As the Economist is also read by our team at ETH I got into the discussion with Stefan blogging his thoughts about the fairtrade article. My response concerning efficiency of fairtrade:

Hi Stefan

Yes, this Economist articles astonished me, too. Therefore I wrote a letter to the magazine - let’s see if they print it ;)

Concerning efficiency of the fairtrade model: I agree, if only 10% of the fairtrade extra charge would reach the farmers it’s not much. This would mean for a fairtrade product that costs 10% more than a conventional product only 1% more would reach the producers. But according to calculations of the Max Havelaar foundation (Switzerland) it’s a lot more as can be seen on page 27 in the annual report 2005. They state the fairtrade premium plus the minimal price make up 6% extra income for the farmers - notably six times more than written in the Economist. For the EUR 1.1 billion fairtrade market this sums up to EUR 66 million more income - a lot for poor people in the south. This is also the explanation why about 5 million people benefit from fairtrade according to the annual report of Max Havelaar.

Instead of bashing on fairtrade, as a clever business man I’d embrace a market with 37% annual growth rate! Well, maybe it’s happening the same with Linux and open source software: “First they ignore you, then they laugh at you, then they fight you, then you win.” (Mohandas Gandhi)

Greetings, Matthias

With great disappointment regarding the quality of the argumentation I read two current articles, “Good food?” and “Voting with your trolley”, in the Economist. I really wonder what’s the point of the authors: Do they really want to tell us that ethical food is bad? Or do they rather want to give us a clean conscience if we don’t buy it? Although there are also several logical flaws in the critique on organic and local food, I concentrate on Fairtrade issues and wrote the following letter to the Economist:

Sir - Critically reviewing systems that circumvent free trade is fine, but yours on Fairtrade (“Good food?” and “Voting with your trolley”, December 9th) is too simplistic. Applying the standard economic argument that Fairtrade directly encourages overproduction assumes perfect market situation which in reality is never the case, especially not in coffee trade. In this $20 billion industry, Fairtrade certified coffee has a share of about 1 percent. However, six trade firms (Nestlé, Volcafe, Taloca, Intercafé, Decotrade and Ecom) control over 70% of the market volume (source: “Kaffeehandelsplatz Schweiz”, BILANZ #16, 2006) thus controlling much of the market mechanisms. And those are harsh in this particular industry: Highest world market price of the Arabica blend was 317 cent per pound in 1977, the lowest ranged at 56 cent in 2001. Today, the price remains highly volatile because of intense financial market enmeshment applying instruments such as hedge funds on coffee. Meanwhile, according to the report in BILANZ, the price of coffee in consuming countries does not correlate with the producing costs at all. While the world market price sank, the power of the traders rose and the sales price of coffee in retail increased - not exactly the prediction of free trade systems with perfect competition.
I believe your suggestion “Proper free trade would be by far the best way to help poor farmers.” is just wrong, since producers will forever be the weak ones when negotiating terms of trade with a multinational. As you pointed out correctly efficiency of help is always improvable. But buying Fairtrade is definitively better than doing nothing or in your case bashing on ethical food and laughing at people who conduct praiseworthy and pay a bit more to purchase Fairtrade products. Obviously, political action is necessary to improve the position of developing countries in world trade on a global level. Nevertheless, do the one and don’t stop the other - because they don’t harm each other.
Matthias Stuermer, Zurich, Switzerland

Update: I just called the Max Havelaar foundation (Switzerland), our national Fairtrade Labelling Organization. Spokesperson Regula Weber referred to their annual report where they deliberately explain what the farmers actually receive by producing Fairtrade certified goods - it’s definitively more than 10% as the Economist generally claims.

Yesterday Peter Weidmann, founder and CEO of teartrade.ch visited our StopArmut meeting in Bern and presented the new fairtrade shop. He stayed for over two hours and answered all our questions on coffee trade, fairtrade, certification, product manufacturing etc. So if you’re still looking for nice and fair christmas gifts, have a look at:

Last week we started the grass root action “Fairteilen” in four Swiss cities. Armed with bundles of little cards with fairtrade slogans like “Fair ist mehr” (fair is more) we talked to pedestrians and tried to convince them to hand-in these fairtrade cards while shopping in a non-fairtrade store, using the “Fairteilen-Leitfaden” as a guideline. One of them was Mrs. Micheline Calmy-Rey, Swiss federal council, accidently passing by the booth and being informed about fairtrade by Heiner Studer, national council of the EVP. So maybe she already distributed some of the cards on her this week’s visit at EU in Bruxel ;)

PS: Today there was a review article in the newspaper “Der Bund” about food labels in Switzerland. Although the research study of WWF, Vier Pfoten and Konsumentenschutz was critized by several lower ranked organizations, the Max Havelaar Stiftung (Schweiz) fairtrade label got rated among the bests.

Ever wanted to change world economy? So our campaign Fairteilen gives you the possibility to express your demand for more fairtrade products by handing in business card-sized slogans to shop or restaurant owners. Sets of 20 cards can be ordered for free on the StopArmut website. Last Sunday we released the statements and winners of the contest and enhanced the event with the screening of WE FEED THE WORLD and a presentation about fairtrade (report with lots of photos).

So now we’re preparing for the official start of this guerilla fairtrade marketing campaign on October 31st in Bern and other cities in Switzerland. You’re warmly welcome to join the street event at 11h at Nägeligasse 11 in Bern, together with EVP parliamentarian Heiner Studer. Or in Zürich with Pfarrer Sieber.

PS: Thanks to the approbation of my colleagues at ETHZ we’re now drinking fairtrade coffee Óromo from gebana ag at our office - and even coffee expert Stefan likes it!