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November 11, 2006

Fair Trade and Capitalism

There often seems to be a 'there, take that capitalism' feel to the fair trade movement. Those backing it somehow thinking that there's a blow being struck against the evils of a system red in tooth and claw.

Now, I'm entirely in favour of fair trade in one way: if consumers increase their utility by paying more for an item because of the way it is produced, well, fine, consumer utility is increased which is the point of the whole game anyway.

I'm a little less happy about some of the rules about what qualifies as fair trade: there seems to be an insistence that only non-mechanised products can be fair trade which means that in the long term, they will all be peasant produced products which isn't known to be the long term route to wealth.

I also reject the idea that all products must become fair trade: clearly, those who do not currently pay those higher prices voluntarily would find their utility decreasing if they were forced to do so.

Having said all of that though I don't really see the techniques used as being in contravention of normal business practice at all:

Now the Ethiopian government plans a scheme which could bring in even more cash to the parents of these children, almost all subsistence coffee farmers, by applying to trademark their premium beans in the United States. But the National Coffee Association of America, allegedly prompted by Starbucks, has moved swiftly to block their path.

Applications from Addis Ababa to the US Trademark and Patents Office for authority to trademark Ethiopian's three most famous bean varieties, Sidamo, Virgacheffe and Harar, has been blocked by the coffee buyers lobby in the US.

Trademarking these premium beans? This is simply product differentiation isn't it? What's the difference between this and a manufacturer of caffeinated fizzy sugar water slapping ' Coke'  on the side and charging a premium? And how capitalist is that?

November 11, 2006 in Economics | Permalink

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Comments

Sunkist Oranges are another good example. Sunkist is a coop, as well. Strange world we live in when we end up supporting Eithiopia on anything.

Posted by: Greg | Nov 11, 2006 2:21:52 PM

It occurs to me that there may be instances where offering a premium for an over-supplied commodity may be akin to putting out a fire by throwing petrol on it.

Posted by: johnny bonk | Nov 11, 2006 4:34:06 PM

In a free society, consumers have a right to spend on whatever they prefer and to form preferences using a plethora of criteria. There is nothing intrinsically wrong with consumers being informed that, in buying a certain brand, they are, in effect, paying more than they might otherwise for the same quantity and quality--for the express purpose of providing a charitable contribution to some disadvantaged producer or group of workers, etc. In doing so, though, they should not expect that their behavior will become the norm nor that it should be made so by law: most prefer, when deciding between equivalent goods, to pay less rather than more.

Posted by: gene berman | Nov 13, 2006 1:21:39 PM

Johnny:

You're always doin' that. Of course, you're right--but you're letting the cat out of the bag! Can't you see past the nose on your face? Raising the price paid to comparatively disadvantaged producers, they're reducing competition (and prices) for the regular stuff. Shut up and let them stand treat for some of our coffee!

I could also see an extension of the principle of fair trade to an even more important sphere of activity. If you and me could just popularize the idea that the plain, the homely, and the ugly gals all deserved to receive more time and attention--to get "what's fair"--we might find even more of the others left over for us (and you could claim to be Johnny Bonk in more than name only). Couldn't hurt (and I like to "drink a lot of coffee!)

Posted by: gene berman | Nov 13, 2006 1:56:17 PM

Discussing fair trade and free society brings up the question of our financial system and exactly what's at the root of our money/trade/capitalism problems.

Posted by: DS | Dec 6, 2006 5:14:08 PM