Fair+Trade

__ Overview __ [|Fair Trade] is a social movement to promote products from farmers in undeveloped countries, believing that free trade harms poor farmers, so they may compete in the market place with larger producers. The ultimate goal of the fair trade is to move the farmers from instability into a position of economic self-sufficiently. They attempt to accomplish this through protective tariffs for developing nations, global standards on working conditions, and trade agreements. The main products promoted are [|coffee], sugar, tea, cocoa, bananas, honey, cotton, and wine. Fair trade sales account for over $3.62 billion every year; 7.5 million disadvantaged farmers currently benefit from the movement in 2008. 



__History and Structure __ Fair Trade arose in the 1940's and 50's with handcrafts, and moved into coffee in the 60's and 70's. The coffee was more of a novelty product though, and people used it to promote the message of fair trade. It was not common, and people had to go out of their way to find it. This caused it to not be very popular. The 80's brought a new look at free trade, and organizations worked to make products more accessible. Coffee and tea were the first products, followed quickly by fruits, nuts, sugar, cocoa, rice, and spices. Labeling and certification organizations, such as the [|Fairtrade Labeling Organization] and [|FairTrade Federation] worked to create independent certifications that allowed the products to be sold where consumers normally shop. With more visible and accessible products, sales have exponentially increase and continue to increase about 50% every year.  

__Support of Fair Trade __ Supporters of fair trade argue that it benefits disadvantaged farmers. Without fair trade, they would not be in a position to compete in the global market and would be overshadowed by the large producers. This approach helps assist them as established farmers, and allows them to become profitable easier. It also allows the farmers to become shareholders in their own organization to allow greater equality in international trade. Also, it shortens the trade chain so producers receive more of the final selling price.

__Criticism __ (I am biased towards the liberty loving supporters of free trade) Critics of Fair Trade are typically supporters of Free Trade. These are usually economists who believe in sound economic principles, such as the Austrian-based [|Ludwig von Mises Institute] or the [|Adam Smith Institute]. They believe that fair trade is ineffective at best, and actually hurts many of the farmers it is supposed to be helping. The Adam Smith Institute published a study named [|Unfair Trade] in February 2008 that examined the details of fair trade in depth. They concluded that fair trade, although supports mean well, is not the way to go. Participation in Fair Trade requires farmers to pay a significant amount to get their products certified as fair trade products, which means some farmers cannot afford it and are disadvantaged because other local farmers can. Sound-money economists feel that free trade is actually fair trade, and that all fair trade attempts to do is establish price floors. [|Price floors] and trying to [|stabilize prices] only lead to prices higher than market levels, which lead to increased production of that product, and while profitable in the short term, the laws of supply and demand dictate that the prices for that product will inevitably crash. A free market approach on the other hand will inevitably lead to real wealth, while a planned approach is not economically viable in the long term. A free market system will naturally diversify and delegate capital to only the most productive and effective producers, while shifting the marginal producers out and onto other tasks they can be more effective at. A free market also opens the economy up to trade with all nations, which is extremely beneficial for the producers.

__Free Trade vs. Fair Trade __ [|Free trade] and [|fair trade] are quite similar in name, but very different in function. Free trade is a belief in allowing people to voluntarily seize marketplace opportunities. It rejects any tariffs, price controls or price-fixing agreements. Free trade exposes the economies in poor countries to the world market. Fair trade, on the other hand, is a belief in using protectionist measures (tariffs and free trade agreements) to isolate the economies of poor countries from the world marketplace. Free trade lowers prices while raising quality, while fair trade attempts to set prices above their market value, essentially in effect creating a subsidy.

__Free Trade Agreements __ Free trade agreements are one of the greatest paradoxes of all time. True free trade is the ability of an individual to trade his goods with anyone in the world he may so desire, without government intervention. Free trade agreements though say that this government-sponsored agreement allows them free trade with nations that have also signed on to the agreement, but penalizes those that have not. The agreements discriminate against lower-priced goods in other countries, creating a system of protectionism in disguise. Since protectionism protects the less efficient domestic producers, and drives out more efficient foreign producers, it forces consumers to spend more money on a good than they otherwise would have to, which leads to an involuntary decreased standard of living. //Free trade agreements, which are supposed to be protecting trade from government intervention,// //are a product of government intervention//. These agreements not only create market distortions and force consumers to buy from less efficient producers though, they also violate national sovereignty. Now how America deals with trade is dependent on what a quasi-governmental international body believes. They are inherently political and rightfully suspicious.The [|World Trade Organization] ([|WTO]) and [|North American Free Trade Agreement] ([|NAFTA]), said only to ensure free transport of goods among the nations, are each over 2 0,000 pages in length. __ Effectiveness of Trade __ Fair trade products make up only a small percentage of sales. No country buys more than 5% of their coffee as fair trade coffee. Although the amount of fair trade products is increasing annually, it is still negligible. Free trade supporters argue that fair trade is a scam. The [|Financial Times] reported, with no surprise to critics, that coffee workers producing "Fair Coffee" in Peru are actually paid below minimum wage. In Unfair Trade, it is stated that most of the fair trade crops are not actually used in fair trade products. Producers may only sell 5-15% of their crops at fair trade prices, because the prices are simply too high. Also, farmers receive only 10% of the premium paid for by the consumer the "fair" product, while retailers pocket the other 90%.

__Work Cited__ Callahan, Gene. Economics For Real People -- An Introduction to the Austrian School. 2nd. Auburn: The Ludwig von Mises Institute, 2002. "Fair Trade." __Wikipedia__. 2008. 12 Dec 2008 . Hazlitt, Henry. Economics in One Lesson. 1st. United States of America: Harper & Brothers, 1946. Paul, Ron. __The Revolution -- A Manifesto__. First. New York: Grand Central Publishing, 2008. Sidwell, Marc. "Unfair Trade." __Adam Smith Institute__ 28 FEB 2008 12 Dec 2008 . <span style="font-family: arial,sans serif;">Tucker, Jeffery. "Free Trade versus Free-trade Agreements." __Mises Economic Blog__. 10 MAR 2008. The Ludgwig von Mises Institute. 12 Dec 2008 <http://blog.mises.org/archives/007889.asp>.

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