Fairtrade Cotton
Today's Financial Times has a wonderful feature on Fairtrade (see "Follow the Thread" on p. W1), with a special focus on the relatively new market for Fairtrade cotton.
Cotton's legacies make it a particulary compelling product for social action - two hundred years ago, in the U.S. South, it was a slavery product; in this century British, Mahatma Ghandi resisted the the colonial system in which India grew cotton and sold it cheaply to Britain, where it was spun and made into clothing, which was sold at disproportionately high prices back to Indians. So to establish a system through which cotton-growers can earn a good living would be a major advance from the industry's history.
The article does point out some of the pitfalls of fairtrade, particularly those based on simple economic principles. One of these is that paying above-market prices "encourages farmers to stay in unprofitable sectors, inducing oversupply and pushing down prices for everyone else." A second critique is not one of theory but of practice, namely that "supermarket chains and international commodity brokers (are) reaping more bnefit than Guatamalan farmers."
These are real and serious concerns, but remember that similar arguments have been made about the minimum wage in the U.S. - that requiring a wage above the "market" wage would imbalance the labor market, leading to unemployment. Most empirical studies of the minimum wage have failed to show such a negative effect.
In the end, forcing apparel companies to devote a reasonable amount of money to cotton sourcing seems to be a wise pre-requisite for helping cotton farmers earn a decent living. Currently, it is the lack of global regulation that allows companies to seek ever-lower prices, erroding any profits that might have accrued to farmers were we still in a pre-globalized world. Since no one nation can impose a minimum price, for fear of being out-competed by another nation, it makes sense that regulation should come on the side of industry, with de-facto rules forcing companies to pay some reasonable minimum. It isn't easy for one company to do this, since it must compete with others in the industry, so it makes sense to do this on an industry-wide basis.
Creating a social norm that says fairtrade labelling is necessary would be one way - perhaps the best way- to balance all the above. We can't ignore the potential pitfalls (so it's important to see how much farmers are gaining and how equally farmers are gaining) but they shouldn't lead us to give up on the idea of fairtrade sourcing.
Cotton's legacies make it a particulary compelling product for social action - two hundred years ago, in the U.S. South, it was a slavery product; in this century British, Mahatma Ghandi resisted the the colonial system in which India grew cotton and sold it cheaply to Britain, where it was spun and made into clothing, which was sold at disproportionately high prices back to Indians. So to establish a system through which cotton-growers can earn a good living would be a major advance from the industry's history.
The article does point out some of the pitfalls of fairtrade, particularly those based on simple economic principles. One of these is that paying above-market prices "encourages farmers to stay in unprofitable sectors, inducing oversupply and pushing down prices for everyone else." A second critique is not one of theory but of practice, namely that "supermarket chains and international commodity brokers (are) reaping more bnefit than Guatamalan farmers."
These are real and serious concerns, but remember that similar arguments have been made about the minimum wage in the U.S. - that requiring a wage above the "market" wage would imbalance the labor market, leading to unemployment. Most empirical studies of the minimum wage have failed to show such a negative effect.
In the end, forcing apparel companies to devote a reasonable amount of money to cotton sourcing seems to be a wise pre-requisite for helping cotton farmers earn a decent living. Currently, it is the lack of global regulation that allows companies to seek ever-lower prices, erroding any profits that might have accrued to farmers were we still in a pre-globalized world. Since no one nation can impose a minimum price, for fear of being out-competed by another nation, it makes sense that regulation should come on the side of industry, with de-facto rules forcing companies to pay some reasonable minimum. It isn't easy for one company to do this, since it must compete with others in the industry, so it makes sense to do this on an industry-wide basis.
Creating a social norm that says fairtrade labelling is necessary would be one way - perhaps the best way- to balance all the above. We can't ignore the potential pitfalls (so it's important to see how much farmers are gaining and how equally farmers are gaining) but they shouldn't lead us to give up on the idea of fairtrade sourcing.
posted by Melissa Paschall at 7/22/2006 06:40:00 PM
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