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What is Fair Trade for?

Emeka Okafor asks:

Does fair trade really change anything or just make Western consumers feel good?

Tyler Cowen suggests:

How about a genre called "Exploitation Coffee"?  You pay less, and they promise to treat the workers especially poorly. That wording is a less effective marketing ploy, but that is what quality differentiation and indeed "fair trade" boils down to.

Frances Stead Sellers comments:

Anti-globalization activists criticize huge companies such as Levi Strauss and Starbucks, even though Levi Strauss was among the first multinationals to establish a code of conduct for its manufacturing contractors and Starbucks is one of North America's largest roasters and retailers of fair trade coffee. And both can probably afford to be more altruistic than many smaller companies.

Here's Alex Singleton:

I've increasingly found being a critic of Fairtrade somewhat uncomfortable. After all, if the Globalisation Institute is about anything, it's about enterprise-based solutions to poverty. And that is, surely, what Fairtrade attempts to be. Fairtrade fits in nicely with the GI's meme that it's better to help developing countries by putting the money in at the bottom, rather than at the top through governments.

And The Undercover Economist (ahem - me) reports:

The truth is that fair trade coffee wholesalers could pay two, three or sometimes four times the market price for coffee in the developing world without adding anything noticeable to the production cost of a cappuccino. Because coffee beans make up such a small proportion of that cost customers might have concluded that the extra 10p was to cover the cost of the fair trade coffee, but they would have been wrong.

What do you think of Fair Trade products, where producers receive a premium for coffee or chocolate? An essential contribution to relieving poverty? Helpful but trivial? Harmless? Worse than useless? Comments are open.


Fair Trade is a branding which gives consumers choice, if they wish, to pay more for products which pay more to their workers. I visited a Fair Trade tea plantation to see what this meant in practice. It meant that the workers on that estate had better housing, better facilities and could send their children to school, in contrast to the estate next door. See my critique of an article at the Adam Smith Institute for more on this. To be fair, Alex S has since revised his view. Owen

Ditto what Owen said, except that fair trade does NOT necessarily cost more for the consumer, cuz many of the middlemen have been cut out. Even at Starbucks, a pound of Cafe Estima -- the Sbux FT coffee -- is priced at $9.99, which is at the low range of Starbucks coffees. Meaning -- Fair trade doesn't mean "altruistic" Western consumers paying more. It means consumers can have a say in the type of products they want to support.

Submitted by an evil coffee trader on
I work for an international coffee trading company, and as such I am forced to make these comments anonymously. Fair Trade coffee seeks to raise the price of coffee paid to farmers. In 101 econonics, I seem to recall a rise in price tends to stimulate production. With an supply/ demand inelastic commodity such as coffee (or cocoa, or sugar) an increase in supply will lead to a disproportionately large fall in price for the rest of the farmers not affiliated to fair trade. Fair? Not in my book. So, either we have a quota system to restrict supply (tried extensively throughout the 70's and 80's by the ICO and always an abject failure) or we have some sort of 'intervention buying' (tried by the EU/ CAP with other markets, and hardly a poster-child for fine economics) Trying to interfere in markets is pointless and expensive. If farmers are poor it is because of bad governance and lack of diversity in their cash cropping. Why not concentrate on these issues rather than constantly knocking the coffee industry? My company regularly operates on negative margins and it is certainly not a licence to print money. "Back-of-a-fag-packet" economics and supply chain analysis will not help anyone. If Western consumers want to feel better about being rich, then pressure your government to stop developing [EDITED FROM 'developed'] world politicians looting their own economies. The coffee market is only a market like any other, and subject to ferocious competition. Those who fail to try and understand this should be ashamed to be part of the debate.

I can appreciate the "pure economics" argument that says that the supply of coffee will likely go up if the price paid to the producers is increased. But keep in mind that if the price of non-fair trade coffee is too low (as it is now) to allow the farmers to stay in business then some of them will go out of business or in more common terms STARVE. It would be great if there was just another legal cash crop that could be grown instead of coffee, but that doesn't seem to be the case. Also, if the supply were really that much greater than demand, the price would REALLY crash much more than it has. By a factor of 2 or 3 or 4 or something. I don't think that providing a sustainable price for existing farmers to produce coffee will significantly increase the quantity of coffee in the market. It will probably remain somewhat constant, at least as influenced by the fair trade system, because the farmers paid fair trade prices won't have to slave away for 12 hrs per day producing even more coffee just so they can get by (as they do trading non fair traded coffee which may be the root of why there is so much coffee on the market). They can work a more reasonable 8 hrs instead and still survive. If their income remains constant, but the price goes up, then the supply would actually shrink using this equation. Then the price would be sustainable in the classical economic model as well as in the real life situation.

