good Better.

The ‘Fairtrade’ licence is given to producers that have met specific criteria, for example meeting certain safety requirements and paying workers a minimum wage. People assume that this means it is better overall for the world’s most poor and exploited workers. Unfortunately, this is not the case.

Because Fairtrade standards are so rigorous and difficult to meet, producers in the poorest developing nations are often unable to fulfil them and get the certification. Much of the Fairtrade production comes from moderately affluent nations (by relative standards at least), and so the money from purchasing Fairtrade is typically not going to the countries and individuals that need it most.

Also, Fairtrade products cost more, but very little of the extra money ends up in the hands of the actual farmers. Most of it is taken by middlemen. To quote some independent estimates provided in Doing Good Better:

Dr Peter Griffiths, an economic consultant for the World Bank, worked out that for one British cafe chain, less than 1% of the additional price of their Fairtrade coffee reached coffee exporters in poor countries. finnish Professors Joni Valkila, Pertti Haaparanta and Niina Niemi found out that, of Fairtrade coffee sold in Finland, only 11% of the additional price reached the coffee-producing countries.

The list goes on.

In addition, the small amount of money that actually reaches the producers doesn’t necessarily result in greater wages for the employees. One study showed that Fairtrade workers in Ethiopia and Uganda consistently had lower wages and less desirable working conditions that those working in similar non-Fairtrade companies.

Finally, MacAskill concludes by saying:

Even a review commissioned by the Fairtrade Foundation itself concluded that ‘there is limited evidence of the impact on workers of participation in Fairtrade’.

A much more effective way to improve the lives of the most poor would be to buy the cheaper, non-Fairtrade products and donating the savings to an effective poverty charity.

In short, buying fair trade instead of free trade redistributes money from the most poor to the moderately poor, it is a very ineffective means of getting money and positive outcomes to the poor in the first place.

Check out Doing Good Better for a lot more research on counterintuitive ways to do more (or less!) good in the world.

Like this: Like Loading...