Red, Green and Blue: Fair Trade?
Image source: WikiMedia Commons: Photographer: Dider Gentilhomme
Editor's note: Fair Trade is a topic that GreenOptions.com has been covering for some time now, so we thought it might be interesting to debate from the progressive vs. conservative perspective. Brady and Alicia offer us some excellent background on the discussion. Now, it's Jimmy and Shirley's turn…
Jimmy: Although I am generally conservative on fiscal matters and would normally lean toward unfettered free trade, I understand the importance of Fair Trade to our country’s interest and as a humanitarian influence on the world. Fair Trade levels the playing field. Where we have certain standards for the treatment of our workers and environmental restrictions, while other countries do not; therefore, they have a competitive advantage. In circumstances where slave and prison labor is used to compete with American labor the need for Fair Trade standards is obvious. But what about circumstances where the cost of living in undeveloped countries is simply so much lower that this allows the country to clobber the US with low cost labor?
Free trade would seem only fair given willing workers and willing employers. Also many of our increasingly stringent environmental standards are a testimony of our wealth. Although basic health and sanitation standards are a must, do we hold other developing countries to the high environmental standards that only our wealth can support?
These are important questions that we will consider. Please add your thoughts as well so that we can determine what might be the best form of Fair Trade policy to live and support.
Tags: Activism, Developing Nations, economics, Education, Fair Trade, fair+trade, free+trade, Jobs and Careers, politics, Red, Green and Blue, Socially Responsible Investing, Taxes
May 29th, 2007 at 5:49 pm
Good morning Jimmy! As you might expect, I have no problem with a requirement that the products we import be fair trade. Rather than harming less-developed nations, fair-trade efforts have proved far more beneficial, I would argue, than so-called "free trade," which is anything but.
To cite a few examples, our current "free trade" system expects developing countries to compete with developed markets that now subsidize their agricultural sectors at a rate of one BILLION dollars per day (according to the Organisation for Economic Cooperation and Development, see http://www.commondreams.org/archive/2007/05/24/1419/)
Meanwhile, the Security and Prosperity Partnership being drafted between the U.S., Canada and Mexico would actually eliminate stricter labor and environmental regulations in Canada and Mexico for the sake of market "harmonization" … hardly free or fair. (See here: http://www.commondreams.org/archive/2007/05/27/1494/)
Finally, current "free trade" laws have done such things as force Japan to accept food imports with more pesticide residues than it finds acceptable, prohibited Guatemala from banning deceptive advertising of baby food, eliminated overseas bans on asbestos, and ruled against other nations' fuel-economy and auto emissions standards. It's also prevented the European Union from being able to bar hormone-filled U.S. beef from its markets (a ban overwhelmingly supported by Europeans) and enabled the Ethyl Corp. (based in the U.S.) to sue Canada for "lost business opportunities" because of Canada's ban on MMT, a gasoline additive Canada considers to be a carcinogen. Canada ended up giving up, paying Ethyl $10 million and agreeing to label MMT as "safe." (You can find details about these and other cases here: http://www.commondreams.org/archive/2007/05/25/1439/)
Fair-trade efforts, on the other hand, encourage developing countries to make the most of their unique skills, crops and natural resources by building sustainable and poverty-fighting markets for their products. "Free trade," as we've seen from NAFTA, often encourages the opposite, generating great market opportunities for the big guys but doing little to help the poor and disadvantaged hop onto the globalization gravy train. For every IT pro and customer service person who's now making great money in Bangalore (and costing someone in the U.S. who used to earn a good living his or her job), you'll find a hundred or more small farmers around the world pushed off of their land or driven into sharecropper-like status thanks to "free trade."
May 29th, 2007 at 7:35 pm
What you have listed, Shirley; is a litany of Static Pie economic thought. With free trade comes a growing economic pie from which everyone benefits. Sure we should have Fair Trade as our ideal. The fact is though that hindrance upon free trade suppresses the world overall economic well-being. It may suck that third world kids are sewing Beanie Babies for overweight American kids for 50 cents a day but if it keeps their families from going hungry and keeps the kids from scavenging the dumps as an alternative then even this lower-than-America standard can be laudable.
Unskilled and semi-skilled labor in this country has priced itself out of the world market. Is our wealthy standard of living we’ve imposed on our consumers something we should force upon the rest of the world that doesn’t have the wealth to sustain it? It could be argued that some of these countries have not made the inflationary mistakes the US has; and therefore are more competitive.
