"The Fair Trade Cup is ‘Two-Thirds Full’ not ‘Two-Thirds Empty’" A Response to the Adam Smith Report & An Alternative Way to Think About Measuring the Content of the Fair Trade Cup
By Alastair Michael Smith
This paper is a direct response to the criticisms of Fair Trade that were published in report from the Adam Smith Institute, Unfair Trade. While the first part of this paper questions the methodology and the intentions behind Unfair Trade, the second part moves to critically examine the criticisms of Fair Trade that it posits. The conclusion is that many of the arguments made by the Adam Smith institute lack empirical evidence or a theoretical grounding in more than the most simplistic economic theory The third section undertakes the same analysis re the claim that those countries that have done the most to reduce poverty have been those that have liberalised trade. This simplistic correlation is explored and refuted using the same case studies used to make the claim, China, India and Singapore. This evidence is also supplemented with wider cases and theory from other temporal and geographical examples. The final section then offers a micro economic criticism of the claim that Fair Trade is negative as it (intentionally) ties southern producers in to relations of production that limit their ability to close global inequalities (the classic economic critique) The paper argues that contrary to macro theory, local empirical evidence shows that developing world producers are not free to take diversification decisions. This is because they lack the stability and the resources necessary; a point well illustrated by risk management theory and research. Conversely, to the tendency of liberal markets to worsen the conditions of the marginalised, Fair Trade offers a genuine opportunity for diversification given the stability and resources that it injects into local production systems. The paper does not claim that this is necessarily all that can be done to ensure that the potential problems of Fair Trade are totally off set. However, this argument goes a long way to refute the condemnation of Fair Trade on the basis of liberal economic rhetoric, and illustrates how such governance can promote humanitarian development progress, in the realities of the local producer context.
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