Does the ‘fairness’ of Fairtrade coffee matter?

According to The Weekend Australian, regular commenter Sinclair Davidson and Tim Wilson of the Institute of Public Affairs are going to the Australian Competition and Consumer Commission, alleging that Oxfam has engaged in misleading or deceptive conduct over its Fairtrade coffee. According to Oxfam:

The term Fairtrade refers to an independently audited product certification and labelling system that ensures those who grow and produce coffee get a fair go. It does this by:

Paying farmers and workers a fair price for their work
Helping them gain skills and knowledge to develop their businesses in the global economy
Providing a certification and labelling system to ensure Fairtrade standards are met and that the benefits of Fairtrade get back to the farmer who produced the product

But according to Tim, drawing in part on this Cato article:

there was evidence that Fairtrade products could do more harm than good for coffee producers in undeveloped nations. He cited reports alleging producers had been charged thousands of dollars to become certified Fairtrade providers and some labourers received as little as $3 a day.

I know nothing about how much Fairtrade affects coffee producers, but if we were to be a little cynical about Fairtrade consumers it perhaps doesn’t matter much whether it is good for producers or not. As I have long argued (eg here and here) there is a market for political gestures, and how effective the gesture is likely to be doesn’t seem to be a huge part of the calculation.

Business has seen the opportunity. In Tim Harford’s The Undercover Economist, in an interesting chapter on the retail coffee market, he notes how a UK coffee chain was able to price discriminate by offering Fairtrade coffee – it was a useful way of identifying those customers prepared to pay more than the standard price because they could add altruistic feeling to the sugar and milk in their coffee. I’m not sure whether local cafes price discriminate or not with Fairtrade coffee, but even if not it is still for them presumably a useful branding exercise to attract customers who want to appear to have a ‘social conscience’.

If Fairtrade is really selling a benefit to the coffee drinker rather than the coffee producer, it is perhaps no more deceptive than the other branding exercises designed to create image associations with particular products that have little to do with their intrinsic qualities or characteristics.


In other coffee news, the best item in yesterday’s Age was a brief report saying that Brunetti’s, the best cafe in Carlton, the place that puts the latte into latte leftism, is to stay. The threat that it may be forced to move or close by a landlord massively increasing the rent even made it to the ABC TV evening news, such is Brunetti’s status in inner Melbourne. Clearly the landlord had been stung badly by the negative publicity, as notices have appeared in Brunetti’s windows trying to salvage her reputation, as part of the deal finally struck by which Brunetti’s would stay where it is. I wonder how many thousands she knocked off her rental ask to try to get her reputation back?

113 thoughts on “Does the ‘fairness’ of Fairtrade coffee matter?

  1. There is a question about appropriate safety standards. Are the appropriate standards in the under-developed countries the same as they are in developed countries? To what extent are safety standards determined by the demands of the population? Is it appropriate for the developed world to tell the developing world that certain activities should be banned on safety grounds, even if doing so makes it harder for their citizens to earn a living? I don’t know the answer to this question.


  2. 100, we can stop now.

    Damien I was just using Bhopal as an example of how companies can get away with unsafe practices in poor countries – so they do. Immoral. (I’m going to use the word in every comment).

    Wikipedia has: “As a long-term cause of the catastrophe, authorities had tried and failed to persuade Carbide to build the plant away from densely populated areas. Carbide explained their refusal on the expense such a move would incur …. In the early 1980s, the demand for pesticides had fallen: the factory was making a loss and overproducing MIC that was not being sold, leading to a series of cost-cutting measures from around 1982 onwards. These measures affected the two interrelated areas of workers and their conditions, and the equipment and safety regulations installed at the plant”


  3. I’m blaming the Christian Brothers: you can go to a Catholic school, and maybe get better marks, but the Catholic schools never did have much truck with the Bible, so Sinclair probably never read “And now abideth faith, hope, charity, these three; but the greatest of these is charity.”

    Sorry, I have read the entire Bible, both the original and the unauthorised sequel. There is nothing wrong with giving money to charity, or spending your own money in any manner you chose, but there is something wrong when charities misrepresent their product. We allege this has happened in the case of Fairtrade coffee. Now the macro claim about the long run effects are probably not actionable (and I have said so before, indeed Oxfam picked on that suggesting that I don’t think our complaint is serious) but we document specific (alleged) violations of the Fairtrade claim and we point to the sections of the Act that prohibit making specific claims that are likely to mislead consumers.

