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Thursday, November 26, 2009

Fair Trade or UNFAIR SCAMS?

Recently I have heard a lot about supporting fair trade which is supposed to support companies which give better prices to their workers.

The question comes up. How do you KNOW that workers are being paid unfair prices?

How do you KNOW that a bag of coffee which says it is approved by "fair trade" is not a downright lie?

Research Helps: However anyone can put anything up on the internet but when published in newspapers, there is some chance of legally being sued if a reporter falsifies information. So I take note especially of the information published in the Telegraph below.

I think perhaps asking missionaries who work closely with the natives in any country would be the most reliable source of information but I have not heard from them.

Here are some answers to those questions.

More about “Fairtrade is a fraud” – nice pamphlet by the Institute of Economic Affairs

22 April, 2008 · 2 Comments

David Davis
Last month one of our experienced writers said that “Fairtrade is a Fraud”.  While this IEA pamphlet here today does not deny the inherent and (very) inconvenient truth of this statement, it enlarges on some of the relationships involved in the whole “Fairtrade” scam, and explains why the entire “Fairtrade” flim-flam-branding exercise has the welfare of the “growers” as the least of its concerns.
Or you can see it here.
Here is part of the article on Fair Trade is a Fraud

Fairtrade is a fraud

18 March, 2008 · 4 Comments

Thankfully “Fairtrade Fornight” is now over. But if you want to remember why Fairtrade is not a good idea, especially if you are having it rammed down your throat by do-gooders and busybodies, here’s what Alex Singleton had to say in The Sunday Telegraph:
Despite Fairtrade’s moral halo, there are other, more ethical forms of coffee available. Most Fairtrade coffee is roasted and packaged in Europe, principally in Belgium and Germany. That is unnecessary and retards development. Farmers working for Costa Rica’s Café Britt have climbed the economic ladder not just by growing beans but by doing the processing, roasting and packaging and branding themselves.
But Café Britt is not welcome on the Fairtrade scheme. Most Café Britt farmers are self-employed small business people who own the land they farm. That is unacceptable to the ideologues at FLO International, Fairtrade’s international certifiers, who will accredit farmers only if they give up their small-business status and join together into a co-operative.
As Brian Micklethwait puts it:
Fairtrade is, in other words, a front organisation, crafted by unregenerate collectivists to con believers in nice capitalism to buy something which is neither nice nor capitalist. And the way to deal with cons is to expose them for what they are, so that only those who really do believe in the actual values being promoted here continue to support the thing.

The Truth About "FAIR TRADE" IS HERE.

Big Surprise: Fair Trade Coffee is a Scam

September 21, 2006 9:14 PM by Justin Ptak (Archive)
The Financial Times reports that:
"'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.
This casts doubt on the certification process used by Fairtrade and similar marks that require producers to pay the minimum wage.
It also raises questions about the assurances certifiers give consumers about how premium-priced fair trade coffee is produced...
...Though certified coffee makes up less than 2 per cent of the global coffee trade it has become increasingly mainstream as large retailers such as Starbucks and McDonald’s adopt it."
Here is one set of intelligent comments from a gentleman in South America

  • Francisco Torres
    The thing is, those are developing countries, and almost by definition they lack the right sort of institutions to maintain equitable results during the development transition.
    What they lack is property rights. We in Latin America are drowning in institutions. However, even with the "right" kind of institutions, I fail to see how is it unfair to the peasants what others are doing with their own property, even if it is growing coffee.

    Subsistence farmers get displaced as land and/or water resources get taken up by export-oriented cash crops like coffee, and so on.

    Again, this indicates that the problem is one of property rights. The US should have the "right" kind of institutions (being a developed country) and yet private property rights are not assured either - I do not believe that not having the "right" kind of institutions is the problem here.

    with sound institutions already in place, they would have been bought out for fair compensation - but that doesn't happen.
    Only problem is that "fair compensation" is a subjective term. The only sound compensation is that which the market provides, and not some institution, the reason being that institutions fall into the economic calculation problem whenever they try to make decisions on what is "fair" and what is not.
    Growing coffee by itself should not displace peasants. If I own a piece of land and a coffee grower wants to have it, he or she should offer to buy it at a price I like. That is the market solution. The "Institutional" solution would be one of expropriation, a la Eminent Domain or through bribing a State bureaucrat.

