Two Unbelieveably Weak Articles in the Economist
Monday December 11th 2006, 13:51h
Filed under: Development Cooperation, Fairtrade, Politics

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.


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