Fairtrade system at risk

The Fairtrade marketing system designed to guarantee fair prices and premiums to farmers could be a casualty of the global boom in commodities prices, campaigners and industry analysts say. Coffee, tea and cocoa prices have soared to multi-year highs in recent months as turmoil in stock markets has sent investors in search of safe places to put their cash.
Cocoa has surged almost 150 percent and coffee has jumped 82 percent since 2000. This should be good for the producers of the raw materials but has raised questions over whether the Fairtrade system, on which many of them have relied during lean times, is still needed as commodity incomes grow.
"I can imagine a situation of high commodity prices driving Fairtrade organisations where they lose a lot of their previous market," said Brink Lindsey, vice-president for research at Cato Institute in Washington, which embraces free market economics.
Lindsey said people would be less likely to pay a premium for Fairtrade products as commodity prices keep on rising. "If they can't get customers to buy it, then the model will collapse," he said.
Fair trade backs farmers and workers from poor countries to develop their communities through fairer terms of trade. The movement developed in the 1990s at a time of falling commodity prices. Marc Sidwell of British think-tank Adam Smith Institute, which is dedicated to free market policies, said while there was a rationale for consumers to pay more when prices were down, present market conditions no longer made that possible.
Sidwell said because of the economic downturn and food price inflation, consumers might not be willing to pay the premium for fair trade branded products. "People are going to become interested in value and price in these difficult times. They are not just going to be so ready to give this little bit extra for the fair trade label," he said.
Sales of Fairtrade products almost doubled year-on-year in 2007, to 493 million pounds ($987.6 million) from 273 million in 2006, and have risen by some 40 percent annually since 2002.
Bretman said the boom might lure farmers away from co-operatives that pool and sell their products. "If you talk to coffee roasters, they tell you that they can't be sure orders would be fulfilled, because somebody might come along and offer the farmers more cash," he said.