“Fair trade” has caught fire; from 2004 to 2014, retail sales of fair-trade products grew an average of 26% per year. The movement has several goals, but the most important is improving the lives of the poor in developing countries. The basic strategy is for retailers in wealthy countries to erect a floor for “certified” products above the global price and pay a “social” premium for each unit produced. Most fair-trade products are commodities; coffee is the best known. In the U.S., the coffee house most strongly identified with fair trade is Starbucks. Public commitment began in 2001, when the company partnered with Transfair USA (now Fair Trade USA, a leading non-profit certifier) to sell fair-trade coffee in the U.S. and Canada. Fair-trade certification appears to be a win-win proposition. Socially conscious consumers benefit from knowing a portion of the retail price promotes social justice. Meanwhile, higher prices for fair-trade goods boost producer incomes in developing countries, and the additional social premiums––which are invested in community infrastructure––spread benefits to the rest of the local population. But some economists are skeptical. They argue that any social good done by fair trade pales in comparison with the real barrier to higher agricultural incomes in poor countries–– massive subsidies for domestic farming in the developed world. In 2014, for example, total ag subsidies by OECD countries came to nearly $250 billion–– against about $8 billion in retail sales of fair-trade products (with less than 2% of that going to participating producers). Furthermore, the weight of empirical evidence suggests little of the extra income garnered by fairtrade producers finds its way to local workers. In short, skeptics argue, fair trade is a drop in the bucket that doesn’t even reach the thirstiest. Even if the social-justice returns on fair trade prove small, companies in the developed world could end up doing well by trying to do good. Consider Starbucks. If fair trade’s popularity with customers boosts demand for Starbucks products by more than fairtrade certification raises the cost of beans, then “ethically sourced coffee” (as the company puts it) is a positive net present value (NPV) investment. Fair trade may prove to be smart politics as well. Eighty percent of fairtrade coffee comes from Latin America and the Caribbean––regions where governments have often viewed U.S. companies as exploitative, sometimes even retaliating with nationalization. By giving local producers and their communities a larger share of profits today, Starbucks could be insuring against the risk a hostile government will eliminate all profits tomorrow. Whatever its motives, the company has fared well since committing to fair trade. Since 2001, Starbucks’ stock price has risen 16 times faster than the composite index of the NASDAQ.

Suppose market research by your company shows it would be profitable to become a fair-trade retailer. Further suppose other internal research suggests producers in developing countries and their communities would profit little from your fair-trade practices—no matter how well designed. Would it be ethical for the company to commit to fair trade just to enhance shareholder wealth?