Free Trade or Fair Trade?
“Trade is neither inherently good nor bad. But how it is conducted is a matter of great concern-and an unprecedented opportunity. Trade can either contribute to the process of sustainable development or undermine it. Given the rapidly accelerating destruction of the earth’s natural resource base, there is no question what the choice must be.” -Hilary French, author of Costly Tradeoffs: Reconciling Trade and the Environment.
It is common to hear Free and Fair Trade used interchangeably, yet they function in constant opposition.
Free trade is based on the conventional economic idea that “international trade without the interference of tariffs, subsidies, price controls and pork-barrel politics is by far the most efficient way of matching global supply to demand while making all the participants more prosperous.” In theory this is a wonderful concept; however, the chasm from theory to reality is quite broad.
Free trade in practice has proven detrimental to the poor and beneficial to the powerful. It is not surprising that the latter strive to expand this system, with the current fast track negotiating authority making this all too easy. Under this speedy version enacted in 2002, Congress has enacted seven free trade agreements (United States-Chile Free Trade Agreement, the United States-Singapore Free Trade Agreement, the United States-Australia Free Trade Agreement, the United States-Morocco Free Trade Agreement, the Dominican Republic-Central America-United States Free Trade Agreement, the United States-Bahrain Free Trade Agreement, and the United States-Oman Free Trade Agreement), with five (Colombia, Peru, South Korea, Malaysia and Thailand) being heavily endorsed before the fast track expires this year. Free trade agreements are done behind closed doors between the president and the potential countries equivalent positions, and can not be amended.
Theorists claim that removing all barriers and tariffs to trade will “be beneficial for workers, whose wages and benefits can rise as foreign markets expand for their goods.” However, when free trade practices are implemented it is usually the opposite that occurs. Large corporations push out smaller, locally-owned businesses. US jobs are lost to overseas production where labor and safety laws are non-existent or not well enforced (879,280 U.S. jobs moved overseas after NAFTA). The money is drained from the poorer countries as corporations fail to reinvest locally. Slave labor conditions abound which do not differentiate between adults and children.
We have found it necessary in the US to outlaw child labor, require safe working conditions, and set a minimum wage. Why then do we take advantage of the non-existence of these laws in other countries to produce cheap goods? We have placed a value on human life and a standard treatment as such, now we must extend that to people other than US citizens and stop conflating profits with human rights.
And to directly counter the exploitation of Free Trade, there is Fair Trade. At its core Fair Trade is remembering the value of people. It is not simply an attempt to set a price floor. Rather it is placing the value of human life and environment equal to profit. We have found cause to implement this within our borders and there is no reason this should be an arrangement exclusive to 1st world citizens. The Fair Trade criteria (from the Fair Trade Federation) are:
- Paying fair wages in local context;
- Supporting participatory workplaces;
- Ensuring environmental sustainability;
- Supplying financial and technical support;
- Respecting cultural identity;
- Offering public accountability; and,
- Educating consumers.
The Fair Trade system is not perfect. It faces legitimate criticisms and challenges, and through this scrutiny is kept honest to its values. Nor should Fair Trade be the ultimate solution but rather a necessary step towards improvement. It strives to establish a new basic economic imperative; the realization that trade is fundamentally a human interaction, with respect for all people involved in the trade.
Tags: Fair Trade, fair+trade, free+trade
- Uncategorized
May 11th, 2007 at 1:14 pm
Great article!
May 11th, 2007 at 4:55 pm
Excellent article Alicia. It's good to see you on GreenOptions. I firmly believe that long-distance trade needs to become a last resort, and that really 'sound' trade systems (for economy, ecology, society, and society's individuals) must become as locally based as possible. As I wrote in a post today, one of the key strategies for success with the globalised corporate model is putting the biggest geographical distances between production and final sale. Out of sight, is out of mind. When you produce and sell your goods within your own community, the effect of your working practices becomes a key aspect of your success, or failure. If you abuse your employees, or pollute your neighbourhood, word will spread, and you’ll lose the customers you rely on. The globalised model does away with the concept of taking pride on one’s work, deftly avoiding the ‘costly hindrance’ of social and environmental responsibility, by putting all the production aspects of your work deep into jungles, or remote sweatshop factories. The final product can then be projected to the unsuspecting customer through glossy brochures and brightly lit billboards. I look forward to more posts from you. You and your readers may also find this post of interest.
