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Are Fair-Trade Goods Recession Proof?

Global economic crisis. Financial collapse. The current climate. Whatever term you want to use to describe our present state of affairs, I've heard it in the halls and meeting rooms at the Skoll World Forum on Social Entrepreneurship. Funding is down, outlooks are uncertain, and people are worried. Except, perhaps, for the fair-trade folks. Demand for sustainably made, socially responsible products seems to be growing even as the global economy staggers.

A few weeks before the forum, candymaker Cadbury announced that, by this summer, all of its flagship Dairy Milk bars in Britain and Ireland will be made exclusively from fair-trade cocoa grown by Ghanaian farmers. By the end of the year, every cup of coffee that Starbucks sells in the U.K. will be brewed with fair-trade beans, and in 2008, the company doubled the amount of fair-trade coffee it imported into the U.S. Wal-Mart is quadrupling its purchases of fair-trade bananas this year, and eliminating non-FT bananas from hundreds of its stores. Transfair USA is planning to certify up to a dozen new products in 2009, including avocados and olive oil, and will begin a pilot project for cotton apparel--its first beyond food. So is fair trade recession-proof?

Prices for fair-trade products may be higher, but one Harvard study has showed that consumers expect them to be: Sales actually increased when the price went up. "Not only is this consumer segment--which is growing, trend-setting--willing to pay a little more for products that speak to those values, but they expect to pay more," Transfair USA CEO Paul Rice said in a session at the forum. It's as if the higher price signals that the certification isn't just a marketing gimmick but guarantees the veracity of the claim.

Rice thinks that companies investing now are being particularly forward-looking. "Companies who are announcing big increases in FT product lines are really trying to position themselves for when we come out of the recession," he says. "They're positioning themselves now, at this unlikely moment, to establish credibility." He believes there's good reason to do so, citing studies that show up to 30% of U.S. adult consumers--some 60 million people--regularly shop for products "that are consistent with their values."

Earlier in the week, Oxford development economist Jim Cust told me "there's no altruistic act in the world. Economists look at the underlying utility you derive from doing something." That's as true of the consumer, and especially the corporation, as it is of the social entrepreneur. Fair trade is certainly seen by corporations as a differentiator for marketing purposes. "We've done something that's far beyond what any coffee company in the U.K. has ever done before," Starbucks CEO Howard Schultz said last fall. "This long-term commitment   will give our customers the assurance that the coffee they're buying in Starbucks in terms of espresso-based beverages is at a price that will allow sustainability for those people who need it most."

The conventional wisdom here at the forum seems to be that the ranks of the ethical shopper are growing. The question is whether this is just what one of my acquaintances calls "an ethical corsage" (thanks, Dan McQuillan!) thanks to clever marketing and corporate strategy, or whether the growth in fair trade really presages some kind of permanent shift in the way we consume.

Maybe fair trade seems recession-proof because the people who tend to buy those products are less vulnerable to the rises and falls of the broader economy. The one problem with the Harvard study that Paul Rice cited was that it was done at ABC Carpet & Home, an upscale Manhattan home-furnishings store/yuppie magnet frequented by folks who are a little more insulated from recession than your average consumer. They're not living paycheck to paycheck. People using food stamps aren't buying fair-trade coffee. Let's say there comes a time when smarter, fairer shopping isn't just a yuppie lifestyle choice--not the only option, but the generally preferred one. That actually could mean that fair trade becomes less recession-proof, not more.