Fair Trade Counters Poverty

As my contribution to Blog Action Day 2008, I’d like to advocate for fair trade as an effective anti-poverty strategy. Not only does fair trade provide a price floor for farmers and workers who produce the raw materials for many products we consume, it also, and that makes it different from any other certification scheme, provide a social premium that is invested in community projects that benefit all members of the communities.

The concept of a floor price is important because it protects farmers from the worst aspects of a down turn in commodity prices. The contracts that fair trade cooperatives negotiate with fair trade manufacturers and distributors lock are guaranteed not to fall below that floor price. For cocoa that price is $1,600 per ton. For most of the past two decades, that price protected the minimum income of farmers when world cocoa prices dropped as low as $1,000 per ton.

But what happens if the world market price is higher than $1,600 per ton? Farmers will, of course, receive that higher world market price. But this is where the second feature of fair trade comes into play–the social premium of $150 per ton.

Take the Kuapa Kokoo cocoa cooperative in Ghana for example. If they sell 1,000 tons of fair trade cocoa, the cooperative will receive $150,000 in social premium. Those funds are then turned over to the Kuapa Kokoo Farmers Trust which will distribute the monies to individual village societies for projects that benefit the society as a whole. Such projects have included water pumps, privies, and schools. They directly improve the lives of farmers.

So if you want to fight poverty in the cocoa sector, buy fair trade chocolate and cocoa. It’s easy and it tastes good.

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