Submitted by Jonathon Zacharias on
Do you know what I would like to see? Comments from people who know what they are talking about. Having said that, I claim no expertise and offer no more than my opinion and the facts I know. Fair trade often means a minimum price for the product, such as coffee. However when market prices rise above that minimum, fair trade prices rise with it as the same price. Fair trade and organic coffee are often both produced, and organic products are given a small premium above market price. The reason for this is the increased labour. Not spraying pesticides might mean hand-weeding. Premiums are also justified by the belief that organic production is investing in the long term sustainibility of the land. Similar to a 'glass ceiling' this is a safeguard to ensure that farmers are able to have a stable basic income. Honestly here, who believes so strongly in free markets that they would advocate the starving of poor farmers, who are obviously stupid because they aren't growing other cash crops and diversifying the crops. Thats enough out of me. You smarter people carry on.

Submitted by an evil coffee trader on
As I write this, the price in New York terminal market is now 123c/lb. Quality commercial grade coffee will trade at a premium of 5-50 cents above this. Fair trade usually seeks to offer about 120c/lb. What crisis? And as for advocating farmers starve, please, do not misrepresent my argument and then attack the misrepresentation. That's just dumb. I believe I know a lot more about the coffee trade than anyone with a degree in International Development. Fair Trade implies what I do for a living is Unfair. I cannot accept that based on my experience. I beleive that the develoment community wishes to raise the standard of living in develo;ping countries, and no decent human being will argue against that. However, by focusing on one market and vilifying the law-abiding participants in that trade, they show their own ignorance and help no-one apart from themselves. The policies they are advocating are simply counter-productive and will do more harm than good. Farmers in coffee-growing areas can diverisfy into cashew nut, small-scale tea, food crops for domestic sale, cocoa and tens of other crops. Help them to do so. The cocoa farmers in the Ivory Coast are the most heavily taxed IN THE WORLD. Sort out the governance issues. This is what the development community, if they had any PRACTICAL experience in these matters would be concentrating on. I have lived for over a decade in Africa and Asia and have seen these issues first hand. Don't patronise me.

I ask myself, "What kind of world do I want to live in, and how can I help make that possible?" On a global level, Fair Trade is the best answer that I can come up with. Fair Trade is not charity. It is Justice. There is an issue of RESPECT that most of us struggle with. Respect means treating people the way they want to be treated. Imagine being a farmer. Governments in wealthy nations give tax dollars to their companies in the form of subsidies, making these companies able to flood the market with a product below cost. How can you compete when wealthy people create an unjust "free-market" system? You have heard of other farmers like you defaulting on their "green revolution" loans and losing their land to wealthy speculators. They are forced to either move into city slums or leave their families to become vulnerable illegal immigrants, with the hope of sending money home, or bringing their family to a place with real economic opportunities. You might hope that: 1. People in wealthy nations stop the unfair trade rules and subsidies, and 2. People buy Fair Trade products that rarely cost much more (sometimes less), but create real opportunities for hard working people... I think that business can be a positive force in the world, rather than what it is today. This is why I promote Fair Trade in Los Angeles at and support and Shachar Erez

Submitted by Abiodun Raji on
The need for a brand such as FairTrade is an indication of the type of world we live in. A world where exploitation, greed and control is systematically encouraged and rewarded. Coffee is the second most traded commodity in the world. Many developed countries do not grow coffee beans so the supply of the raw material is sourced from the third world. Without the supply of coffee beans, the west will probably be in a standstill as many consumers are coffee and chocolate dependent. So why then do the the biggest four coffee manufacturers (sara lee e.t.c) not pay a decent price for its beans? to make more money for its shareholders! and why is fair trade more expensive than the 'exploitative coffee'? because of the 'little increase' paid to the growers or their co-operatives and all the administration cost incurred by the fair traders!! why do consumers have to pay for all the administration cost e.t.c ? Because adverts are clever and appleal to our emotional side (i.e buy this coffee and you can help stop this peoples suffering). Yes, I am in support of free trade with fair rules ( something the ptotectionist Eu and American would not know about) But not fair trade as it stands. Nike/addidas do not have to put a fairtrade logo on its trainers, but we now know its goods are produced ethically after a series of protest and boycotts etc. This is the approach the world needs to take in standing for fairness and against exploitation.