    The timing was fortunate and oppourtunistic. We did not plan the submission on the basis of Fairtrade fortnight and then embarrassing Oxfam. We undertook the complaint and discovered expost that Fairtrade fortnight was about to occur and timed the release for the end of the week, as opposed to the beginning of the week. Damien this is a serious complaint that would have occurred anyway. Exploiting farmers is not illegal (perhaps immoral – but that is a value judgement), exploiting consumers in some circumstances is illegal, and Tim and I allege those circumstance have arisen.


  4. Sorry, meant to put blockquotes around the first sentence from Russel’s comment. Andrew looks like you’re getting your own thread of doom.


  5. Sinclair – Yes, looks that way. As it still seems civil, I will let it run for a little longer.


  6. “but there is something wrong when charities misrepresent their product” – – if the Fair Trade people have misrepresented their product, do you think they did so knowingly?

    I might disagree with “There is nothing wrong with … spending your own money in any manner you chose” but at 106 comments let’s leave it for another time.


  7. If they did not know, they should have known. Afterall, the claim is that monitoring takes place.


  8. Russell, I don’t understand your major point, which seems to be that the owners of sweatshops make inordinate profits from their sweatshops. Now, I’m interested in people having as good lives as they possibly can, which in the case of people who might potentially work in sweatshops, probably means that those people have as good wages as possible. It seems to me that you think that the level of profits of the owners of these businesses is inordinate.

    The question it seems to me that you have to answer, is what would be a reasonable level of profits? What distinguishes reasonable from unreasonable? (This is not to say what I think constitutes a “reasonable” level of profits.) What is that basis of your conceptualisation of “reasonable profits”?

    It seems to me that the core of this discussion, which I havn’t seen addressed in your comments, is that sweatshops pay people better wages than they otherwise would receive (if they worked elsewhere). The offer to the worker is better than elsewhere. The fact that it is not as good as many people in the west might like probably doesn’t matter much to the people being employed (this is my guess). How can I, or anyone else, “make” companies pay people more?

    “I’m not sure what the fair trade argument is from Doug Cameron – something about a level playing field in wages and conditions? Anyway I’d be very surprised if organised labour in Australia has any objection to Oxfam’s Fair Trade project.”

    The “fair trade” thing from Doug Cameron (amongst others) that you often hear about is not the coffee “Fair Trade” thing – my understanding about the Doug Cameron et al version of it is that there’s an insistence on minimum labour standards and perhaps environmental standards (unsure of that) before free trade deals are put into effect. In one sense, these “fair trade” deals could be seen as protectionist, which is often why they’re pilloried.


  9. Sacha – “The offer to the worker is better than elsewhere. The fact that it is not as good as many people in the west might like probably doesn’t matter much to the people being employed” is similar to Leopold’s question “a worker being paid sweatshop wages by Nike is evil; the same worker being paid sweatshop wages by Oxfam is fine?”

    My point is that morality isn’t inherent in the dollars and cents, it lies with the person creating the exchange. If Oxfam finds enough money out of its funds to pay some women $1 a day to run a women’s co-op producing craft goods, that’s a good thing; if Nike sets up a factory there and pays women $1 a day, and from their labour makes huge profits, it’s immoral. As to when the line is crossed, well, that varies (and I suppose it’s much easier to judge in others!) but excess is fairly obvious. (Not thinking of fridges filled with champagne as much as gold plated taps etc)

    “How can I, or anyone else, “make” companies pay people more?” Creating a demand for Fair Trade products? Naming and shaming companies that exploit their workers?


  10. If Russell used the words “not nice” instead of “immoral” then the conversation may make sense to more people.

    I agree it’s nice to give people money.

    But the offer still holds to employ my associates in Cambodia Russell. Only $50/month will make them more than happy. In some cases it will be a 66% pay increase! And if you aren’t able to do that at the moment… do you think the world may be just a bit better if we allow Nike to do it?

    Just until you get your funding together. 🙂


  11. If it is immoral to have money and not give it away… then is it also immoral to not earn that money in the first place when you have an opportunity? The consequence is the same and both outcomes are a result of a free choice.

    I could choose to work hard and make lots of money. Then I would apparently be “immoral” if I didn’t give x% of it away.

    Instead I chose to quit my job and travel the world as a homeless unemployed bum. Consequently I’m not making much money and not giving much to the poor. I am making a decision that makes me better off (ie more happy) but provides less help to the poor. By the above standards (ie it is immoral not to sacrifice my happiness for poor people), it seems that I am more immoral than Nike.



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