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    Fair Trade Has Limits as a Model for Development


    © International Trade Centre, International Trade Forum - Issue 2/2006

    Fair trade is one of the few development models that reaches marginalized (often indigenous) rural communities who rarely benefit from economic growth and who have little choice between subsistence farming or migration to the cities.

    Unemployment, lack of access to good land, water, health care and schools make it difficult to climb out of poverty. For the lucky few, fair trade has brought tangible benefits to farmers by connecting them to export markets. It is just that there are limits to this model.

    There is only a limited number of well-off consumers willing to pay a premium to support small producers who cannot compete with bigger and mechanized farms.

    Low prices (which consumers want) are the result of larger farms and improved technology, not just cyclical markets.

    Fair trade should also not distract us from the bigger picture.

    Fair trade bananas and coffee are still commodities with no real added value. Historically, creating wealth has been about adding value to a product (e.g., turning milk into butter or iron ore into screws) and then trading it. The rural poor in Africa would derive greater benefit if developed countries opened their markets to a higher level of processed products.

    Sustainable growth in rural areas requires investing in roads and electricity, reducing tariff barriers and export subsidies, creating political and economic stability and raising education levels.

    These are the conditions that allow the wider agricultural sector to flourish and so reduce poverty in countries that are still in early stages of development.