Wednesday, September 08, 2010

Free Trade and Fair Trade

An anonymous guest writes,

"What's the strongest case in the Free trade versus Fair trade argument? Do you a good book to recommend for further review?"
The argument on the free trade side is based on idea that economic growth benefits the entire economy. If we eliminate tariffs and other barriers to trade and leave the marketplace to its own design, then it will work with maximum efficiency, relocating jobs to where they produce the most goods at the lowest cost and creating a positive climate for consumers. This will give rise to an increase in economic activity and this causes a multiplier effect that will in turn allow prosperity to spread. If a rising tide lifts all boats, government control over economic behavior between nations is a dam that artificially keeps the tide from rising. By opening the dams and letting the water flow where and how it will, both economies will benefit.

Those on the fair trade side of things disavow this deep religious faith in markets for two reasons, one economic and one ethical. The economic argument contends that the increase in trade that results from opening markets does not positively affect all, but in fact negatively impacts the most vulnerable. Free trade might work, the line goes, if the playing field were level in terms of labor standards and environmental regulation, but this is not the case. As it stands, employers will take the jobs of those who have the fewest other prospects and move them to countries where they can get away with treating the workers the least humane and pollute with impunity. Arguing that those people benefit because this makes plastic goods at Walmart cheaper is missing the larger point. Yes, free trade does benefit some -- those among us with the most already -- but to think that benefiting them will then help everyone else is tantamount to thinking that one could dump gallon buckets of paint over the roof of a house and have it coat the walls evenly. Free trade, on this view, further exacerbates the divide in wealth causing even more to accumulate at the top to the detriment of those at the bottom.

The moral argument is that the move to free trade forces those who have the most reasonable safeguards for workers and the earth in place will then have to weaken them to remain competitive. Doing the right thing puts you at an unsustainable disadvantage, leaving you with the conundrum "do I do the right thing for the people and planet and let them starve or do I harm the people and planet in the name of helping them?" The third option is to insist that everyone do the right thing before they are allowed to play the game, but this is a rejection of free trade.

As for books, the only thing that pops to mind (and it's not a perfect fit) is Beth Shulman's The Betrayal of Work. I know others here (yes, I'm looking at you, Kerry) read a lot more on these issues and may have other suggestions.