Sunday, 17 February 2008

Fairtrade and competitive prices

The Fairtrade mark on consumer goods indicates that they meet certain standards, such as guaranteeing a minimum price for producers and being sourced from organisations with genuine control by producers, such as cooperatives. You can see them here (

The project is worthy, though a problem is that so few goods are sold with the Fairtrade mark that there is not much competition between them in markets. The Fairtrade standards do not seem to put a maximum price on goods sold with the Fairtrade logo. In the absence of price controls through price competition or Fairtrade restriction, a good with the Fairtrade mark could have high costs in addition to the Fairtrade standards. The shop which sells the product could mark up the price heavily, for example, to get large profits from the good.

A Fairtrade good does not have to display the split of price into Fairtrade parts and other parts (which other things being equal, buyers would like to see lowered). So buyers are not aware of whether the cost difference between Fairtrade and non-Fairtrade goods is going to the producers or to the shop. As more goods are sold under the mark, the cost difference will tend to decline and be paid to the producer.

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