Friday, February 24, 2012

Any point in Fair Trade coffee & chocolate?

Aid Writing links to a post by James Choi discussing fair trade coffee and the finding that it has in fact zero-impact on coffee producers. I haven't read the study, but presumably zero impact is all the more unexpected since you would more likely expect a positive effect simply due to self-selection effects, even if steps are taken to try and minimise their impact on the outcome.

In any case, the reason given for zero effect is that high coffee prices mean that the guaranteed price offered under fair trade is actually below market price.

As it happens, I recently read The Chocolate Nations which, apart from providing an interesting insight into the importance of cocoa for Ghana and Cote d'Ivoire, has similar findings for fair-trade chocolate. Basically all cocoa buyers offer certain incentives so that producers will sell to them, such as tools, household items etc., and ultimately an additional financial incentive from fair-trade companies when cocoa prices are high anyway is made irrelevant.

I suppose the question is what will happen if and when prices come down... The coffee summary suggests that so many flock to fair-trade certification that the share that can be given the higher mark-up falls, thus still neutralising the effect. Or do companies form long-standing commitments with those producers who stick by them even when prices are high so that those serving the fair-trade market reap the benefits while the others bear the brunt?

In any case, it is interesting to see that the simple story that western consumers can "pay more to pass on more benefit" hides a rather more complicated story, although I'm not sure it means that fair-trade is totally useless....

'via Blog this'

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