The idea of "fair" trade is very appealing, whether confronting the plight of autoworkers in Michigan or farmers in the Third World. Unfortunately, it will be only a small part of any trade solution for the U.S. and the world as a whole.
Fair trade in goods like coffee is a fine thing, because there exists a clear idea of unfair practices in how coffee importers treat coffee farmers and how to avoid them. That sort of fair trade basically consists in First World consumers voluntarily not using the full strength of their bargaining position with Third World producers. This is admirable enough.
Unfortunately... fair trade embraces less than one percent of trade in cocoa, tea and coffee, so it will have a small impact for the foreseeable future. Can the idea scale? Perhaps. There are some encouraging signs, like Nestlé's recent announcement that it will henceforth make Kit-Kat bars sold in Europe out of fairly traded chocolate. (But not America. What gives, Nestlé?)
More fundamentally, there is currently a huge sandbag blocking fair trade from further acceptance: mainstream economics holds that it is largely futile, or even counter-productive. For example, conventional economics holds that the price supports entailed by fair trade encourage overproduction and drive down the price for other growers.
So conventional economics must carefully be picked apart, using its own conceptual vocabulary, before fair trade can even get a decent hearing outside those already committed to it. This means, above all, getting away from the "free markets are always right" economics that dominates the field in the U.S. Pure free markets aren't the way ex-Third World nations (which means everyone from South Korea to the good old USA, if you go back far enough) escaped poverty, so they aren't likely to work now.
For Americans, the more important meaning of fair trade concerns questions like what is the fair share for U.S. firms in the Chinese airliner market? Because the greater share of America's trade problem concerns products like airliners, not coffee. These high-tech, high-value products are decisive for U.S. trade performance and will be the main objects of any future American industrial policy. This is where the battlegrounds for American jobs are.
Unfortunately, the concept of fairness is a political minefield. A political coalition strong enough to abolish free trade will need support on both sides of the aisle, and these sides disagree about what is fair every day. This problem is even worse when foreign societies are involved (as they must be in trade) because different societies define fairness differently.
The Japanese, for example, consider it unfair to lay off workers in a recession--for core employees at major firms, at least. Many European countries consider America's antiunion "right to work" laws unfair. (Imagine if nations like Germany and Sweden, where unions enjoy rights undreamed of in the U.S., like guaranteed board representation, were to demand that Alabama, Texas, and similar states rescind their right-to-work laws as a prerequisite for being allowed to export to the EU!)
As former trade diplomat Clyde Prestowitz has pointed out:
Because the law assumes that American-style capitalism and laissez faire international trade are not only good but morally right, it implicitly defines deviations from such a system as 'unfair.' There is no provision for the possibility of a different system or for dealing with problems that arise not out of unfairness but from the grinding together of systems that simply do not mesh well.
As a result, appealing to fairness to resolve trade disputes, or judging foreign actions by a standard of fairness, is unlikely to solve anything.
To take another example currently in the news, there is no particularly good reason why currency manipulation should be considered "unfair." Currency manipulation is a tactic, and while the U.S. should certainly fight back to restore advantageous currency values, this is about protecting the national economic interest, not ethical justice per se.
Fairness isn't even a particularly meaningful concept in much of trade economics, which turns on technicalities like capital flows and economies of scale. And fairness isn't the objective of trade policy for the most part, anyhow. Prosperity (of ourselves or others) is. Decent people naturally hope these will coincide, but one can't just a priori assume this.
China's authoritarianism, for example, is morally objectionable in a dozen different ways, but it has probably raised the living standards of the Chinese. If prosperity is what we want, then we need to admit that prosperity is what we're after (subject to whatever ethical constraints we believe in).
It is similarly pointless to argue about whether America's trade mess is the "fault" of foreign nations or ourselves. Realism demands that we assume foreign nations will take advantage of any opportunities we put before them. And even if foreigners really are to blame sometimes, we don't have control over their actions; we have control over our own.
Follow Ian Fletcher on Twitter: www.twitter.com/IanFletcher
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Perhaps after my post to your first blog you elected to address the negative impact and the "unfair US agriculture exports."
Yet, even here its NOT "bargaining position with Third World producers". Its the old colonial monopoly or cartel practices of first world middle-men (between the producers / farmers and consumers).