It is proven that as a higher standard of living evolves around the world so, too, do the social reforms. Are we to deny the possibility by letting government(s) mandate arbitrary social reforms that inhibit the economic growth? Not to be chicken-n-eggish here but it would seem that the cycle can be fed or starved from either end.
I think my main problem arises from your use of the word ‘requirement’ in your first paragraph.
May 29th, 2007 at 8:02 pm
As for agriculture, I really don’t know what to suggest here. We debated this on the Farm Bill and I’m not a fan of government hand-outs for any reason but we’ve got to keep US agriculture viable for national security reasons. Doing this creates a glut of staple food in the world market and puts small farmers out on their ear.
I have hopes for more specialized organic crops as the ‘Long Tail’ continues to grow where smaller farmers around the world can have their niches. We’ll just have to see how it all works out in the long run. I think our policies are tending toward encouraging smaller farmers though.
May 29th, 2007 at 10:10 pm
Sorry, Jimmy, but I don’t think my problem with “free trade” vs. fair trade represents a “Static Pie” view. I do agree that, through the various “free trade” agreements, the economic pie is expanding — U.S. and global stats both bear that out — but I’m seeing more of a “trickle-up” than “trickle down” effect for most of the “little” people. The pie might be growing, but it’s growing biggest and fastest for the multinationals.
Re: “It may suck that third world kids are sewing Beanie Babies for overweight American kids for 50 cents a day but if it keeps their families from going hungry and keeps the kids from scavenging the dumps as an alternative then even this lower-than-America standard can be laudable.”
If we did more to encourage (require) fair trade in the global markets, young Huang or Lupe might not have to sew cheap goods for bloated Americans to make ends meet for their families; experience shows that fair trade programs, coupled with efforts to promote local sustainability, helps families in developing countries make ends meet much more effectively … while allowing the young kids to learn and perhaps prepare for better futures for themselves.
I don’t understand why it’s so abhorrent to establish fair-trade requirements when current regulations enforced by the WTO force countries (our own included at times) to swallow marketplace standards the locals don’t want.
The problem seems to be that “free trade” advocates view the approach toward the global marketplace as an either-or proposition: either we have free-trade agreements (which aren’t really all that free, again, because of the subsidies and restrictions in place) that might or might not eventually benefit the least advantaged in developing countries, or we let the rest of the world sink or swim as best they can. I think there’s a better way, one that favors fair trade over so-called “free trade.” (Sorry, I just can’t use that phrase without the quote-marks! : ) )
May 30th, 2007 at 12:07 am
Hi Jimmy,
Although I agree that bringing jobs to people who would otherwise be dumpster diving for suvival is a good thing, I think a lot of people get bogged down by the deceptive “fifty cents is better than no cents” argument. I think the issue is not wage alone but “living” wage.
If a factory worker in another country works for an Amerian Corporation that claims to be rich and powerful, than shouldn’t the employee be able to better their livelihood? And by better I don’t mean not starving. Anything is better than not starving. The questions is, can they earn a good living? Can their children go to school? Can they work a reasonable work week? Can they take a day off without penalty? sick days? Do they get fired for being pregnant?
If there are only a few jobs avalilable to you, and you are trapped in that job because there is no security. They can fired you at anytime. You have no say in your work hours or conditions. And they pay you only enough to keep alive so you can come to work, than what is the difference between this and slave labor? That is exploitation.
I am not saying that every company is like this, but many are. Also, Many companies move to countries with less stringent environmaental laws and regulations, so that they can pollute because pollution is less costly in the short-run. And business is not very good at looking at anything but the short-run.
Fair trade attempts to remedy these problems. I think it is a good start!
May 30th, 2007 at 6:07 am
From the sound of it, it seems like there are only two trading partners in the world, the U.S. and the third world. What about all the trade done between developing nations? I live in Thailand where rice farmers send only seven percent of their rice exports to the U.S., most goes to other developing countries in Asia, the Middle East and Africa. It’s unlikely these countries are going to develop “fair trade” with Thailand, but they’d all be better off dropping their tariffs. Thai farmers would get a better price, poor people in Africa get cheaper rice. Africans won’t waste their time making sure Thai farmers are following fair trade principles, so free trade is really the only way to improve things.
May 30th, 2007 at 2:28 pm
Good Points all.
What ‘fair trade’ boils down to though is US protectionism. Protecting us from the flaws in our own system. It’s not the fault of other countries that through labor unions and policies like minimum wage we have priced ourselves out of the world market and harmed our competitiveness in the production of manufactured goods. The bottom line is that many, what we call ‘fair’, policies are in truth crutches and handouts that other countries cannot afford.
