Can Fair Trade Really Impact Poverty?

Can Fair Trade Really Impact Poverty?

When the fair trade movement first gained real marketing attention in the early 2000s, many conscientious minded individuals were thrilled. Finally! A way to impact poverty while supporting the dignity of work, rather than perpetuating a cycle of charity.

I bought in all the way myself. No more M&Ms or Hershey’s bars for Halloween or Easter. My clothing was either purchased second hand or from pricey online retailers, I scheduled meetings across town in pursuit of ethically sourced coffee instead of enjoying my normal neighborhood cup, all because of a tiny black and white label.

 Thankfully, competition within the fair trade market itself has ensured that coffee (thankfully) has again become valued for it’s quality, not only the price paid to the farmer. Fairly-traded clothing is (almost) affordable and actually form-fitting, and even Hershey’s has promised to remove child-labor from its cocoa supply...sometime.

Despite these gains in the quality and popularity of fair trade over the past decade, critics from the economic world are questioning the validity of the movement. Similar to many complex issues, it can be tempting to consider throwing the baby out with the bathwater after hearing an articulate argument. This is because we humans have a tendency to want to categorize everything into good/bad, right/wrong, black/white, or should/shouldn’t. Our brain actually rewards us when we are able to “figure” something out and appropriate a judgment into its proper place. But when we are talking trade issues, we are going to have to become a bit more comfortable with gray areas, because snap judgments will result in an incomplete picture.

In this article, I have collected some of the most valid critiques of the Fair Trade movement, as well as some equally ‘pro’ arguments, in hopes that consumers will continue to engage the important issue of “where my stuff comes from.”

Below are 3 reasons some think Fair Trade doesn’t work:

  • Fair Trade is a marketing scheme benefiting the wealthy. Fair Trade is a movement begun in the 60s by charitable and religious organizations seeking to advocate for the poor (whom they perceived as losers in the global marketplace). Fair Trade has since grown into an extensive “labeling” system benefiting wealthier nations through what has become mainly a marketing campaign rather than an institution ensuring profitability of those at the bottom of the economic pyramid. For more on this argument...
  • Fair Trade promotes an unrealistic skewing of local economies. The argument is that one producer group in a community is afforded a relationship with an international organization promoting fair trade and thereby earns a higher wage than others in their community not lucky enough to be chosen. Take for example, a Ugandan jewelry maker who earned much more than the local wage for their work with an American Company. When it was discovered by neighbors that these individuals were earning much more than others in the community, the cost of taxi rides and groceries became 10 times the normal rate for cooperative members. Whoops. 
  • Fair Trade creates dependence. Because those buying fair trade goods must do so at a higher wage than what the free market may suggest, it limits the sale of those goods to a smaller and often foreign buyer. This does not always promote the overall development of local business within source countries. i.e.: if I am a small producer of coffee or cocoa, and know that I can receive $1 per kilo more by waiting to sell my crop to a fair trade buyer, I will not be encouraged to circulate my crop within my local market. I am therefore dependent on the continued goodwill of my international buyer and am robbing my community of the opportunity to benefit from my particular good, while at the same time receiving an superficially inflated price for my goods when compared with the actual market.


    The argument FOR ethical or direct trade:

  • The global poor need access to marketplaces. “The poor are not poor because they lack material goods,’ but because they are excluded from systems of justice.” - Michael Miller of Poverty Inc. The global poor are excluded from 98% of all export opportunities. This means they have limited access to free markets that are necessary for economic growth and sustainability. Many grassroots fair, direct, and ethical trade organizations are partnering with producer groups that would never otherwise have access to a market that is capable of valuing their skill or product. There is no reason these individuals should not be recognized, developed, or paid a living wage for the quality work they produce so long as the market demands it. When given an avenue to sell their goods to a consumer that desires it and is willing to pay a fair price, both sides benefit in the exchange.
  • Ethical trade creates REAL, dignified change in the lives of thousands. It can be easy to judge a system from the outside looking in. However, there are hundreds of grassroots organizations doing the real, hard work of investing in the freedom of others from oppressive systems throughout the world. When my friends living in developing nations are asked what they “need” more than any other thing, they say “JOBS. We need jobs.” Why do you think that is? Because as human beings, we are made to work and to feel the validation that comes from a fairly earned wage. Unfortunately, there are all kinds of entities who are willing to offer desperate people a “work” opportunity that is less than dignified. From multinational corporations extending positions in sweatshops, to tourists willing to buy sex, the exploitative options are seemingly limitless. It is easy to make the case that ethical companies are much-needed in this day and age of disposable goods offered by those viewed as disposable people.
  • We as consumers should be held accountable for the production process behind the goods we consume each day. Each time we spend a dollar, we cast a vote for the company we purchase from, many of whom are using sweat, slave, or child labor. Ethical companies that are educating consumers about not only the labor conditions, but also the environmental considerations behind their products should be supported by a community that values those ideals. There must be a way for these companies to let their customers know about the values they sustain. Those values come at a higher cost to the company and are oftentimes reflected in the cost of goods sold. However, there should arguably be a benefit to the consumer in the form of quality, authenticity, and sustainability of those products in exchange for the higher cost that goes beyond a mere label. We have many more fair, direct, and ethical trade companies competing in 2017 than in 1960. We have a choice where we spend our dollar amongst these corporations and can demand a better standard of good, one capable of competing in the free market, not merely a subsidized one.

  • On a macro scale, I do not believe Fair Trade (for all it’s high ideals) is going to be the most effective mechanism to move the economic needle within developing nations. However trade in general is arguably one of the factors that will. On a micro-scale, however, fair trade principles are actually enabling thousands of individuals to leave poverty and work with dignity as they partner with grassroots initiatives. 

     As an illustration, I received a letter yesterday from Hope Jewellery company, employing 23 women outside of Lima, Peru. The letter was thanking me for a large order placed last year which allowed them to live well, afford healthcare, and send their children to school, and also enabled 2 of the women to become debt free as a result.

    The women of Hope Jewelry operate a top-notch enterprise, earn a fair wage, and exhibit internationally in trade-shows in the US and Europe. Their product is priced reasonably and is extremely on trend and affordable. Essentially, their line is capable of competing within the free market, yet they would not have reached that market had they not been connected and cultivated by UK designer, Laura Cave, co-founder of Just Trade, a BAFTS certified business.

    For these 23 women, the opportunity to be brought to market by an ethical company ensures that they are paid fairly, have safe working conditions and reach the buyers they need to succeed. Fair Trade has made the difference for them between a life of lack versus a life of enough. It may not have the power to transform the entirety of Peru’s economy, but it has uplifted the lives of these 23, along with the families for whom they provide.  

    In closing, I would argue that if ‘trade not aid’ is what is most needed to build economies and eradicate poverty, then why not make it fair? We as consumers have a responsibility to hold the companies we buy from responsible for their labor practices so as to accomplish the most good to the most people, in any way we can - including our shopping, travel, dining, and building practices. Next time you purchase a fair trade, direct trade, handmade, local, ethically-sourced product, feel good about it. You may not have changed the world, but you just might have changed a life.

    Leave a comment