Sunday, December 13, 2009

Facts about FairTrade

 

We might think of sub-Saharan subsistence economies when we think of Fairtrade, but the biggest recipient of Fairtrade subsidy is actually Mexico. Mexico is the biggest producer of Fairtrade coffee with about 23% market share. Indeed, as of 2002, 181 of the 300 Fairtrade coffee producers were located in South America and the Caribbean. As Marc Sidwell points out, while Mexico has 51 Fairtrade producers, Burundi has none, Ethiopia four and Rwanda just 10 – meaning that "Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nations".

The article offers many other points of interest.  For instance:

By guaranteeing a minimum price, Fairtrade also encourages market oversupply, which depresses global commodity prices. This locks Fairtrade farmers into greater Fairtrade dependency and further impoverishes farmers outside the Fairtrade umbrella. Economist Tyler Cowen describes this as the "parallel exploitation coffee sector".

Coffee farms must not be more than 12 acres in size and they are not allowed to employ any full-time workers. This means that during harvest season migrant workers must be employed on short-term contracts. These rural poor are therefore expressly excluded from the stability of long-term employment by Fairtrade rules.

In other words, it's mostly a marketing gimmick.

From Tyler Cowen

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