Is Fair Trade unfair?

I’ll let the Adam Smith Institute tell it how it is on how unfair Fair Trade may be and what the alternatives are. You can download a pdf of the report Unfair Trade.

“Unfair Trade argues that for all its good intentions, Fairtrade is not fair. Firstly, by guaranteeing certified farmers a minimum price for their goods, it can distort local markets leaving other farmers even worse off. Secondly, only about 10 percent of the premium paid by consumers actually makes it to the producer, which makes it an inefficient way of helping the poor. Most importantly, Fairtrade does little to aid economic development, focusing instead on sustaining farmers in their current state.”

Fairer than fair trade chocolate

One of the founders of Malagasy, a company from the north of England making chocolate in Madagasca, tells how it was established to help with poverty on the island. Like The Grenada Chocolate Company, the idea is to make chocolate locally rather than export a cheap commodity. It’s known as Equitrade.

Writing on The Guardian’s Word of Mouth Neil Kelsall says:

“…we wanted to make it all in the country of origin – in our case, in Madagascar, with the Malagasy people. Yes, the whole process – farming, fermentation, drying, roasting, winnowing, grinding, mixing, refining, conching, tempering, moulding, packaging, and transportation.

This is what is termed as “added value”. Compared to exporting farmed cash crops (in this case cocoa) it’s worth many times more for Madagascar. Why do we do it? Because we want to help the people trade their way out of poverty rather than accept charity. If they acquire the skills and equipment they can make quality products that we want to buy whilst satisfying the stakeholders.”

I’ve often wondered if the same could be done for coffee but am told it needs to be roasted locally. Why then is so much coffee imported to Australia from Italy?