“Fair Trade” products have carved out a decent little niche for themselves in the market, and are becoming increasingly popular among guilty white liberals. Anytime I hear anything described as “fair” my instinct is to immediately become suspicious, as “fair” is a completely and totally subjective term. Of course, praxeology tells us that every voluntary transaction is fair by definition, otherwise one party or the other would not have agreed to it. The existence of “fair trade” products then implies that there is something unfair about the other products in the market. Given that fair trade products universally cost more (costing more seems to be the entire point) than the going market rate for a particular product, the implication is that voluntary market transactions are inherently unfair. So already, without any serious analysis, you can tell that the entire premise of “fair trade” products is anti-market, and depends on subjective values of what is “fair” rather than market forces. After reading up a little bit on the practice on Wikipedia, I’ve found three different issues I immediately have with “fair trade” products: they’re inefficient at achieving their stated goals, they benefit the somewhat poor while not benefiting the desperately poor, and that the definition of “fair” (and the consequent above-market premium) are completely arbitrary.
When you purchase a fair trade product, you are essentially engaging in an act of charity. You are knowingly paying an above-market price for a particular good, gaining a psychic benefit from the fact that the premium you are paying is going to some farmer in South America. Keep in mind that these are essentially two separate transactions. If you purchase $5 worth of “fair trade” coffee and similar coffee is available for $4, you aren’t really buying $5 worth of coffee, you are buying $4 worth of coffee and donating $1 to the farmer. Of course, there’s virtually no way to track exactly which farmers it goes to, or have any real knowledge on their relative wealth, status, etc. As far as charitable giving goes, this seems to be a highly inefficient way of accomplishing it. I would recommend that anyone who wants to help the world’s poor buy regular coffee, and donate the difference to a well-run charity. Charities are much more accountable for their money, and it is far easier to track than trying to follow the “fair trade” chain.
One other thing to keep in mind, as this video from LearnLiberty points out, the above-market premium that you pay for “fair trade” goods is usually paid to the farmer directly. Whether any of that gets passed down to the farm hands that do the actual physical labor is unknown (Personally, I assume that not much does.). Just like in America, there are plenty of poor farmers in the developing world who could use some assistance. Of course, also like in America, there are also plenty of much poorer people who don’t own any land at all, and make their living traveling from farm to farm doing backbreaking physical labor all year round. Presumably, these people deserve your charity more than the farmers themselves do, but there is no way possible to ensure that they benefit from “fair trade” agreements.
Finally, let me once again emphasize that “fair” is a completely subjective term. Who decides whether an agreement is fair? We can assume that every voluntary transaction is fair, otherwise one party would not agree to it. The idea that some bleeding-heart liberal CEO of an American company that imports food can determine (and dictate) what the “fair” price of a commodity is better than the market itself can is absurd. When you pay the market price for a particular good, the price has been determined collectively by all the buyers and sellers in the market bidding against each other. That is the fairest possible way to determine a “fair” price. While individuals are certainly free to pay more than the market price if they desire, the illusion that paying some completely arbitrary amount over the market price is required for “fairness” is ridiculous.