CFACT on Leadership Institute's website!

A write up about CFACT's recent speaker event, a night with Adam Shepard, is up on the Leadership Institute's blog! Go check it out, and vote for CFACT! We look forward to keeping in touch with Adam and hope to bring him back next school year. Be sure to check out his book "Scratch Beginnings". It's a great read and an absolutely amazing story.

Free Trade IS Fair Trade

Across the country and around the world, a new fad has developed— “fair trade”. Meant to provide consumers with the opportunity to feel like they are helping the world’s poor, it has become a staple in a line of goods designed to make consumers feel better about their purchases. The University of Minnesota has taken an initiative to offer as much fair trade certified coffee as possible. However, this begs the question: what is fair trade?

The fair trade movement has existed since the 1970s, but didn’t really take hold until the early 1990s, when many fair trade groups came together under the label of the Fair Trade Federation (FTF). The mission of the Federation reads:

“The Fair Trade Federation is the trade association that strengthens and promotes North American organizations fully committed to fair trade. The Federation is part of the global fair trade movement, building equitable and sustainable trading partnerships and creating opportunities to alleviate poverty.”

What does this mean? Basically, believers of fair trade advocate a model where farmers can apply for “fair trade certification,” which enables them to receive a guaranteed price (above the current world market price) for their goods. The idea behind this, as the mission states, is to help alleviate poverty. This is a worthwhile goal to be sure, but how does it work?

Not all farmers are allowed to become fair trade. First, individual farmers are not allowed to apply for certification—they must be cooperative farms. This means that an individual farmer has to team up with numerous other farmers to apply for certification. Cooperatives also cannot be large, must be family owned, and must pay the FTF $2,000 to $4,000 for certification (plus yearly fees and a percentage of coffee gross). With this comes a theoretically huge benefit. Farmers receive a price above the free market value of their coffee. This ideally makes everyone happy. The consumer is helping the poor, the corporation sells more coffee while getting good publicity, and the farmer makes more money. What’s not to like?

Sadly there is much not to like. For starters, many corporations make more profit off of fair trade products than they do from their non-certified goods. This is because the consumer assumes the price increase is benefiting the poor. However, this is not the case. Of the price premium paid for fair trade coffee, almost 90% of it goes to the corporation! Fair trade is a contributing factor in keeping the poor in poverty. Because fair trade is only applicable for small family owned operations, it ignores the plight of the vast majority of coffee laborers. Fair trade helps small land owners, not the workers that make up the world’s poor. Stemming from this, if a small family owned farm wants to grow, it can’t if it wishes to stay a fair trade certified operation. For many farmers, this poses a huge problem. If they grow, they can employ more people which would alleviate poverty, yet the fair trade groups won’t allow this!

One of the largest flaws in the fair trade system is the lack of economic principles. Because of the guaranteed high price of fair trade coffee, many people will become more attracted to becoming coffee farmers. This is catastrophic not only for farmers attempting to become fair trade, but also detrimental to the coffee industry at large. Because of the increased amount of coffee, the overall price of coffee becomes lower. The increased interest in fair trade also poses a problem for farmers lucky enough to have become fair trade certified. There is no guarantee that their beans will be sold at the fair trade price, even if they have complied with all of the FTF’s costly restrictions.

Obviously, fair trade has many flaws. What is a socially conscious consumer to do? The answer is the free market. Coffee has been transformed since the beginnings of the fair trade movement. The rise of Starbucks has created more demand in coffee than ever before. Coffee is no longer viewed as a necessary commodity used to stay awake, but something to be enjoyed. How has this raised the price of coffee? Starbucks (and its competitors) are constantly trying to outdo each other with higher quality coffee from more exotic locations. Because the need for quality is so high, Starbucks is willing to pay more for coffee to ensure the highest quality. No longer are consumers content with cheap coffee. They want quality and are willing to pay for it.

Free trade truly has an impact. Free trade coffee accounts for more than 95% of the world’s coffee, ensuring that every purchase is truly making a difference. All farmers are able to participate in free trade and are able to grow without consequence. Fair trade has noble intentions, but fails to accomplish any of them. Free trade ensures that all farmers are treated equally and fairly. After all, free trade is fair trade.

Internship Information Night!

Collegians for a Constructive Tomorrow (CFACT), the only free market based environmental group on campus, is looking for interns for the 2009-2010 school year! Come to our informational meeting to learn what we do, how to get credit, and enjoy some free pizza! Third floor of Coffman, room 324. Questions? Email oreil034@umn.edu.

Who: Students at the University of Minnesota
Where: Coffman Memorial Union room 324
When: Tuesday April 28th, 6pm
What: Learn how to earn easy credits--and get free pizza!