As coffee prices on the world market have fallen by two-thirds in the past five years, Green Mountain Coffee Roasters pays $1.26 per lb., more than twice the market price for coffee and also offers pre-harvest financing. Why? It allows the company to identify its coffee as "fair trade certified," proof that it paid a living wage to the growers and helps the company position itself as a socially responsible corporate citizen. The strategy has been profitable. Green Mountain's Fair Trade sales grew 92% last year.

The recent supply glut has driven coffee prices down and while multinational firms such as Kraft, Procter & Gamble Nestlé and Sara Lee have profited from the price drop, local farmers have greatly suffered. Ten years ago, countries such as Mexico got about a third of every dollar spent on coffee. Now they get less than 10cents. To free market economists, the solution lies in reducing supply or increasing demand. To "fair traders," a label giving consumers product information to make a choice is merely classic marketing.

The "Fair Trade" seal has expanded to tea, chocolate and bananas. Other politically correct labels include organic certification, dolphin-safe tuna fish and child-labor free carpets. Social responsibility is not the only reason some companies have adopted the Fair Trade strategy. Sara Lee and Dunkin' Donuts have jumped on the "fair trade" bandwagon to compete against Starbucks, who offers only one Fair Trade variety.