What they do have though is inexpensive cost of living and inexpensive cost of labor. These combined make the arbitrary and artificial policies like minimum wage a substantial barrier to competition and thus the idea of ‘fair trade’ is imposed to protect our labor market.
Other problems arise from these policies that intend to bridge the gap between rich and poor. Take the progressive income tax… in order to keep the producers (who work because they choose too) working; a company must increase the net reward to these people and thus increase the ‘income gap’. The unintended consequence is that it ultimately harms those it intends to help because the system rewards those who do not produce as much for not producing harming the overall pie and leaving less resource for residual benefits.
Our minimum wage is an example of another problem. Relative unemployment rates between urban areas and rural areas that are actually affected by minimum wage flip every time the minimum wage is raised. Rural unemployment increases relative to urban unemployment. This forces concentration of labor in urban areas and harms rural industry that relies on cheap labor. That’s why there is no more textile industry in our rural south. This unintended consequence of urban concentration is the opposite of what we would like from an environmental perspective but since a high minimum wage is ‘fair’ that’s what we do anyway.
Now we are offered the concept of ‘fair trade’ to protect us from our internal mistakes and at the same time inflate the cost of goods such that it hurts… who? Again, mainly those you are trying to help. Unintended Consequences.
May 30th, 2007 at 7:25 pm
Wow, where to begin?
To David K.'s argument that dropping tariffs would give Thai rice farmers a better price and give Africans cheaper rice: The problem is that subsidized, cheap crops are harming, not helping, poor farmers in Africa. Their own crops can't compete with, say, cheap, subsidized crops from the U.S., so they struggle to survive or give up and move to the city to become another member of the urban under- or unemployed.
Jimmy, so U.S. labor unions (What are those? Seen any lately? : ) ) and minimum wage have hurt us on the world market, but cheap subsidized U.S. corn that floods world markets is a good thing? Do we really want to see the U.S. move to the point where our poor kids face the same options as poor kids in Bangladesh and Cambodia (i.e., sweatshops and manual labor at the ages of 7 or 8)?
Re: your argument against the progressive income tax ("in order to keep the producers … working, a company must increase the net reward to these people … the unintended consequence is that it ultimately harms those it intends to help because the system rewards those who do not produce as much"): I have yet to meet this one person who chooses NOT to work for a higher salary because he might have to pay a higher rate in taxes (yet will still bring home more in total dollars). We're not taxing people making six-figure incomes to the point they're earning the same as minimum-wagers.
One of the problems with so-called free trade, as Oxford professor Alex Nicholls points out, is that the pre-conditions (information, market access, credit, etc.) for that kind of trade "are notably absent in rural agricultural societies in many developing countries." That's why what seems fair to developed economies often feels anything but in places like South America and Southeast Asia.
Again, we're not really practicing "free trade," anyway, or else the U.S., for example, still wouldn't have in place those sugar tariffs that keep out cheap imported sugar.
Finally, look at which country is doing best in today's global marketplace: protectionist China, with its artificially low yuan. It's not "free-trade" Mexico. "Free trade," while it sounds good and appealing to fair-minded Americans, is really one of those Frank Luntz-inspired euphemisms for making a negative sound more palatable (i.e., "global warming" becomes the more innocuous-sounding "climate change.")
May 30th, 2007 at 8:14 pm
Shirley your logic about taxation falls apart because the majority of people who pay substantial taxes in this country work because they choose to not because they have to. I know many couples who opted to be one earner households during the 2000 economic down-turn because income inflation had put them into a position where about half the second income was eaten up by taxes of one form or another. That bracket creep was the fundamental reason for the recession when everyone (who was actually paying substantial taxes) looked around and said “screw this”. If Hillary gets elected and has her way with taxes I’ll probably opt out of the rat-race myself. I can fire the housekeeper, wash my own cars, eat out less, pack wifey delicious and nutritious lunches, clip coupons and basically play defense with the household budget. That’ll directly harm the economy because I won’t be paying the substantial progressive income and residual taxes I pay now… it will indirectly harm the economy because I won’t be spending so that the housekeeper and lawn service (etc.) can earn… plus there’s the opportunity cost of not having my specialized skills put to efficient use in the economy. It would be an even larger no-brainer if my kids were still little with the cost of day-care etc.; and we’ve not even touched on quality of life issues yet.
So back to the point… as the tax becomes more progressive the employers must be more aggressive with gross salary on the high earners to overcome the progressive tax burden to lure and keep them in the workforce. Thus, the unintended consequence of a greater income gap with the added benefit of lower overall economic efficiency.
May 30th, 2007 at 8:15 pm
Re: sugar, I’m in agreement.