Compare and contrast free and fair trade. After reading the case study “Fair Tra

Question

Compare and contrast free and fair trade. After reading the case study “Fair Trade Coffee: The Mainstream Debate,” answer the following questions:

What are the similarities and differences in free versus fair trade arrangements? How are these reflected in the actual prices of coffee?

Are fair trade principles both an effective and economically efficient trading mechanism?

Is fair trade coffee sustainable for the mass market, or is it a niche product for the socially conscious and well off?

How does the Ignatian value of “cura personalis” or "care for the person" relate to the debate about free vs. fair trade. (Recall that “cura personalis” implies having concern and care for the personal development of the whole person. This implies a dedication to promoting human dignity and care for the mind, body and spirit of the person.)

Based on all the information in the course, synthesize and propose a sustainable solution to the problem of low prices for coffee producers.

Explanation / Answer

A) Similarities

Both free and fair trade have following similarities:

- Quality guarantee :It means in free trade money spent by a customer on a product (coffee) fulfill some requirements that needs to be fulfilled by the brand name. Example:Various coffee brands have their standard price and quality, like the farmers are guaranteed a stable price for same quality coffee beans.

- Minimises the supply-chain costs: In fair trade arrangements, farmers sell directly to international traders saving unnecessary supply-chain costs. Similarly, in free trade arrangements companies minimises these costs to maximise their profits.

Differences:

Free trade and Fair trade have following differences:

- Pricing : Coffee's market price in the free market is dependent on the demand and supply trends. These farmers are price takers. While a corporate farmer has many resources available.

- Objectives: Free trade : to buy coffee at leat price from farmers. In fair trade, retailers may charge the customers extra for commodities. It is difficult to calculate how much extra is to be charged and how much money would reach to the farmers. Usually, with fair trade, the retailer benefit can far outweigh the farmer's benefit.

B) No, although fair trade may benefit some small farmers but overall it can do little good and more harm as,

- Fair trade can lower the income of the farmers as the premium charged to the customer may or may not reach the farmers.

- Fair trade would demand farmers to produce organically, which would increase the sales price and also lower farmers income (becaus of high costs in producing organically).

-Fair Trade Certification is Expensive

C)

No, fair trade coffee is not sustainable for the mass market and it is a niche product.

The mass market works on the forces of demand and supply and is self- regulating whereas, fair trade is more profitable for retailers than the coffee farmers.

D) As fair trade aims for the betterment of the local producers and communities, which may or may not happen as mentioned above. While free trade does not contribute directly for the personal development of the whole person, but it helps in economic welfare of all countries.

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