Thursday, February 9, 2012

Fair-trade coffee's zero benefit

Fair-trade coffee isn't a scam, but it is hard to find a development program that has attracted so much attention while having so little real impact. The most recent rigorous academic study, carried out by a group of researchers at the University of California, finds zero average impact on coffee grower incomes over 13 years of participation in a fair-trade coffee network. Low impact is due to a flawed program design: growers must pay for FLO (Fair-trade Labeling Organization) certification and bear the costs of compliance with fair-trade standards. When coffee prices exceed the $1.41 threshold (as they do today, with prices at around $2.50), all growers essentially receive the same market price. It is when coffee prices fall below this minimum price that the real benefits of the program kick in. But in these same years of low coffee prices, coffee growers flock to fair-trade certification, lowering the fraction of the fair-trade crop that can be marketed at the higher fair-trade price, thus neutralizing the benefits of the program.

What is more, fair-trade programs continue to encourage the cultivation of more coffee; the best thing for coffee growers around the world would be if everyone grew less.
--Bruce Wydick, Christianity Today, on the case for free-trade coffee