Is Fair Trade a development strategy?

In seminar this week we had a brief discussion on how to secure "fair" labour conditions in developing countries. The traditional model is for the state to intervene in setting minimum wages and prices. More recently, an alternative model has emerged in the form of the Fair Trade Movement. Fair trade certification requires farmers or producers to comply with certain rules ( no child labour, adoption of environmental practices, participation in democratically-run cooperatives) in exchange for fair trade certification. There is very limited evidence out there on the real impact of fair trade, but for a handful of case studies that have a hard time overcoming selection bias.

One of you suggested in class a different model altogether based on increasing transparency in the supply chain. This would not impose constraints on farmers to become certified but would require companies to disclose more information to the consumer on the how it sources its products. Presumably, this would be verifiable information (if not by an individual consumer by watchdogs, NGOs, etc), creating incentives for companies to truthfully report information.

The new wave of cause-related marketing and inclusive business gives us plenty of reasons to pay attention to this issue. The number of products you can find at a supermarket these days that include some sort of claim to support either local communities, an orphanage in Haiti or an endangered species is growing exponentially. Could there be diminishing returns to this strategy? Could this type of consumer activism become a sustainable model of development and would it crowd out traditional charity or even other forms of political participation?

On the bright side, here is an organization that is striving for more transparency. Here is a more negative take on project RED, headed by Bono, a popular charity scheme.