Should I buy fair trade products?

Many of us have seen symbols from Independent-labeling organizations on products at the grocery store, among these “Fair-Trade Certified,” “Non-GMO Project Verified,” and “Certified Gluten-Free.” We trust these labels when we purchase goods at grocery stores. Logically, and as Professor Goldstein pointed out, whether consumers trust labeling organizations depends on the consistency of standards they apply and our perceived benefit when we purchase a product based on what the label symbolizes.

When we buy something labeled fair trade, we expect that a good amount of the purchase price will be returned to small-production farmers who produced this imported good.  Although the fair trade model has been criticized for not providing enough substantial financial benefit relative to benefits available through government programs, there is evidence that the fair trade model is working. (Haight, Colleen. “The Problem with Fair Trade Coffee.” Stanford Social Innovation Review. Summer 2011). A 2014 paper in Journal of Economic Perspectives points out that fair trade has succeeded in increasing economic stability for farmers through access to credit and increased profit, as well as advancing environmental objectives like limiting pesticide use. (Dragusanu, Raluca, Daniele Giovannucci and Nathan Nunn. 2014. "The Economics of Fair Trade." Journal of Economic Perspectives, 28(3): 217-36).

Accountability drives the fair trade model for both producers and consumers. Fair trade labeling organizations do require producers to keep records, submit to audits of farming practices, and pay a fee to become certified. (Elliott, Kimberly A. “Is My Fair Trade Coffee Really Fair? Trends and Challenges in Fair Trade Certification.” Center for Global Development. December 2012). These requirements can be costly for producers, and a producer can lose certification if he/she does not meet the standards. 

Fair trade can be costly for consumers and retailers. Depending on the primary-source commodity, fair trade labeling organizations take a fee from the retailer that goes toward the organization. Fair Trade USA takes ten cents on each pound of coffee sold by retailers. (Haight 2011). In contrast to the labeling model, under direct trade, end product retailers work directly with small producers and avoid paying a labeling organization, theoretically passing on greater profits to producers and bringing producers directly to the market. However, without transparent requirements for certification and a label signifying fair practices, consumers face greater difficulty discerning which retailers are actually paying producers fairly.

Despite some of the burdens imposed on producers and the middleman costs of certification, fair trade labeling supports accountability in labor and environmental standards. Fair trade labeling organizations provide consumers with confidence in the products they are buying and trust in what the labels symbolize. The fair trade labeling model may not be perfect, but on a wide scale consumer basis, it is good enough to inspire confidence in the fair trade label.