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Making the case for choosing free trade

By Daniel Millenson

Section: Opinions

October 7, 2005

Over the past year, student leaders and activists at Brandeis have drawn increasing support for allowing only fair trade coffee to be served on campus. Although I do not doubt these students good intentions, so-called fair trade practices may actually end up hurting those growers in developing countries we all want to help, while unjustifiably raising coffee prices on campus.

Fair Trade is built around the idea of paying growers a fairer (higher) price for their coffee. According to TransFair USA (www.transfairusa.org), one of the non-governmental organizations (NGOs) responsible for certifying fair trade products, this fair trade price means that farmers can feed their families and that their children can go to school instead of working in the fields. Unfortunately, this benevolent intent rests on a faulty premise that farmers can receive a higher price without damaging their sales. However, a fairer price entails just that and, by extension, may actually reduce farmers income. In some cases, farmers might be driven out of business entirely.

In fact, not only does that fairer price boost what students pay at Java City by $0.20 or 17 percent per cup, (the low estimate according to Student Senate leaders), but it also hurts farmers in developing countries overall. Coffee, like copper, corn and crude oil, is a commodity. That means that no matter where or whom it comes from, the product will exhibit almost no difference in quality and will therefore command the same price, set by global markets. So, for example, just as crude oil from Norway costs the same as crude oil from Russia, coffee from Honduras costs and tastes the same as coffee from the Dominican Republic. In addition, unlike oil, coffee remains a luxury good, easily substituted with other caffeinated beverages or, for those without a severe coffee addiction, given up entirely. Thus, while 80 percent of us students claim we are willing to stomach higher costs for coffee we deem more ethically acceptable, our wallets may sing a different tune. Even more important, the rest of world will not swallow these price hikes, and by encouraging farmers to switch to fair trade practices (i.e. employing more expensive farming methods, charging higher prices to wholesalers, etc.), we undermine their competitiveness in the global market, sadly sacrificing sales, profits and income in the name of higher quality of life.

Many argue that organic or fair trade coffee represents an entirely different product than normal, free trade coffee. Yet the fact that cheaper (and identical-tasting) free trade coffee exists as such a close substitute means that fair trade and organic coffees will never grow beyond a certain niche market, eliminating farmers opportunities for growth and expansion. But would it benefit farmers if the United States as a whole purchased only fair trade coffee? Regrettably, the answer is again no. The basic laws of supply and demand tell us that a reduction in US coffee consumption would accompany the inevitable price increase, resulting in higher income for some farmers, but lower incomes or unemployment for many others, leaving them even more destitute than before.

Improving the lives of those in developing countries is an important goal worth supporting. But if we really want to improve the lives of those in developing nations, we should take a look at our own federal budget and ax the billions of dollars of agricultural subsidies that let US farmers unfairly under-price their own commodities, denying third world farmers a shot at profitable exports and prosperity. If were serious about truly fair trade, well choose free trade.

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