The Many Myths about Fair Trade

Posted on September 10th, 2019

The Many Myths about Fair Trade

The Many Myths about Fair Trade

In spite of beginning more than four decades earlier, the Fair Trade movement has really taken off in the 21st century. Over 90% of UK consumers now recognize the Fairtrade International product label, and over 60% of Americans recognize the Fair Trade Certified seal.

But while many consumers might be somewhat familiar with Fair Trade, many are still skeptical of the movement's impact and validity, leading to a whole bunch of misconceptions that unfortunately still persist today. Some have even floated the idea that “Fair Trade” itself is a myth, though these tend to be instances of economists mistakenly using the phrase “fair trade” to refer to protectionist policies, or cherry-picking unflattering pieces of research to shoot down Fair Trade Organizations that can't adequately enforce their own rules (something governments everywhere have been struggling to do for centuries). To help you navigate these concerns and misconceptions, here's a quick run-down of some of the most common myths about Fair Trade.

Myth #1: Fair Trade refers mainly to food products.

It's true that a majority of Fair Trade goods sold in today's markets consist of agricultural food and drink products like coffee, chocolate, and bananas. However, the Fair Trade movement actually started with hand-made items and only later incorporated specific agricultural products. Although you may be familiar with Fair Trade because you saw a label on a bag of coffee at your local supermarket, many Fair Trade shopping destinations––like our marketplace––also specialize in clothing, bath, beauty, and assorted home goods.

Myth #2: Fair Trade products are more expensive than conventionally sourced goods.

There's no denying that prices between Fair Trade and their non-Fair Trade equivalents often differ. For many Fair Trade goods––particularly, the more popular ones like coffee and bananas––that difference might only come down to mere cents. But in other cases, such as with clothing, the price is higher; mainly because the quality is too. It's really the case that much of the non-Fair Trade stuff we buy is actually problematically cheap––a potentially destructive scenario we've gotten very used to in a world of fast fashion and fast food. Fair Trade goods aren't sold in the same volume as other goods and often have higher production costs to account for better labor conditions and materials.

Myth#3: Producers receive little of the extra cost that consumers pay for Fair Trade goods.

Many people believe that the difference in retail prices between Fair Trade and other goods represents how much extra money Fair Trade producers receive from each sale, but this is not the case. Fair Trade Organizations work to guarantee that producers are able to offer their goods at a minimum acceptable price regardless of how the global market is doing. This prevents small producers from being bankrupted by price decreases that larger producers can usually absorb until prices go back up. If the market price is above that minimum price, Fair Trade producers receive the market price. So, regardless of what the price is at the supermarket, producers have already been sufficiently compensated for their product––an insensible tool for any community working their way out of extreme poverty. In other instances, Fair Trade premiums also go to fund community development projects that (especially marginalized) farmers determine themselves, democratically.

Myth #4: Fair Trade labels don't necessarily guarantee anything.

The abundance of Fair Trade (and seemingly related) labels today prompts many to assume that a Fair Trade designation doesn't mean a whole lot. The truth is, it just depends on the label! Many popular labels such as Fairtrade International and the WFTO Product Label conduct rigorous audits of suppliers to ensure that they meet Fair Trade standards, but these processes obviously differ among the 500+ certification labels out there. Fair Trade Organizations (FTOs) have also come under scrutiny for being unable to guarantee compliance to standards such as Fair Payment, but that fact, of course, doesn't mean that Fair Trade products are some sort of scam. FTOs are actively working to find ways to guarantee compliance with extremely complicated issues (like fair wages), and they are continuously improving.

Myth #5: Fair Trade is inefficient.

This is the most pressing criticism of Fair Trade because it has the potential to invalidate many of the specific aims of the larger movement. Here are the most common forms that this argument about inefficiency take:

  1. Certain studies like this one have shown that some Fair Trade producers don't actually receive higher wages.
  2. By simplifying supply chains, Fair Trade cuts out middlemen and creates job losses.
  3. Fair Trade keeps inefficient producers in relative poverty instead of letting the free market lift them up.

These are all understandable criticisms, and can't be totally dispelled in a few hundred words. Still, here are some things to keep in mind when you hear them.

  1. Despite the fact that other studies suggest that Fair Trade actually increases wages, it's true that authors like this one have used studies reporting relatively low wages among Fair Trade producers in order to assert that economic benefits don't reach the small producers. However, these findings are case-specific; if the author had paid attention to the conclusion of the report, he would have noticed it suggests only that the existing Fair Trade model used in this case was poorly suited to the needs of that agrarian economy, and that the standards should be revised. In other words, Fair Trade as a general approach isn't inherently flawed, but may need to be practiced differently depending on many contextual factors. And, as mentioned above with issues like Fair Payment, that work is being done all the time.
  2. Interestingly, this study suggests that introducing Fair Traders into markets serves producers that middlemen cannot, and also reduces the national poverty gap. Additionally, traditional supply chains consisting of many middle-men concentrate profits on traders rather than producers. To those who argue that Fair Trade is bad for developing economies, we might ask: is it healthier to have a country full of wealthy traders who squeeze potential profits from the industry and limit their market capacity, or a country full of thriving producers who can keep their own wealth and grow sustainably?
  3. The extra profits that Fair Trade producers receive comes with the condition that those producers have structures in place to improve their operations, support community development, and more. Check out our 7 Core Principles of Ethical Production to see what we look for to make sure our sellers are doing the most to help uplift their communities.

Many who criticize Fair Trade today have referenced studies to show that the movement isn't doing enough to help alleviate poverty, but the task at hand is anything but an easy one––and the effects vary significantly from case to case. One thing to keep in mind, though, is that Fair Trade seeks to be effective where many governments and businesses have struggled, ignored, or simply failed: in ensuring human rights for producers everywhere are protected, and in giving hope to those who need it. It's important to consider all of these misconceptions before clipping the wings of a movement that has a growing track record of success, and great potential for the future.

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