Saturday, September 9, 2006
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The trouble with implementing fair trade
The Financial Times' Hal Weitzman has an interesting story about the failure to enforce "fair trade" labels on items like coffee:
“Ethical” coffee is being produced in Peru, the world’s top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage. Industry insiders have also told the FT of non-certified coffee being marked and exported as Fairtrade, and of certified coffee being illegally planted in protected rainforest.Click here for a companion story by Weizman that gets at the details of the problem. The most interesting section of the latter piece comes here:
“No certifier is able to check that at no time are workers paid below minimum wage,” says Luuk Zonneveld, Managing Director of Fairtrade Labelling Organizations International (FLO) in Bonn. “This issue comes up everywhere. Poor people struggle to pay their workers fairly.”This suggests the following:
1) If fair traders really want workers to receive what they believe is a living wage, they're going to have raise the price of properlylabeled coffee;Is there a solution to the problem? My solution would be to raise the price of fair trade coffee such that everyone in the distribution chain can receive higher wages, and let consumers decide whether the higher price is worth it.
A perfect solution? Hardly -- but it's the one that is the most honest while not restricting employment in poor economies like Peru.posted by Dan on 09.09.06 at 02:05 PM
Thanks for those links. This is the kind of scrutiny that FT needs to keep it honest. The risk of abuse is obvious. Nevertheless, even if the workers are not quite making the legal minimum wage, one has to think that the extra cash can take a lot of pressure off small producers AND raise the incomes of the workers.
I'm less sure that I agree with your conclusion of raising the prices without having adequate control over how the wages are being paid. The risk of abuse would seem to increase, and the fallout from scandals would climb with the prices.
Seems like the audit system still needs major work and FT needs some sort of local presence in producing countries to help educate the workers as to what they should expect from FT certified producers. The real key would be to keep the prices competitive by increasing volume, which would also provide funds for the controls that are needed.
Certainly there will be an occasional scandal with FT, but the food industry produces scandals at regular intervals. That alone does not render FT illegitimate. Of course, going against market forces may be tilting at windmills in the long run, but compared to the often inefficient alternatives of massive aid projects or charity work, FT still has a certain appeal to this lapsed libertarian.posted by: Karl B. on 09.09.06 at 02:05 PM [permalink]
I have working experience with the certification process (principally in banana). The certifying organizations are honestly trying to implement the standards and the producers are complying because they have no choice. But there is a limit to the unnatural behaviour a foreigner can impose on the natives. Forcing workers to use heavy plastic protective gear in the tropics is, for example, like forcing Samoan teenagers to use Victorian dress. Certification has eliminated the worse abuses, but it should not and cannot force foreign peoples to behave like Europeans.
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