Submitted by i wonder.. on
Would someone point out specifically where the exploitation is taking place in the coffee value chain? (note: sweeping statements like "the huge profits made by multi-nationals" or "just look at the price of a coffee in Starbucks" not permitted).

Pointless arguments about a very kind but useless concept. We are in a fight against exploitation, not a contest for warm fuzzies. Pay me or my kids less than minimum wage and I'll punch you in the face. Exploited labour has to be illegal. Products and produce must be manufactured/grown in conditions equivalent to the countries that they are being purchased from. In a civilized world, evil coffee traders (not referring to anyone in particular here), wouldn't have to feel morally bankrupt about what they do, they would simply be unable to trade goods legally that were produced under the minimum standards allowed in their country. One evil coffee trader in particular clamours for better government in foreign countries, what should we do? Send in the troops? Trade is the most powerful force in the world today coffee traders reward and endorse bad foreign governments. The road to hell is paved with good intentions and one particular path is called "Fair Trade" We cannnot be a party to exploitation, something that fair trade accomplishes. Choosing not to purchase exploited goods, but not rallying against it is about as kind as refusing to kick your next door neighbour in the teeth, but not being particularly upset when others do. People unite, they're coming for us next! Andru

Submitted by evil coffee trader on
Andru, you make a lot of sense, although my feelings of moral bankrupcy are far more wide-ranging than simply supporting foreign regimes. For an example of how a company really tries to use the market to bring about change, see Starbucks "Cafe Practices" programme (its all in their website). Currently it is far and away the largest independently certified ethical sourcing program, demanding economic transparancy right down to the farmer and minimium social and environment standards. They will buy 80,000mt through this scheme this year, compared to 30,000mt of "Fair Trade" certified product doing the rounds. It is much more stringent than "Fair Trade", but is more adaptable because it does not just limit its purchasing to a narrow farmer-owned co-operative ideal, which "Fair Trade" does, but rather recognises that not all roasters want to partner directly with dodgy co-ops in politically unstable countries. That's our job. Other schemes such as Utz Kapeh and Rainforest Alliance are equally pragmatic, and less confrontational with the trade as a result. It is time for the "Fair Trade" movement to be stripped of its holy-cow status. Its a pointless and counter-productive Aid-based movement which hasn't got a clue what its talking about. A bit like most organisation in the aid industry.

Submitted by an evil coffee trader on
So, no response to the "specifically where is the exploitation?" question. So I'll tell you. It's in the supermarket. It's in the coffee-shop. Do the maths on the rest of the supply chain, and you'll see razor thin (if any) margins, vicious competition and the ususal triumphant benefits of free-trade. But once it gets near the fat smug consumers in the North, ie after the roaster, the margins rocket. So stop looking south to find the "exploitation". It's not there. It's in your own heads, with your love of brands and convenience.

The fact that child slaves are used in the harvesting of cocoa beans in Cote D'Ivoire, the world's major supplier of cocoa, is undisputed. The US State Department estimates that there are approximately 15,000 children working on cocoa, coffee, and cotton farms in the Cote D'Ivoire. In June 2001, the ILO also reported that trafficked child labor was used in cocoa production in West Africa. Media reports have unveiled stories about boys tricked or sold into slavery, some as young as nine years old, to work on cocoa plantations in Cote d'Ivoire. ILRF has verified these reports through our own independent investigations conducted in 2002 and 2003, and has interviewed children who have escaped from the cocoa plantations. If cocoa farmers were paid a fair wage, then they would not be forced to bring their children to work with them or sell them into slavery. Fair trade certified chocolate, which is made from fair trade cocoa, pays cocoa farmers enough money to send their kids to school and gives them a future. Buy fair trade certified chocolate. Encourage multinationals, like Nestle, who have billion dollar profits, to pay a fair price to their suppliers. For more information, go to and see our Nestle campaign.

