Fair Trade?

It is fascinating to watch Fair Trade products becoming more and more popular. I myself was accustomed to buying them sometimes, until fairly recently, when I became sceptical of the thinking behind them.

Fair Trade is a classic example of a movement which has the highest aims, of helping poor farmers. But it can only cause harm, because it is based on faulty economic thinking. It is not Fair Trade but free trade which lifts countries out of poverty, in a transaction which benefits both buyer and seller.

Unfortunately, because Fair Trade is backed by many charities including Christian Aid and Oxfam, anyone questioning it will appear uncharitable.

But questioning the aims of these charities is not the point. The long-term results of NGOs meddling with the market will be to damage the interests of the poor.

I am not aware of any single conclusive refutation of Fair Trade schemes available on the web but posts like this one from The Globalization Institute are invaluable:

Taking coffee as the example, it is said that the grower gets about 5 pence from each £2 cup, or 2.5%. This may seem unfair. But the real unfairness is not that the raw material has a low price, but that the European Union 'protects' itself against processed, packaged end products.

UPDATE, 4/4/05: The Institute now links to this piece attacking Fair Trade in the Spectator.