Fair Trade - Is it Really Fair? Konečný, T/Mysliveček,J.

Link: http://myslivecek.com/Fair_Tra...
Source: CERGE-EI

Abstract: Fair Trade certification scheme has the capacity to increase the incomes of both participating and non-participating farmers. The minimum contracting price as part of Fair Trade standards, however, precludes the full realization of the programís potential beneÖts. Despite being consistent with the objective of maximizing farmersí participation in the scheme and under more stringent conditions with the maximization of participating farmersírevenues, the minimum price might reduce their payoffs relative to the free-contracting alternative and paradoxically increase profits of the middlemen whose local monopsony power it originally aimed to retrench. Furthermore, the total surplus generated by Fair Trade cooperatives as the primary form of farmer organization declines, which translates into reduced investment resources available for community investment. From the policy perspective, measures to reduce excesssupply such as relaxed-price setting over a stipulated time period or gradual replacement of participating cooperatives by new applicants could provide a superior alternative.

Keywords

Fair Trade

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