Submitted by A pragmatic person... on
So concretly, for those who are not satisfized by fair trade: What do we do? Do you have idea to improve the system?

Submitted by D-conomist on
Free trade, Fair trade (you say tomato, I say toe-mah-toe) Look, there are going to be winners and losers in both. The bottom line is that there is a market demand for 'fair trade labeling' It is the same yuppie consumer concious driven decision making that makes my wife buy orgainic tea tree oil shampoo. Personally, I feel terribly about the economic plight of developing countries, but will fair trade solve for this poverty? No, it will help a few co-ops in a few countries. Large retailers of products with 'moral market demand curves' will buy a small portion of their products with fair trade labels to appeal to those select consumers. The poor farmers of the world will remain poor because they live in areas deviod of natural resources or with political instability and corruption. The answer is charity - markets, free or fair can't stop exploitation of the poor. On a different note... I find the products people pick and choose to become ethically concerned with... coffee, tea, chocolate, tennis shoes.. How many of these same people would pay .20 more per gallon for 'fair trade gasoline' or '$100 more for fair trade cellphones'

Submitted by Achillax on
What about buying "Fair - Trade " Coffee made by poor peasants in North Korea or even Somalia? Would these have the same price as those from Kenya. Also, does it make sense to buy coffee from poor countries where it doesn't make economic sense to make it? Wouldn't an overall criteria of governance in the producing country be more important than singular prices for the producers?

Submitted by Reuben on
"How many of these same people would pay .20 more per gallon for 'fair trade gasoline'" Here in Alberta, the oil-producing machine of the north, there is no need to pay a surcharge for "fair trade gasoline." Believe me when I tell you that everyone involved in the oil-producing process is bringing home a healthy wage, from the CEOs and the government to the plant workers and truck drivers. In the oilpatch, manual labour can easily bring home six-figure incomes. That's not to say that oil-production everywhere is equitable, or that the products that people choose to make a stink about are the right ones -- there are certainly many more that should be paid attention to (especially in the agro/food industry). But just because buying one product equitably isn't going to change the world, isn't a good reason not to do it. Changing the world isn't going to happen overnight, but through baby-steps. The only thing that frustrates me more than people who simply don't care is those who throw up their hands in despiration before they even make an effort.

Submitted by uzma on
I think all this about Fair Trade is intresting i would like to point out that what farmers d in the third world they do sooo much and they get paid soo little ! which is totally wrong. People should get out there and start buying Fair trade stuff, a little difference can make a big difference ! and remember when you buy these fair trade stuff, its all for a good cause at the end of the day for what you did some how you will get rewarded for this, so make the most and give a smile to someones face in the third world :) bye x

Submitted by hanna on
Not only that but the creation of a fair international trade system, will in fact help third world countries grow economically, so that aid will not be needed any more. Studies show that an increase of 1% of income generated from trade would be 100 fold of anual aid given by "western countries". So, what needs to happen is the creation of a fair trade arena!

I'm not suggesting that an evil coffee seller would personally advocate for the starvation of coffee farmers. However, the "invisible hand" of the market often causes conditions to exist that would result in just that. Why do you think the unemployed and underemployed in the US often visit soup kitchens or go on food stamps. No employer in his right mind who lays off someone would personally advocate that the person they let go should starve, but the conditions often exist to create hunger when people are let go from their jobs. Then there are examples of employers who directly or indirectly take advantage of public assistance for their low income employees. An example is Wall Mart. Of course long before the farmer actually starves, he would sell his land to a developer and move to a city slum to work in a sweatshop. Then the developer can move in and harvest coffee with a machine that scoops up green berries along with the red, making a truly awfull cup of coffee. I doubt that Nike shoes are manufactured under any better conditions now than they used to be. Just watch the movie China Blue to get a clue about the challenges of making sure that products are not produced under slave labor conditions. That movie makes me wonder how the Fair Trade Federation is so sure that sellers it certifies are selling products not produced under sweatshop conditions. The challenge is not to find something better than fair trade, but to make sure that the claims that "fair trade" and "ethical" producers are making are actually true. Of course there is something better than fair trade. It is called fair trade direct, where coffee producers ship their product directly to consumers and get paid $3 per pound instead of $1.26. I'm a little suspicous that the marketers/distributors of even this type of coffee are getting a fairly hefty cut, since the retail price per pound is $2-$3 higher than a competitive fair trade label coffee.

