Fair trade debate

The fair trade debate is a debate around alleged issues with the Fairtrade brand. The debate surrounds the ethics and alleged economic implications of fair trade. Some criticisms have been raised about fair trade systems. One 2015 study in a journal published by the MIT Press concluded that producer benefits were close to zero because there was an oversupply of certification, and only a fraction of produce classified as Fair Trade was actually sold on Fair Trade markets, just enough to recoup the costs of certification. Some research indicates that the implementation of certain fair trade standards can cause greater inequalities in some markets where these rigid rules are inappropriate for the specific market. In the fair trade debate, there are complaints of failure to enforce the fair trade standards, with producers, cooperatives, importers and packers profiting by evading them.

Although there is evidence to suggest that consumers buy fair trade goods for a variety of reasons, some are willing to pay more for Fairtrade certified products – for example, in the belief that this helps the very poor. Critics of the Fairtrade brand have argued against the system on an ethical basis, stating that the system diverts profits from the poorest farmers, and that the profit is received by corporate firms. It has been argued that this causes "death and destitution". This has been used as evidence to doubt that much of the extra money paid reaches farmers, and that there is reason to believe that Fairtrade harms non-Fairtrade farmers. There are criticisms that false claims made for fair trade and the withholding of relevant information constitute Unfair Trading under EU law. There are also criticisms using many other criteria.

However, pro-Fairtrade researcher Alastair Smith claims that while some of these criticisms are grounded in acceptable standards of evidence (and deserve serious attention), others are less well elaborated, and that in a few cases, the criticisms presented are assertions with little or no credible evidence to support them. However, these claims have themselves been criticized on matters of fact, theory, methodology, use of evidence and incorrect citations.

The evidence available suggests that little of the extra money paid by consumers actually reaches the farmers. The Fairtrade Foundation does not monitor how much more money retailers charge for Fairtrade goods. Furthermore, retailers almost never sell identical Fairtrade and non-Fairtrade lines side by side, so it is rarely possible to determine how much extra is charged or how much reaches the producers in spite of Unfair Trading legislation. In a very few cases, it has been possible to find out. One British café chain was passing less than one percent of the extra charged to the exporting cooperative; in Finland, Valkila, Haaparanta and Niemi found that consumers paid much more for Fairtrade, and that only 11.5% of that reached the exporter. Kilian, Jones, Pratt and Villalobos talk of US Fairtrade coffee getting $5 per lb extra at retail, of which the exporter would have received only 2%. Mendoza and Bastiaensen calculated that in the UK only 1.6% to 18% of the extra charged for one product line reached the farmer. Critics claim that many counter-examples would be needed to show that these are not typical. Since Fairtrade charges a 1.9% licensing fee at wholesale, the maximum that reaches the developing world, even if traders charge unrealistically low margins, is 50%, and a much smaller amount would reach the target farmers.

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