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The challenge of fair-trade chocolate

Fair trade brought sweet success to Dominican cacao farmers. Why more demand might take profits away.

(Page 3 of 3)

“They’re making their money by saying everyone else is crooked,” he says. “And by doing this, they’re pushing down the demand for perfectly legitimately traded coffee.”

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Other free-market advocates are less critical. “If an individual consumer wants to pay above-market price to get a warm fuzzy feeling, I have no problem at all,” says Sallie James, a trade-policy analyst at the Cato Institute, a libertarian think tank in Washington, D.C. “As long as it’s not coercive and as long as taxpayers are not forced to pay above-market prices, I’ve got nothing against it.”

Fair-trade proponents say that the practice doesn’t artificially bloat prices. Rather, it accounts for costs that the free market fails to include, such as those required to farm sustainably and maintain a viable community. Since there are precedents to this approach in the developed world, like the minimum wage, they argue, why not apply the same principles to internationally traded goods?

“We have to see smallholder producers as more than just economic actors responding to price signals,” says Daniel Jaffee, a sociologist at Washington State University in Vancouver. “To force [them] to basically compete on the unprotected world market is a recipe for social and ecological disaster.”

A growing number of impact studies indicate that, whatever its long-term prognosis, fair trade has improved the lot of some small producers. One study found that a floor on prices lessened Nicaraguan coffee farmers’ vulnerability to market fluctuations. Another in Bolivia concluded that fair trade not only reduced poverty, but the potential for conflict as well. It also increased what buyers were willing to pay even in non-fair-trade markets.

“Yes, it makes a difference,” says Professor Jaffee, who studied fair-trade and conventional coffee farmers in Mexico, but the costs of fair-trade certification and administration were prohibitive for some, he says.

Like other initially small movements that go mainstream, some wonder if fair trade might fall victim to its own success. Jaffee has noted that large firms’ entry into the fair-trade market has partially undermined the movement’s founding principles.

“The entry of large commercial firms has worked against raising minimum prices,” he says.

“What was a clear living wage in the late ’80s when the movement was founded [is] less so now.”

But Raynolds points out that although large firms have entered the market, the smaller players, like the nonprofit Equal Exchange, CONACADO’s US buyer, never got pushed out.