May 12th, 2007 at 8:00 am
I love how the author argues that their is a chasm between benefits that the free trade brings in theory and what we get in practice. Yet she fails to mention any proof to substantiate this silly assertion. Accordingly, she fails to mention the countless empirical evidence, compiled during the last two centuries, which demonstrates that free trade is a key element of economic development.
The author should note that the first economic liberal was Adam Smith the man who wrote The Wealth of Nations. In this book he argued that protectionist policies benefited the wealthy few at the expense of the masses. And contrary to the author’s previous assertions, their is ample evidence that dropping protectionist tarrifs thus does the opposite.
What the author should know is that big business and big labor are the greatest enemies of free trade. What do they want instead? Fair Trade. What does Fair trade means tariffs that protects them at the expense of the consumer.
What is sad that these groups attack free trade because they know which side of their bread is buttered, the author because she is an economic analphabet.
May 12th, 2007 at 1:23 pm
Fair trade argues for a level playing field. I don’t know that government should be involved except to the extent that they make it known that the pair of sneakers was made by slave prison labor in China rather than by a place in America where basic working standards are considered.
Free trade as a whole does benefit all parties involved. I think you misstate Smith’s position in that his point was that open trade grows the pie and thus creates the surplus with which we can even consider government and private altruism of any form.
Fair trade is an excellent goal and I encourage consumers to definitely consider the source of the products they buy with respect to these standards. We must be careful about what is imposed by fallible government, however, because, at best, government will trail the beneficial trends of free trade and at worst it will simply hinder them for political purpose.
Two things that come to mind are minimum wage and immigration policy. Minimum wage crushes rural industry in America and ruins our competitiveness in labor sensitive markets. All theoretical benefits are at the expense of inflation and population concentrations in urban/suburban areas (not a very smart swap from the environmental perspective). That’s why there is no more textile industry in the rural south anymore.
Additionally the demand for unskilled and semi-skilled labor from Mexico is overwhelming our current immigration policy to the point that the policy is ineffective. A more reasonable guest worker program that makes coming to this country to work; easier to do right than it is to do wrong would be of immense benefit in controlling the border. This way immigration officials could concentrate their efforts on people who try to subvert a more reasonable system.
Fair-traders, however, almost always fall into the category of those who support minimum wage and organized labor and thus they encourage economic, cultural and environment damaging minimum wage and they disagree with a potentially very positive guest worker program.
Smith used the ‘invisible hand’ metaphor to describe how economic gain is made when government and other prohibitive forces get out of the way of free trade. This holds true in that the larger economic pie supports greater charity and altruism because the largesse of society is no longer stuck on Maslow’s first step.
As with everything, fair trade and free trade are a matter of balance and certainly deserve the thoughtful consideration of this article.
May 14th, 2007 at 3:27 pm
This is a hot topic every time it’s brought up here!
May 23rd, 2007 at 5:44 pm
You are correct, Alicia. The core of the Fair Trade movement is *people* not processes.
Our line of sports balls certified both FSC and Fair Trade is based on adults - not children - doing the hand-stitching, getting paid a fair wage and ensured healthy working conditions.
More stories about the benefits of Fair Trade for people on our manufacturer’s website:
http://www.talonfairtrade.org/
- Scott James
Fair Trade Sports
http://www.fairtradesports.com
Fair Trade Soccer Balls with FSC Certification!
August 23rd, 2007 at 12:41 am
This article really helped me to get a general overview on Free Trade especially. The problems with Fair Trade are not really discussed but I still learned tons from it. Thanks a lot!