Or if that one didn't make you think, how about this comment?

  • According to information published on Fair Trade Labelling Organization's (FLO) website (Fair Trade's umbrella organization), the Fair Trade price paid to coffee farmers is set at $US 1.06 per pound or $US 2.35 per kg (inclusive of a Fair Trade "premium" of $US 5 cents/Ib to be used for development projects within the community).
    The same coffee - after having been processed in northern countries - is marketed and sold to socially-conscious (and naive) consumers under the Fair Trade label at an average retail price of $US 40- $US 50/kg, which means that the HUGE difference between the price paid to small-scale farmers ($US 2.35/KG) and the average retail price of coffee labelled, marketed and sold as Fair Trade ($US 40 to $US 50 per KG) generated from value-addition has ended up enriching the numerous mostly foreign economic agents within the supply chain(i.e. traders, exporters, shippers, processors, marketing agents, wholesalers and retailers, etc.)In this context, one wonders who is helping who...?
    Furthermore, the coffee has not been processed in the country of origin, thus failing to create much needed local employment and to generate income within the local economy. Processing the coffee in the country of origin would also enable coffee producing nations to break free from the dictate of the world market and from the vicious trap cycle of declining prices of coffee on the world market accentuated by increases in production to offset the initial price decline, thus further decreasing world prices and further impoverishing coffee and other primary agricultural commodity producers in poor nations. This is a vicious trap cycle, which the Fair Trade "business" is brilliantly using to its advantage...The Fair Trade "business" is capitalizing and prospering on both declining prices of primary commodities on the world market and on the good conscious and naivete on Western consumers...
    Fair Trade coffee statistics
    -The Fair Trade price paid to coffee farmers ($US 2.35/kg) only represents about 5% of the average retail value of coffee beans sold to consumers under the Fair Trade label ($US 40/kg -$US 50/kg).
    -1 KG of coffee makes on average 50 cups of coffee.
    -The average starting retail price for a cup of coffee in coffee shops or restaurants in the West is $US1-$US2: Thus, the equivalent price paid for a cup of coffee is $US 50/kg to $US 100/kg. The "Fair" Trade price paid to small-scale farmers only represents 2.5%-5% of the average retail price of a cup of coffee in the West.
    In this context, one wonders how "fair" the Fair Trade price paid to coffee farmers is and who is helping who...?

Or you may wish to check out or purchase the book explaining the Fair Trade Fraud


Or you may want to go to the source of a lot of this controversy and ask "IS FAIR-TRADE HELPING FARMERS OR HELPING THEMSELVES?"

Here is part of the article ...

Alex Singleton

Alex Singleton writes about politics from a free-market perspective. You can get his insightful email bulletin (sent every few weeks) by clicking here and you can follow him on Twitter at alexsingletonuk.

The poverty of Fairtrade coffee

“Fairtrade purports to work within the market economy but its rise has been largely based on marketing subsidies and public-sector procurement,” says Tom Clougherty, policy director of the Adam Smith Institute. Despite huge pressures on the public purse, local councils are squandering large sums becoming Fairtrade towns and cities, distributing posters and leaflets to nanny people into only buying Fairtrade. Meanwhile, the Fairtrade Foundation has received over £1.5m from the Department for International Development. It wants more. In December, reminiscent of 1970s-style industrial policy, it called for £50m of development aid to be spent as “strategic investment” on Fairtrade.

