Free trade vs. Fair trade


mentalfloss
#1
I'm surprised the econohoes aren't given this issue more credence, especially when we're falling behind the times on trade.

Free Trade vs. Fair Trade

Free trade refers to a general openness to exchange goods and information between and among nations with few-to-no barriers-to-trade. Fair trade refers to exchanges, the terms of which meet the demands of justice.

Proponents of fair trade argue that exchanges between developed nations and lesser developed countries (LDCs) occur along uneven terms, and should be made more equitable. The Fair Trade Federation's Annual Report describes the fair trade movement as "a global network of producers, traders, marketers, advocates and consumers focused on building equitable trading relationships between consumers and the world's most economically disadvantaged artisans and farmers."

Fair trade organizations, such as the Fair Trade Federation and the International Federation for Alternative Trade maintain that fair trade practices alleviate poverty, enhance gender equity, improve working conditions, the environment, and distributive justice.

By contrast, free trade proponents believe that under a system of voluntary exchange, the demands of justice are met. Although free traders hope to alleviate poverty and improve conditions around the world, they prefer measures that are less intrusive than fair traders, who regard the unfettered market as injurious to these same goals.

Free traders argue that in the long run markets will solve - that is, when permitted to come to equilibrium, both rich and poor nations will benefit. In this way, free traders hold that free trade is fair trade.

Free Trade Vs. Fair Trade
 
Machjo
#2
Quote: Originally Posted by mentalfloss View Post

I'm surprised the econohoes aren't given this issue more credence, especially when we're falling behind the times on trade.

Free Trade vs. Fair Trade

Free trade refers to a general openness to exchange goods and information between and among nations with few-to-no barriers-to-trade. Fair trade refers to exchanges, the terms of which meet the demands of justice.

Proponents of fair trade argue that exchanges between developed nations and lesser developed countries (LDCs) occur along uneven terms, and should be made more equitable. The Fair Trade Federation's Annual Report describes the fair trade movement as "a global network of producers, traders, marketers, advocates and consumers focused on building equitable trading relationships between consumers and the world's most economically disadvantaged artisans and farmers."

Fair trade organizations, such as the Fair Trade Federation and the International Federation for Alternative Trade maintain that fair trade practices alleviate poverty, enhance gender equity, improve working conditions, the environment, and distributive justice.

By contrast, free trade proponents believe that under a system of voluntary exchange, the demands of justice are met. Although free traders hope to alleviate poverty and improve conditions around the world, they prefer measures that are less intrusive than fair traders, who regard the unfettered market as injurious to these same goals.

Free traders argue that in the long run markets will solve - that is, when permitted to come to equilibrium, both rich and poor nations will benefit. In this way, free traders hold that free trade is fair trade.

Free Trade Vs. Fair Trade

But even "fair-trade" advocates in Canada generally support a very limited form of fair trade. For instance, consider the following EU petition:

lingvo.org/GRIN_en.pdf

You might also want to consider this document too:

uk-online.uni-koeln.de/remarks/d5134/rm2169353.doc

As it turns out, the dominant position of English and French in the world essentially leads to a subsidization of English-speaking and French-speaking countries worldwide via the publishing, education, tourism, and other industries. Looking at it that way, Canada's foreign aid is really merely a transference of some of that money back to those countries on our terms.

We could also apply this to Canada's First Nations and Innuit in more isolated communities who must struggle to learn two European languages to function in Canada, which is a considerable burden on them and might explain drop-out rates too in some communities where a knowledge of English and French is weak.

Other books on the subject available in English are:

(By robert Phillipson) Linguistic Imperialism
English-Only Europe: Challenging language policy

And if you know French:

(By Lous-Jean Calvet) La guerre des langue et la politique linguistique
Pour une écologie des langues du monde

Ever more research is showing how language policy nationally and internationally determine an individual's and a nation's access to the world's economic resources.

Some of the books mentioned above, especially La guerre des langue et la politique linguistique by Louis-Jean Calvet implicate the Canadian International Developement Agency with the SIL (Summer Institute of Linguistics) and other activities involved in the promotion of Canadian interests via ethically and morally questionable practices involving language promotion.

Yet even the Canadian left remains mute with regards fo the position of English and French at the UN for instance, thus making even the Canadian left hypocritical by its silence on this issue and even active support for the funding of CIDA and Canadian Heritage which is also involved in language promotion especially in China via LingoMedia:

Lingo Media - Partners

In fact, ironically enough, some of the less linguistically imperialistic politicians we have right now are sitting in the Conservative Caucus in Parliament, such as MP Scott Reid who does in fact support reducing spending on CIDA and Canadian Heritage and intends to weaken at least somewhat the special privileged status granted English and French Canadians over Canada's indigenous languages for example.

