Friday, March 17, 2006

Fair trade: Foolish Economics or Foolable Spin?

"An economy built on relationships" sayz

The details:
"By and large the people we see coming here are coming because they can't feed their families and they can't send their children to school," said Joan Harper of the archdiocesan Office of Justice and Peace. "That comes from not being paid a fair wage for their products and for the work they do. If people are making coffee and they get a fair wage, they are going to stay producing coffee."

Typically coffee farmers get paid 20 to 60 cents per pound of coffee. Fair trade buyers are paying farmers $1.26 per pound for non-organic coffee and $1.41 per pound for certified organic coffee.

Consumers of fair trade coffee end up paying three cents more per cup of coffee, said Allis Druffel, community services director at Holy Family Church in South Pasadena.

The parish now purchases fair trade coffee for its meetings and gatherings and also resells the product to parishioners so that Nicaraguan farmers can earn a fair wage.

"This is not about politics. It's about an equal exchange. This encompasses every single Catholic social teaching principle," said Druffel during a recent workshop held at USC to launch a coordinated Fair Trade movement in Los Angeles.

The fair trade system is built on relationships, said Michael Sheridan, director of the CRS Fair Trade Coffee Program.

"These are relationships based on mutual respect and mutual benefit," said Sheridan who lived in Nicaragua for several years. "It flies in the face of the greed instinct." Consumers, he added, are often "excited" to know they can participate in fair trade.

Fair trade now includes many more products besides coffee, like tea, chocolate, rice and sugar. Key to the fair trade system are organizations that certify specific products as reaching a fair trade standard.
So, is this for real? Well, that depends on who you ask.

Jordan Ballor, associate editor of the Acton Institute for the Study of Religion & Liberty, isn't buying it. Why not? While he finds the fair trade approach more commendable than government-controlled pricing policies or taxes, he still sees the "fair trade" value as an artificial imposition on the market. This introduces unintended consequences that the supporters of fair trade have not considered. Like these:
Such artificial and arbitrary measures fly in the face of economic reality. The law of supply and demand is a major player in regulating the price of coffee, which is bought and sold like any other commodity. The economic price mechanism takes into account a variety of factors that an artificial price standard cannot hope to deal with justly.

Fair traders also ignore one of the main reasons coffee growers face price drops: worldwide production has greatly expanded, especially in Southeast Asia. Increased supply equals lower prices given a static demand.

From 1995 to 2002, according to and the International Coffee Organization, Brazil increased coffee exports by more than 200 percent. Colombia has shown a slight decline in production over the same period, while Vietnam’s production has almost tripled. So the three largest exporters of coffee in the world had all either maintained or increased their production during the seven-year period. Worldwide coffee production peaked in 2002 and because of a long buildup of surplus, finally showed a 15 percent decline last year. There’s simply too much coffee on the market.

Even though the U.S. is one of the largest importers of coffee in the world, per capita consumption of coffee has declined steadily, dropping from 38.8 gallons in 1960 to 22 gallons in 2000, according to the USDA Foreign Agricultural Service. This is indicative of a downward trend in global demand, which, combined with increased supply, is a major cause of the plummet in coffee prices.

Most troubling is the fact that the fair trade movement effectively pits the poor against the poor. It’s a case of coffee farmers in the fair trade co-ops versus conventional farmers. Those who sell coffee in the traditional commercial manner are forced to compete with those who are artificially enabled by the fair trade movement to maintain production through such guilt-driven, market-based subsidies.

The Apostle calls us to live godly lives, to “keep these instructions without partiality, and to do nothing out of favoritism” (1 Ti. 5:21 NIV). This stems from our proper reflection of God’s holiness and justice, “For God does not show favoritism” (Ro. 2:11 NIV). While these words are spoken especially in regard to salvation history, they have application to our morally-informed economic lives. Religious groups especially should reevaluate their position with respect to fair trade in the interest of true justice. The fair trade movement needs to take into consideration the poor who are left out of their arbitrarily constructed system of privilege.
He offers an alternative:
Rather than attempting vainly to maintain the status quo, the fair trade movement should look for other, more innovative ways to provide resources for the world’s poor. For example, Ronald J. Sider in his book Rich Christians in an Age of Hunger (Dallas: Word Publishing, 1997, pp. 233-36) outlines ideas about micro-enterprise development that might offer a better solution. Those who care about small coffee growers, according to Sider’s view, might invest capital and enable farmers to grow crops that are in higher demand.

In this way, those who choose to stay in the coffee growing business would see less competition and, in theory, rising prices resulting from decreased supply. How much better than fair trade price fixing and guilt trips, which demand partiality for a select group of the poor.
Mr. Ballor raises some valid points. If we Christians help some of the poor at the expense of others, have we restored social justice? How do we decide whom among the poor will benefit and whom will not?

The advocates of "fair trade" would probably say that we should not make the perfect the enemy of the good. They would say that helping any of the poor beats leaving all of them at the mercy of exploitation. They would say that many of the countries in which coffee producers work are ruled by corrupt, autocratic regimes. Therefore, how can they be getting a fair price?

I say that if the market will bear the fair traders, then more power to them. Having said that, why can't the fair traders--or others--help the poor on "micro-enterprise development?" Why can't we offer more both/and propositions? Why can't we quit carrying water for our favorite political ideologies and start preaching the Gospel in action?

The relationships we form with our neighbors enliven our communities. The relationships our communities form with our neighboring communities enliven our region. Et Cetera.

Yes, it's that hard. Yes, it's that necessary.

In the end, it's our call: Sheep or Goats. Which one do we want to be?