Submitted by Christina Redwine on
If the consumers make a decision to buy fair trade products, demand will rise. If corporations that conduct unethical business are not supported by their target market then they will be forced to become ethical. We have the power to make sure everyone is treated equally, I mean everyone! Let's do it!

Submitted by F0ul on
There is a simple reason why fair trade is bad. It discourages the 'simple honest farmer' from adding value to their goods. Coffee is only expensive after it has been processed into something that can be drunk. If the fair trade movement started helping these 'simple folk' into processing and roasting their own coffee allowing it to be exported from their home countries, rather than only exporting the raw beans as happens now - that would be worth supporting. FairTrade as we in the west know it is just a must have brand for guilt feeling liberals. If you really wanted to help the farmers, you would help them onto the value part of the ladder. Ever wondered why StarBucks is happy to do FairTrade Coffee, but doesn't want Ethiopia to own the trademark on their own type of Coffee? (hint: that is where the money is!),1518,448191,00.html

Submitted by JuanRa85 on
As someone who does marketing and PR for a fair trade company, I have this to add: 1) I find it hard to believe that some people here are even human, because they sound extremely cold-hearted and because they talk as if they have memorized an economics book. Wake up you Q##%$^[email protected]!#! Fair trade does not fit your close minded, limited economics models because it's taking into account the costs that coffee, cocoa and handcrafts incur on the health of the farmers, the health of the environment and the emotional effort made by the producers (i.e. their sense of dignity, being able to send their children to school, etc.) 2) People against fair trade sound like the typical skeptical who also doesn't believe in issues like global warming. These people are lazy, don't want to think outside their comfort zones, and are quick to criticize a movement (and its supporters) to preserve the status quo. This is because they're mentally lazy and don't want to take responsibility for backing up corrupt governments that subsidize their own farmers, making it impossible for poor countries to compete. 3) In particular, I am really upset that many of you think that we (fair traders) have created a "yuppie" brand to appease the hearts of those who feel guilty, and for thinking that we do this to sell products at a premium and do who-knows-what with the money. Grow up. We have created a brand that will appeal to the hearts of the consumers, and if anything will force corporations to take action and adopt more socially responsible business practices. So what if corporations are not doing it out of the goodness of their hearts? Companies only understand one language: trade and profits. If they see a trend towards fair trade, then they will understand that consumers are accepting the fact that the environment and the workers' health and emotions ARE part of the cost of a product. They will become more responsible in response to their consumers' needs and wants. I will agree, though, that a big issue prevails around the labeling of fair trade products, and who is making sure that fair trade is really fair? Finally, “fair trade” had to be created because your precious little market and economic models were not working, and free trade was far from being “free” or even “trade”. Peace.

Submitted by R Holmes on
My daughter stopped working at Starbucks during college and started working at a so called fair trade coffee shop. She was paid cash so the owner did not have to report her earnings. Her pay was the same, but not taxed. Nor did this fair trade coffee shop pay any social security or workers compensation insurance had she been insured on the job. We forced her to quit working at this Fair trade shop because we did not want her to be encouraged to break the law by not paying taxes. Most young people, including my daughter, don't understand some fair trade shops will use fair trade as a marketing tool. If they are willing to hire illegal's what is the real point!

Submitted by Matthew Jackson on
Hi, I'm doing my dissertation at the minute on perceptions of fairtrade, the discussion here is really interesting and helpful, would anyone mind if i used some of your comments? Yu would remain anonymous, no names would be mentioned? Thanks, Mat

Submitted by sabistarr on
I run a small fair trade business ( and it does make a difference to the women who make the products. The project is amazing, pulling women off the streets and out of the sex trade - this would not happen without the support of people who buy fair trade. Over 50 women have been able to establish economic independence - a real measure of fair trade. The important thing is that fair trade is a consumer driven movement - it gives people the chance to choose what goods to purchase - to choose if they want to support sustainable development and stop exploitation.

Submitted by georgia on
I completely agree with sabistarr. As a fair trade business owner myself ( I see first hand, the positive effects of offering an alternative product base to consumers, can help to educate the general public, helping them see that there ARE choices for us to put our hard earned money into, that can actually benefit the global grassroots fair trade economy. The more the choice for an alternative exists, the bigger the movement will become, and ultimately the greatest chance for true change.

