IS "FAIR TRADE" FAIR TO CONSUMERS?
June 10, 2004
Retailers promote "fair trade" by selling goods such as a coffee and bananas at a price higher than the world price, then donating the extra cash back to the growers in developing countries.
However, this seemingly altruistic move may benefit retailers more than growers, as they freely increase prices to offset the costs of providing goods at so-called fair trade prices:
- The British supermarket chain Sainsbury's sells fair trade bananas at four times above the world price and 16 times what growers receive.
- Raw Arabica coffee costs about 60 cents per pound to produce, sells for 82 cents on the world market, but sells for a minimum fair trade price of $1.26 per pound.
- In one case, Borders Book Store Cafe in New York City sells fair trade coffee for $16.00 per pound (the price of their regular coffee is $12.00 per pound), but growers receive only $1.41 per pound.
To further complicate the issue, labeling and wording creates confusion for consumers. In one case, Allegro (the coffee unit of Whole Foods Market) promoted a program to donate 5 percent of sales from selected coffees back to growers. What they didn't tell consumers, though, was that the 5 percent was a portion of a lower price between Allegro and Whole Foods, not the retail price paid by consumers.
Moreover, critics of inflated prices are reluctant to criticize retailers, for fear they will stop carrying fair trade goods.
Some stores, however, are taking a hit in order to avoid the reputation of using fair trade goods as an excuse to excessively raise prices. Wild Oats Natural Marketplace stores, based in Boulder, Colo., is pricing fair trade organic bananas at the same price as regular organic bananas, and fair trade coffee at $9.99 per pound, the same price as regular organic coffee.
Sources: Steve Stecklow and Erin White, "At Some Retailers, 'Fair Trade' Carries a Very High Cost," and "How Fair is Fair Trade? That's Tough to Figure," Wall Street Journal, June 8, 2004.
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