Though I have met New Democrats and Greens who also supported putting an end to this type of linguistic imperialism, they generally represent such a fringe element of their respective parties so as to be negligeable.
 
mentalfloss
#3
Right, like everything, I'm sure that semantics has its role to play.

That said, it should be patently obvious that free trade is not inherently "fair" in bilateral agreements.
 
captain morgan
#4
I suppose that the real question is: How do you define fair?
 
Machjo
#5
Quote: Originally Posted by mentalfloss View Post

Right, like everything, I'm sure that semantics has its role to play.

That said, it should be patently obvious that free trade is not inherently "fair" in bilateral agreements.

Sorry, I did not quite understand what you meant by semantics?

Quote: Originally Posted by mentalfloss View Post

Right, like everything, I'm sure that semantics has its role to play.

That said, it should be patently obvious that free trade is not inherently "fair" in bilateral agreements.

I believe free trade and fair trade can be synonymous as long as you don't have international laws, even subtle and apparently unrelated laws, stacked in favour of one group.
 
mentalfloss
#6
Quote: Originally Posted by captain morgan View Post

I suppose that the real question is: How do you define fair?

There are apparently two different facets of fair trade which seem to be a result of free trade criticism. I don't commit to endorsing these ideas, but they are interesting to discuss.


The Dependency Thesis

Proponents of fair trade maintain that trade between and among nations occurs in coercive and uneven ways. Even if nations trade freely, smaller nations become increasingly reliant on richer states, whose interaction with smaller countries depletes natural resources in those countries, and slows their progress. Dependency theory has many variations, and has undergone changes over several decades.

Here are the basics. Richer, powerful nations are collectively known as the "core," while LDCs and other very poor countries are known collectively as the "periphery." Dependency theories entertain the idea that periphery states depend for their well-being on the core. The core produces more luxury goods, while the periphery specializes in basic and industrial goods. Although there are many putative mechanisms driving the dependency - some of them highly disputed even among dependency theorists - the general theme is that such a dependent relationship exists, and is ruinous to the LDCs.

F.H. Cardoso and Enzo Faletto published Dependency and Development in Latin America in 1969, the first academic statement of dependency theory. In it, Cardoso and Faletto argue that "economic development has frequently depended on favorable conditions for exports." Argentina in 1900 looked economically very similar to the United States of 1900, but Argentina's growth was severely depressed when compared to U.S. economic growth over the twentieth century. Cardoso and Faletto attribute this decline to unfavorable terms of trade relationships for Argentina.

Later versions of the dependency theory hold that governments mismanage money, while private investors regard the Third World as risky investment. So, the Third World finds itself perpetually disadvantaged. John Gray of the London School of Economics argues in False Dawn: The increased interconnection of economic activity throughout the world accentuates uneven development between different countries. It exaggerates the dependency of ‘peripheral' developing states such as Mexico on investment from economies nearer the ‘centre', such as the United States. Though one consequence of a more globalized economy is to overturn or weaken some hierarchical economic relationships between states - between western countries and China, for example - at the same time it strengthens some existing hierarchical relations and creates new ones.

Dependency theory ultimately maintains that the terms of trade between center and periphery nations is unbalanced and therefore unfair.


Alleviation of Poverty and Human Dignity

Fair trade advocates maintain that nations that have limited export opportunities become poorer, and hard-working individuals and their children struggle to meet basic life needs. Fairtrade.org argues that trade introduces an exploitative mechanism which impoverishes those in the Third World: "Particularly in the field of trade, our area of attention, the law of the strongest is frequently the only law. In Asia, Africa and Latin America, both male and female craftsmen and farmers know all about this. If they cannot free themselves from the grasp of the numerous middlemen and buyers, who from their position of power prescribe the lowest prices, they will remain slaves of circumstances their entire lives."

According to the principles of fair trade, the prevailing terms of trade between rich and poor nations are unjust because prevailing market prices for the goods produced in the Third World are too low for the laborers to reap a wage reflecting their dignity.

Nobel Prize winning economist Amartya Sen, in Development as Freedom notes another problem of poverty: Many of the same people who have small incomes also have deficiencies in the ability to convert those incomes to useful life pursuits. In other words, there are "unequal advantages in converting incomes into capabilities." Sen continues, "the interpersonal income inequality in the market outcomes may tend to be magnified by this ‘coupling' of low incomes with handicaps in the conversion of incomes to capabilities."

Poorer nations are thereby perpetually punished even further as they are less able to efficiently use the income they accumulate. Fair trade organizations take up the project of buying products from Third World producers at supracompetitive prices - prices that exceed the equilibrium price, as a form of poverty alleviation.
 
