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Fair Trade coffee does not help

Letter to the Editor | Wednesday, April 4, 2007

Although Matt Palkert titled his April 3 guest column “The economics of Fair Trade: Responding to a complex problem,” I didn’t notice where he actually responded to the complex problems. It surprises me that despite the fact that eminent economists have voiced very legitimate objections to Fair Trade, advocates of Fair Trade seem to have complete disregard for those arguments. I have yet to read a proponent of Fair Trade who actually addresses those objections directly instead of using lofty or what I call “let’s hold hands and sing John Lennon songs” arguments. I, for one, am a skeptic of Fair Trade. I believe Fair Trade acts as a subsidy to farmers and governments, thereby taking away incentives to move away from an agrarian economy. Third World countries are poor for the very reason that their economies are too dependent on agriculture. The only way Third World countries are ever going to achieve higher levels of economic growth and thereby eliminate poverty on the large scale is by becoming industrialized. If you keep subsidizing farmers and holding their hands, surely it will take away incentives from their governments to transition from an agrarian economy to one that’s based on manufacturing. Presumably the reason Mr. Arias, the Ugandan coffee farmer, was so exuberant at the prospect of his sons going to secondary school is in the hope that his sons will be able to get better, higher-paying jobs and improve the family’s standard of living. However, if Uganda fails to industrialize and remains a commodity exporter, how will his sons be able to get better jobs and move away from farming? Uganda and other Third World countries need to industrialize, improve infrastructure, bring in investment, etc. All this is only possible if the government and the people decide to move away from an economy that always falls victim to the declining terms of trade and keeps them in perpetual dependency. If the objective is to help farmers in third-world countries, there are many other sensible and effective ways to achieve this. Fair Trade needs to be examined in light of a broader, long-term perspective. While Fair Trade coffee certainly adds a jolt of self-righteousness along with its jolt of caffeine in the morning, I believe the long term effects may not be as rosy as people make it out to be. Finally, let me point out to Palkert that I am no economist – just an average Joe (no pun intended).

Atul Adhikary

business graduate student

Fischer Graduate Housing

April 3