Fairtrade coffee is not actually the most ethical form available
Monday sees the start of Fairtrade Fortnight, the time each year when we are hectored into paying more for a cup of coffee. Charities, politicians and primary school teachers will deliver the scheme as an undisputed good. With all this effort, it is a pity Fairtrade does not work.
Fairtrade’s supporters blame the plight of coffee farmers on world prices and ruthless multinational companies. But supporters ignore the real causes of poverty among growers. Farmers I interviewed in Kenya told me that the problems they face are not caused by global influences but their own government’s interference. They are forced to use milling companies granted regional monopolies, who fleece them. They want to boost productivity by using fertiliser, but they cannot afford the inflated prices demanded by the government fertiliser monopoly. Imported tools and machinery would transform their output but are subject to punitive tariffs. Police roadblocks slow their goods and involve money exchanging hands.
Brazil, conversely, pursued free-market reforms and the farmers have mechanised. This has enabled five people and a machine to enjoy the same output as 500 unaided farmers. Yet the Fairtrade Foundation, the lobby group behind the scheme in the UK, seems oblivious to this and admits it has no programmes to encourage the use of technology. Even worse, it is giving counterproductive advice to farmers, encouraging them mix different crops in the same field, thereby cutting productivity and making future mechanisation more difficult.
Despite Fairtrade’s moral halo, there are other, more ethical forms of coffee available. Most Fairtrade coffee on sale in UK supermarkets and on the high street is roasted and packaged in Europe, principally in Belgium and Germany. This is unnecessary and retards development. Farmers working for Costa Rica’s Café Britt have been climbing the economic ladder by not just growing beans but by also doing all of the processing, roasting and packaging and branding themselves. Shipping unroasted green beans to Europe causes them to deteriorate, so not only is Café Britt doing far more to promote economic development than Fairtrade rivals, it is also creating better tasting coffee.
But Café Britt is not welcome on the Fairtrade scheme. Most of Café Britt’s farmers are self-employed small businesspeople who own the land they farm. This is wholly unacceptable to the rigid ideologues at FLO International, Fairtrade’s international certifiers, who will only accredit the farmers if they give up their small business status and join together into a co-operative. “It’s like outlawing private enterprise,” says Dan Cox, former head of the Speciality Coffee Association of America. Many African farmers, organised along tribal lines, are similarly excluded from the scheme. Other producers complain that accreditation is needlessly bureaucratic and costs five times as much as organic certifications.
Café Britt accuses the Fairtrade scheme of failing to understand the cultural realities in countries like Costa Rica where many farmers simply do not want to become part of co-operatives. Unlike campaigners’ romantic vision of developing country co-ops, the overwhelming evidence is that they are breeding grounds for corruption and abuse of workers. Co-operative leaders, who routinely get re-elected in fiddled votes, rake money from ordinary farmers, keeping them in the dark about their output’s true worth.
While true that certification requires an annual inspection (for a fee) these can range from simple visits to requests for paperwork by post. The scheme does not verify wages paid to labourers. Those co-operatives who run free elections are little better, with leaders often unwilling to make tough but necessary choices for fear of losing popularity with their voters. Moreover, an independent investigation into Peruvian Fartraide farms found breaches of Fairtrade rules, with many workers being paid less that that country’s minimum wage and non-certified coffee being passed off as Fairtrade.
Meanwhile, Fairtrade has the effect of encouraging relatively affluent, but not very efficient, producers to stay in the market. Being more affluent, they find it easier to jump the bureaucratic hurdles the scheme imposes. Accordingly, Mexico is the largest single Fairtrade coffee producer, despite the country having free access to US markets and enjoying average wages eighteen times those of its coffee rival Ethiopia, which loses out as a result.
Unfortunately, the juggernaut of Fairtrade marketing has been extremely damaging by crowding out other ethical approaches. While Café Britt’s products are sold globally, its products have found competing in the UK very difficult. Its UK distributor, 100% Arabica, was recently forced out of business. Good African Coffee, a non-Fairtrade Ugandan firm that packages and brands its coffee in Uganda, has done better but has still only gained a very small part Britain’s ethical coffee market.
While high-street chains like Starbucks and Caffe Nero have encouraged consumers to favour higher-quality, speciality coffee, there is growing evidence that Fairtrade is damaging quality, too. Fairtrade farmers typically sell in both Fairtrade and open markets. Because the price in the open market is solely determined by quality, they sell their better quality beans in that market, and then dump their poorer beans into the Fairtrade market, where they are guaranteed a good price regardless. Moreover, because co-operatives mix every farmer’s beans together, farmers who improve quality receive the same payment as those who do not, which discourages improvements. That’s worth considering next time you pop out for a double espresso.
There are often two sides to "truth" and sometimes the side that claims to be on the side of the "poor", "developing nations" are actually more interested in destroying FREE TRADE not helping farmers in developing countries at all.
I guess you will have to decide. However I have been scammed myself too often to simply accept the word of a large organization that seems to be making MORE MONEY themselves than that which is HELPING the farmers they claim to help.

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