Machjo
#7
I see three ways of promoting fair trade:

1. Via standardizing the structure within which trade occurs on a more even footing. One example as mentioned in my post above would be via making some kind of planned auxiliary language the or at least an official language of international organizations such as the UN, so as to put all buyers and sellers on the world market on a more equal footing via a neutral common easy-to-learn second language.

2. Via redistribution of wealth. In other words, those countries that benefit unfairly compensate the rest via transfer payments. Experience suggests that that is not an effective means since first off not all countries or even people within a country acknowledge their unfair advantage; secondly, there is no guarantee that they shall compensate adequately; and thirdly, the compensation will likely be accoring to rules imposed by the already-advantaged nation.

3. Via price controls. Any economist will tell you that price controls never work since they either encourage a black market thus making things worse or lead to either a surplus or shortage of goods and services available in the market.

I get the impression (and correct me if I'm wrong) that most "fair-trade" advocates iat least in Canada support options 1 and 2 above, but give little to no thought to option 1, even though option 1 deals with the root cause whereas options 2 and 3 deal exclusively with the symptoms. If fair-trade advocates intend to be taken more seriously, they ought to focus on dealing with the root causes of unfair trade rather than the superficial symptoms thereof. Also, if they focussed on option 1, they'd then find that fair trade and free trade would suddenly become synonymous.
 
captain morgan
+1
#8  Top Rated Post
Quote: Originally Posted by mentalfloss View Post

There are apparently two different facets of fair trade which seem to be a result of free trade criticism. I don't commit to endorsing these ideas, but they are interesting to discuss.


The Dependency Thesis


Alleviation of Poverty and Human Dignity

Interesting to read. That said, the market forces that determine where the risk money is to go will have an impact on the overall equation. In terms of Dependency, ultimately, every nation/jurisdiction will travel through the same cycle, the big difference being, how does that society expend the resources and monies in advancing themselves. Ultimately, incorporating a fair trade style legislation may in fact increase that dependency in the future.

On the alleviation of poverty front, while that is a noble and useful goal, it is entirely based on relative measures. Look at the examples of Brazil, Nigeria or Iraq, all of these nations have tremendous wealth and natural resources, yet it is held almost exclusively by those in gvt or ultra elite positions. The message here is that there is a societal organizational structure that is more directly the cause of any imbalance moreso than 'fair trade'
 
mentalfloss
#9
Quote: Originally Posted by captain morgan View Post

Interesting to read. That said, the market forces that determine where the risk money is to go will have an impact on the overall equation. In terms of Dependency, ultimately, every nation/jurisdiction will travel through the same cycle, the big difference being, how does that society expend the resources and monies in advancing themselves. Ultimately, incorporating a fair trade style legislation may in fact increase that dependency in the future.

I think these can be revisionary changes that have multiple iterations.

Quote: Originally Posted by captain morgan View Post

On the alleviation of poverty front, while that is a noble and useful goal, it is entirely based on relative measures. Look at the examples of Brazil, Nigeria or Iraq, all of these nations have tremendous wealth and natural resources, yet it is held almost exclusively by those in gvt or ultra elite positions. The message here is that there is a societal organizational structure that is more directly the cause of any imbalance moreso than 'fair trade'

It's understood that the root cause of any poverty or injustice needs to be shown as a direct result of the type of trade, not governmental inadequacy. If the root problem is with the state itself, then it goes without saying that they need to resolve the problem themselves.
 
Machjo
+1
#10
As I mentioned in my last post here though, I get the impression that the Canadian Fair-Trade movement is way too focussed on dealing with the sympoms rather than the root cause. Rather than focussing on removing unfair policies imbedded in the international structure, they're more focussed on simply dealing with how to mitigate against them. That to me is wasted energy.
 
mentalfloss
#11
Quote: Originally Posted by Machjo View Post

As I mentioned in my last post here though, I get the impression that the Canadian Fair-Trade movement is way too focussed on dealing with the sympoms rather than the root cause. Rather than focussing on removing unfair policies imbedded in the international structure, they're more focussed on simply dealing with how to mitigate against them. That to me is wasted energy.

Do you have any evidence of this?
 
Machjo
+1
#12
Quote: Originally Posted by Machjo View Post

As I mentioned in my last post here though, I get the impression that the Canadian Fair-Trade movement is way too focussed on dealing with the sympoms rather than the root cause. Rather than focussing on removing unfair policies imbedded in the international structure, they're more focussed on simply dealing with how to mitigate against them. That to me is wasted energy.

Do I need evidence to prove what my impression is?
 
mentalfloss
#13
Quote: Originally Posted by Machjo View Post

Do I need evidence to prove my impression?

Of course.

I'm not saying you're not credible - just looking for any other bits for analysis.
 
