Fair Trade: A Costly Fallacy

Jim Gaffigan (one of my favorite comedians) has a great line where he states, “Organic is a grocery term meaning twice as expensive.” It seems this stereotype has carried over to people’s perceptions of Fair Trade products as well though. It makes sense in theory. Paying producers more means that the sellers need to charge more to make money still. Yet, take a simple visit to Amazon.com and search for "Ethiopian coffee." You'll find a 5 pound bag for $39.99. Then look up “Ethiopian Fair Trade coffee” and you’ll find a 5 pound bag for $38.95. That's a perfect example that Fair Trade products are not always more expensive. Now of course Fair Trade coffee is going to be more expensive than brands like Maxwell House and Folgers, but those are mass produced with very little care for quality.

            Now you may be thinking, how could Fair Trade products compete with other products in a normal market? The answer: supply chains. Fair Trade products cut out the middle men. If you watch Black Gold, a documentary on Ethiopian coffee farmers, they explain how middle men will buy the coffee at the farmers for a small percentage of what it would be worth on the direct market. Fair Trade cuts these middle men out of the equation, lessening the cost and allowing most of the profit to go directly to the producers.

The products that are priced above competitors might end up higher due to a simple supply shortage. There hasn’t been a large enough market yet for Fair Trade producers to create more goods. As the market grows, as it has been doing, the producers will be able to create more goods which will drive production costs down. This means the Fair Trade market will become even more competitive with the regular goods market in terms of prices. Eventually if you can’t rationalize buying Fair Trade products on a moral basis, you’ll see the economic benefits in lower prices.