Reimagining free and fair trade
In the early 1990s, the concept of free trade was a lot more contentious than it is today. I recall watching daily reports of ongoing riots in Seattle protesting the 1999 WTO conference that was being held there. Being a teenager then, I couldn’t fully grasp why people were so angry over trade, and how something like the free exchange of beans between countries could have serious implications on wealth, exploitation, or worker’s rights. I asked my high school geography teacher to explain why some people were so upset. The explanation she gave was little more than a surface observation of events and grievances that had no more depth than a general mistrust of corporations and multinational institutions.
Sometime thereafter, the protests over free trade evolved into a demand for fair trade. It was a good brand. Replacing that one word, free, for fair, also had the powerful effect of entirely capturing the difference in the left-right value continuum. The right, prioritizing freedom over outcome, and the left prioritizing fairness over unadulterated liberty.
There was never quite a clear definition of what fair trade meant, however. Because “fairness” inherently relies on observed outcomes, it is less easily distilled into a single principle, the way freedom can be, and so its definition existed more as the accumulated rectification of observed injustices than a unified law to be blindly applied.
Best I could tell, fair trade advocates demanded paying workers like coffee farmers a fair wage at least commensurately associated with the final sales price of their goods. No matter your economic literacy, anyone with a soul could see the questionable morality of a coffee farmer earning less in a day than the price of a latte. In one telling documentary, a French reporter travels to the Ivory Coast, a former French colony, to learn more about the production of cocoa beans and the life of the farmers. We learn that not only have some of the farmers never tasted chocolate, but they are also so detached from production, that they aren’t even sure what use Europeans have for the cocoa beans. “I’m just trying to make a living,” says one cocoa farmer.
Consumers started paying attention to these kinds of injustices, and several organizations sprouted with the intent of verifying and advocating for fair trade. Besides a small handful of commodities that garnered the public’s attention like coffee and chocolate, fair trade never really entered the mainstream. One problem is that the nature of injustice varies based on the product and industry. Coffee and cocoa farmers are underpaid and work in poor conditions. On the other hand, the export and commercialization of Quinoa, a grain native to Bolivia, has created its own set of social justice issues. Its growing popularity in the west and consequent export has resulted in a spike in its price, which has made it unaffordable to natives that rely on it as their primary protein source. The quinoa trade and the coffee trade require different remedies to be “fair.”
Another problem was that fair trade kind of flew in the face of one of the main advantages of trade: to exploit wage differences between countries. While a $2 per hour wage seems like nothing in the west, in many countries it represents a liveable wage capable of carrying people out of poverty.
For all its good intentions, fair trade never really made it as much more than a niche for socially-conscious consumers and failed to garner the attention of a large voting block or viable political candidate.
Thanks in part to the mainstreaming of neoliberal ideology, both the left and right eventually accepted free trade as a generally good policy for an economy and a society. The recent bipartisan outcry over President Trump’s protectionism and imposed tariffs on goods from countries like China is case in point. It is telling that the hysteria, even by the left, was centered around how protectionist measures could hurt consumers and corporations at home, without much of a word about Chinese labour practices.
And that is a serious problem. The debate surrounding free trade is now being discussed along purely domestic and economic grounds, devoid of any consideration for the welfare of people or the environment. This is a moral failure of developed nations.
What the fair trade movement got wrong was that there is nothing wrong with taking advantage of lower wages in a country. An increase in demand for labor in poorer countries raises wages, introduces more capital into the local economy, and is exactly the kind of structural economic change that has the potential to bring an entire class of people out of poverty.
While fair traders identified valid flaws in the outcomes of free trade, the movement became little more than a set of piecemeal solutions that lost sight of the greater opportunity to support both freedom and better economic outcomes.
The real problem with free trade, as it exists today, is not the exploitation of wage differences, but the exploitation of labor, legal, and environmental standards.
Trade between countries with similar standards should indeed be free. If Canadian salaries are lower than American salaries, outsourcing an American automotive plant to Canada lowers the cost of cars for consumers and makes American automakers more globally competitive. If Germany can produce cheaper and better hops than Japan can, Japan should indeed import their hops from Germany.
The four countries listed above have relatively similar environmental, labour, and legal standards. Efficiencies in one country over another are a result of comparative advantages in those countries, and trade between them is net beneficial to both parties involved.
What makes US trade with China, for instance, different is that Chinese production advantages are in part derived from lower standards, as well as theft of intellectual property — not just natural or economic differences.
Chinese electricity is cheaper than that of America in part because it is derived from far more polluting sources. For this reason, exporting a company’s production to China, is really a roundabout way of evading higher electricity costs from less-polluting power sources. Likewise, American companies, which must, for instance, properly dispose of chemical waste, might struggle to compete against companies in countries with poor or unenforced environmental standards that effectively allow them to dump their waste in a local river.
Morever, while I have argued that it is a morally-acceptable advantage of trade to exploit wage differences between countries, I submit that it is not okay to exploit standard differences. In China, for instance, what labor laws exist are rarely enforced, job security is fragile, and harassment or abuse have little legal recourse. And pathways to change these standards are equally obstructed. Authentic collective bargaining is nonexistent, and labor unrest is often met with police brutality.
The case for trade cannot be just financial. Economic policy, the framework through which societies decide how to distribute wealth, is inseparable from morality. What values are important to us? What behaviors do we choose to encourage or discourage? What is the relationship between capital and labor? These are all moral questions that economic and trade policy must address. A calculation of trade balances and effects on GDP alone reduce our decisions to cold exchange and divorce policy from humanity.
Trade ties the welfare of two countries together and has the potential to simultaneously create economic wealth for both nations and raise the standards and dignity of trading partners.
I suggested earlier that fair trade failed because it wasn’t so much a policy proposal as it was a collection of bandaid solutions and well-meaning but incoherent moral imperatives.
Instead, I propose a trade policy that is both simple, and fair. Simple in facilitating free trade across nations. And fair in and promoting the raising of labor, environmental, and legal standards globally.
Let’s call it the Triaged Trade System. In this system, a country like the United States codifies a set of standards it obliges to uphold. Standards that outline minimum acceptable requirements across a breadth of areas: labor laws, carbon output, intellectual property laws, human rights, and so forth. A point system creates clear thresholds whereby countries can be categorized into tiers. The top tier includes countries who more-or-less share similar standards and laws and thus enjoy truly free trade. Each successive tier is penalized with a sequentially higher tariff in order to level the playing field.
This system simultaneously appeases protectionists who complain of countries with unfair advantages and social activists who complain of trade with tyrannical regimes. It also creates an honest framework that ties moral rhetoric with real policy and encourages Nations to improve the welfare of their people and the treatment of the environment.
Too often, developed nations will entangle their economies with the very countries they morally decry under the unsubstantiated slogan that it creates pathways to encourage change. While it is true that as economies develop, governments tend to start caring more about things like pollution, it is a mistake to think that values like democracy, human rights, and environmental stewardship naturally and inevitably evolve from trade and economic development. In fact, recent history has shown the opposite to be the case, where the competition to attract capital has contributed to a race to the bottom of standards.
It is in fact not standards, but stability, reliability, and favourable treatment that attract investment, and it is often more authoritarian and corrupt governments capable of delivering on those virtues. And free trade, for all its benefits, has embroiled developed nations in an awkward dance with these regimes and in the worst cases has created immoral incentives to support their tyranny.
A transparent system of trade that ties freedom to fairness has the opportunity to fundamentally shift globalization for the better and turn government rhetoric about the advancement of rights and environmental stewardship into reality.