Machjo
#14
If in fact the Fair-Trade movement does focus on removing systemic and systematic obstacles to fair trade rather than just combating the symptoms, then its PR machine is doing a poor job of it.
Last edited by Machjo; Apr 16th, 2012 at 10:19 AM..
 
petros
#15
What is the main goal of business, Govt, NGOs and NPOs? Keeping the lights on and the doors open? The less hands that touch a product the easier it is to market at a fair price with the best returns for the producer.
 
mentalfloss
#16
Quote: Originally Posted by petros View Post

What is the main goal of business, Govt, NGOs and NPOs? Keeping the lights on and the doors open? The less hands that touch a product the easier it is to market at a fair price with the best returns for the producer.

You can have an agreement that ensures a streamlined, but just policy is enforced.
 
captain morgan
#17
Quote: Originally Posted by mentalfloss View Post

You can have an agreement that ensures a streamlined, but just policy is enforced.


The policy won't work in the manner it is intended.

'Fair' is being measured in terms of comparing 2 unique economies, cultures and social/governmental systems. In the end, 'fair' for one group will generate unfairness for the other.
 
Machjo
#18
Quote: Originally Posted by mentalfloss View Post

Of course.

I'm not saying you're not credible - just looking for any other bits for analysis.

I'm not aware of any document focussing on root causes, but it would seem to me that the Fair-Trade movement is sympoms-focussed by definition since should unfair policies be removed, free trade and fair trade would by definition become synonymous.
 
mentalfloss
#19
Quote: Originally Posted by Machjo View Post

I'm not aware of any document focussing on root causes, but it would seem to me that the Fair-Trade movement is sympoms-focussed by definition since should unfair policies be removed, free trade and fair trade would by definition become synonymous.

I disagree.

One fair trade principle appears to be sustainability. In a free market, this just isn't possible - even if you remove any societal or ethical injustice and have two states where there is nothing holding them back but their own economies.
 
captain morgan
#20
Quote: Originally Posted by mentalfloss View Post

I disagree.

One fair trade principle appears to be sustainability. In a free market, this just isn't possible - even if you remove any societal or ethical injustice and have two states where there is nothing holding them back but their own economies.


Sustainability of what?
 
mentalfloss
#21
Quote: Originally Posted by captain morgan View Post

Sustainability of what?

Resources.
 
petros
#22
How does fair market sustain banana production if the bananas are already in sustainable supply through an unfair market?
 
mentalfloss
#23
Quote: Originally Posted by petros View Post

How does fair market sustain banana production if the bananas are already in sustainable supply through an unfair market?

If sustainability isn't a problem, why are you even asking the question?
 
Machjo
#24
Quote: Originally Posted by mentalfloss View Post

I disagree.

One fair trade principle appears to be sustainability. In a free market, this just isn't possible - even if you remove any societal or ethical injustice and have two states where there is nothing holding them back but their own economies.

I disagree. Regulation and trade barriers aren't necessarily the same thing. Economic policy apoplying within a country's borders that are not intended to discriminate against imports is not a trade barrier per se since local and foreign producers must abide by the same rules. For example, a Canadian breakfast cereal producer must print the box bilingually in French and English, as do his foreign competitors. This policy does not apply to the competitors only and so does not discriminate and is thus still free trade.
 
petros
+1
#25
What does sustainabilty have to do with getting a good dollar for you goods?
 
Machjo
#26
Quote: Originally Posted by mentalfloss View Post

Resources.

A country is certainly free to manage its resources responsibly, but if its rules apply equally to both domestic and foreign companies on its soil without discrimination, then there is no trade barrier.
 
Cliffy
+1
#27
Quote: Originally Posted by captain morgan View Post

Sustainability of what?

Natural resources. When I first came to BC there were signs every where that forestry was a sustainable industry. But over logging has taken all the economically viable trees and the industry is now struggling. I've talked to loggers who knew 15 years ago that their children would never be able to work in the industry because of unsustainable practices. We do not have an infinite supply f resources and eventually will run out. But we will probably choke to death in our own sh!t (pollution) before that happens.
 
mentalfloss
#28
Quote: Originally Posted by Machjo View Post

I disagree. Regulation and trade barriers aren't necessarily the same thing. Economic policy apoplying within a country's borders that are not intended to discriminate against imports is not a trade barrier per se since local and foreign producers must abide by the same rules. For example, a Canadian breakfast cereal producer must print the box bilingually in French and English, as do his foreign competitors. This policy does not apply to the competitors only and so does not discriminate and is thus still free trade.

Right, but this doesn't deny that even with trade barriers in place, unregulated free trade could still be harmful to sustainable development.
 
petros
#29
Quote:


Natural resources. When I first came to BC there were signs every where that
forestry was a sustainable industry.

What were the signs?
 
Cliffy
+1
#30
Quote: Originally Posted by petros View Post

What were the signs?

Funny!

Big billboards put up by the Forest ministry.
 

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