What is dispecable to third-world is pitting American govt's largess in agricultural subsidies to mega corporations against near-improvished third world subsistence farmers. This modern-day economic colonialism cannot be camouflaged with all our "assitance programs" to these same countries that we improvish.
Hence a lot of progressive writing in this and other blogs is SPIN. The author makes no attempt to expose and eliminate US agricultural subsidies to rich farmers and mega-corporations as the cost of the American tax-payers, consumers and yet-to-be-born Americans (stuck with the 15.5 Trillion debt) as well as improvished farmers and countries throughout the world.
So knock off the subsidies crap, we all know it happens, we all don't like it, but don't think for a second that removing those subsidies in the US would magically let inefficient 3rd/2nd world farms suddenly pop back into existence.
Those 2nd/3rd world farms would have failed WITH or WITHOUT agricultural subsidies here in the US, don't think any differently cause that's fantasy land.
Why? Because a group of politically connected sugar producers in the south use their influence to keep protective tariffs in place that keep foreign sugar out & US prices high.
So it is in their interest to follow and respect the "rule of law"; and try & force every one to follow those self-serving laws... as long as they are self-serving.
This is the basis of the problem. Minimum wages. This is no easy feat, of course, but a trade agreement should include a wage that allows emerging markets to attract business, but also increases that minimum in steps.
China should be the first to get behind this agreement. Their worker's wages will increase, allowing the country's internal economy to excel (and they get to take credit when talking to workers/blame us when talking to corps).
Some manfuacturing will certainly then leave China. However, entering into this agreement assures that other emerging markets aren't able to take the wind out of China's sails. European and Canadian trade partners (who have such protections in place), would see no change.
The race to the bottom for wages is a lose/lose/lose proposition in the long-term. It is a structural defect that will collapse the capitalist bridge if not addressed.
back in the 70's there was a little rule to help puerto rico................(and some corporations too by the way).
and suddenly three very large drug manufacturers moved out of the midwest...................maybe it was
the union, and excellent wages and benefits and pensions.............that the original owners were from that little town and
were heavily invested in and pillars of that community, huge supporters of local education, and all had
foundations to send the children of their employees to college. then they got bigger and decided to go public.........and the executive staffs were encouraged to take a much deserved retirement.........and
were replaced with wall street hand picked vultures.........and in no time at all - 1/3 of all workers in
the little town were out of work............but the folks in p.r. were thrilled to have any job at all and making $.25 an hour, with no benefits..........
then there was the arrow shirt factory..............
what was that little ditty they used to sing on the commericials: remember the union label...........
now we can't even find a made in america label. (and i don't think the northern marianna's count either)
http://www.citizen.org/documents/FinanceReregulationFactSheetFINAL.pdf
To Rescue Main Street, We Need to Curb the WTO
"...StartiÂng in the late 1970s, the U.S. government and corporatioÂns pushed to redefine “finance” from a service that supports the real economy to a tradable commodity whose flow across borders should be uninhibiteÂd. Starting in the late 1980s, they successfulÂly pushed for financial services to be included in “trade” negotiatioÂns, including those establishiÂng the World Trade OrganizatiÂon (WTO). “The sector was truly unique in that respect, and there is little doubt within the trade policy community that financial sector support in the European Union and the United States was a determininÂg force in concluding the FSA [WTO Financial Services Agreement]” notes a study posted on the WTO’s own website “Financial Services and the WTO: What Next?”
The WTO rules require deregulatiÂÂon – and lock-in – of financial services that countries “liberalizÂÂe” under these terms.
[snip]
For instance, the Glass-SteaÂÂgall Act created a firewall between commercial and investment banks to prevent the former from speculatinÂÂg with consumers’ savings. But the U.S.’ 1997 FSA commitmentÂÂs noted an intent to change Glass-SteaÂÂgall to conform with WTO rules. The Gramm-LeacÂÂh-Bliley Act, which did so, passed in 1999 – the year the FSA went into effect....ÂÂ"
People who are really for Tariffs say instead they are "fair traders" because they fear the word "Tariff". That's right they are afraid of a word. People think Tariff a 4 letter word when it's really a 6 letter word.
And its a perfectly acceptable solution under article I section 8 of the constitution, to heck what the WTO thinks