Leading article: The benefits of a fairer trading system

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Ethical consumers should be celebrating. This year's "Fairtrade Fortnight" has kicked off with an announcement from Tate &Lyle that all its sugar will be designated Fairtrade by next year. This represents the biggest ever Fairtrade switch by a UK company. It follows Sainsbury's promises that all of its bananas are to be Fairtrade and Marks & Spencer's pledge to use more Fairtrade cotton in its clothing ranges.

It has also been revealed that more consumers than ever are buying Fairtrade products. The UK market is now worth almost £500m a year. Sales rocketed during 2007, registering an 80 per cent increase on 2006. We are on course to spend £2bn a year on such products in Britain by 2012.

But with success comes greater scrutiny, and some are suggesting that Fairtrade products are of little benefit to local producers in the developing world. There are also suggestions that the higher price of Fairtrade goods boosts the profits of retailers rather than producers. So what is the truth? No one would dispute that Fairtrade products cost more than the alternatives. This is because Fairtrade demands that farming collectives be paid a stable price, above market rates, to cover the cost of sustainable production, plus a premium to be invested in community projects. This inevitably means retail prices are higher. Pure free-marketers argue that such price-fixing distorts trade.

This is true up to a point. But such distortions are nowhere near as damaging as the tariff barriers in the rich world on developing world produce and the subsidies we pay our own farmers. Fairtrade can hardly be classed alongside the European Union's Common Agricultural Policy or the US Farm Bill as offences against the principle of free trade. And in any case, such Fairtrade distortions are not so different from UK company pension schemes, or other assorted employee benefit systems. It is not unreasonable for UK consumers to demand that farmers in the developing world be awarded similar sorts of protections and benefits as workers over here.

Another complaint about Fairtrade is that it "traps" poor countries in a backward agricultural economy, when they would otherwise be modernising farming techniques or moving into other markets. But this ignores the fact that greater profits from agriculture can provide a springboard into other economic areas. For instance, it is common for Fairtrade co-operatives to build labour-saving infrastructure. And tellingly, Ecuadorean coffee farmers believe Fairtrade will give their children a chance to do something other than grow coffee when they grow up.

In the meantime, Fairtrade brings tangible benefits. In Kenya more than 6,000 farmers on the Iriaini tea plantations in the central province have seen their incomes increase by a third because of Fairtrade, enabling them to pay for school fees and healthcare that would otherwise have been beyond their means. The supplementary payments have also funded a new bridge and the construction of a centre for orphaned children. Elsewhere, farming collectives have benefited from new education facilities and clean water supplies.

It is true that Fairtrade, on its own, will not end poverty in the developing world. A far bigger challenge is to bring down the tariff barriers and subsidy system operated by the rich world. And the system must be carefully scrutinised to ensure that the Fairtrade price mark-ups reach producers and are not skimmed off by retailers. But as a practical way for consumers to demand a fairer deal for farmers in the developing world, the Fairtrade system is an effective scheme, and its rapid growth should indeed be a cause for celebration.

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