Submitted by Jay Kilby on
Buying products that pull producers out of poverty is not only good for the producers. Is also benefits the consumer. Consider, for example, Guatemala, where 56% of the population lives below the poverty line (CIA World Factbook). Political stability is very difficult to achieve under such circumstances. The U.S. has already incurred considerable costs in dealing with political instability in that country. Declassified government documents show that up to the 1990's, the U.S. spent three decades involved in covert operations supporting military dictators in Guatemala that killed tens of thousands of people ( Doesn't it make sense to support trade practices that help to mitigate the underlying economic causes for such instability rather than relying on the CIA or U.S. military to deal with the "leftists and terrorists" that it generates? Widespread poverty doesn't remain contained within a vacuum. It has educational, health and political consequences that spill beyond borders. Any narrow economic analysis that fails to take this into consideration is misleading. Fair trade is a way (though, admittedly, perhaps not the only way) to bring free market forces to bear on these problems. When you choose to buy a gift from women who are paid decent wages in Guatemala, and they can then afford to get health care or an education for their children, you are doing a small part to pull a country out of a desperate economic situation that is not conducive to stable democracy. I will be writing a monthly series of blogs at that are intended to help people connect the dots between the goods they buy and the lives of the individuals who produce them. A free market is not completely free without full disclosure of the impact of our consumer choices. Most of us make a purchase without any knowledge of who that purchase impacts or how. I want to join the free trade movement in drawing attention to this piece of the equation that we should consider when deciding what we buy.

Submitted by Anonymous on
Forgive me for replying to comments posted in 2006, but I feel compelled to respond to our "evil coffee trader" friend's remarks. He is telling us that if we pay more for a fair trade cup of coffee, the supply of coffee will go up, and therefore, the price of coffee for ordinary coffee will drop, which (he claims) is unfair to ordinary suppliers and traders. This seems to be to a case of selective application of a theory in the interest of its proponent. Not long ago, Starbucks began selling a cup of coffee for 3-5 times the price it had previously cost. They were able to do this because they sold a product that people preferred. It is true that they put many mom and pop coffee shops out of business in the process, but we do not consider that unfair. We consider it to simply be the free market at work. Now if people are willing to pay more for a fair trade cup of coffee, and that puts some ordinary suppliers and traders out of work, how is that different? The only difference is that my reason for preferring Starbucks is that is pleases the taste buds, and the reason for preferring fair trade is that it helps the farmer. So in the Starbucks case, I wind up with some people losing their jobs, other people getting jobs, and perhaps a better cup of coffee. In the fair trade case, I wind up with some people losing their jobs, and others getting better jobs. What sort of crazy economic theory tells me that it is fair to quadruple a cup of coffee that pleases the palate, but is unfair to raise the price a few cents on a cup of coffee in order to feed people and send their children to school?

Submitted by Moa on
I have done some research into fair trade recently and into the interest in fair trade products. It is now much more of a brand than a campaign... have a look at this article if you'd like more information:

Submitted by tan101 on
Very interesting - and sometimes heated! - discussion all round. I would like to pick some brains out there, if possible: my area of interest is associated with fair trade labelling: how effective is existing labelling, and could it be more 'better' (aka - could better labelling induce more consumers to buy fair trade?) Also - does anyone know of studies investigating what consumers think fair trade is about, or investigating the impacts of different labelling schemes on consumption of fair trade? Thanks!

Submitted by Sylvia Ansay on
Two years ago I spent several days living with a family in Nicaragua. Besides seeing first-hand how the lives of these small farmers had been improved by the services offered through their Fair Trade co-op affiliation, I also witnessed the changes Fair Trade had made within the community.

Hi, I've enjoyed reading everyone's opinions and I have to agree that as someone who runs an online webbased store from central Vietnam. The idea of fair trade in practice and in reality are two different things. I work directly with my producers here in Vietnam and cut out any middle man profit margins. Some of the people I work with also have contracts with huge international brands and they get paid about 10% of what i give them, yet some of these companies still claim to be fair trade.

Submitted by daniel on
Hi, I just found a new web page that sells only Fair Trade Flowers from Colombia. the link is:

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