Free Trade Fair Trade

International trade is critical in addressing a lot of the world’s problems and I try to follow the news on it. Unfortunately in recent years most of the news has been bad, for Americans anyway. George W. Bush was the last president to negotiate a serious trade agreement, three of them actually, with South Korea, Panama, and Colombia, all signed in 2007 and all still pending approval. Congress and the administration may finally be ready to ratify them but a lot of time has been lost, despite a consensus among economists they will create thousands of jobs. In an economy where new jobs have been scarce as hens’ teeth it is disheartening there is not much else in the pipeline.

The Obama administration seems to have engaged in only one new initiative, the Trans Pacific Partnership, and it is not clear it is going anywhere. It is multi-lateral, with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. If you are like me and think the more trade the better that’s good. It would be better still if another major economy like Japan were included but so far no. As always with trade talks there is a fair amount of opposition, from unions who routinely oppose trade deals for protectionist reasons, from environmentalists, some of whom would dismantle the industrial revolution if they could, from people who think the United States always gets the short end in these deals, and from fair trade advocates who think they tend to further disadvantage the poor, especially in third world countries or emerging economies.

It’s this last I would like to address, fair trade. The term needs some explanation. It is one of those phrases that has been co-opted from the language to mean something fairly specific and very different from its more general, accepted meaning. Sometimes it simply describes policies of a luxury goods manufacturer who restricts sales outlets to retailers who agree to charge a minimum price. Increasingly it refers to the charitable practice of paying higher than market prices for goods from disadvantaged producers. The idea is to see to it the producer is fairly compensated. At its best the practice can help break the cycle of poverty. Typically the producers and their goods are certified by a charity or Non-Governmental Organization to meet certain economic, environmental, and labor standards. The NGO organizes cooperatives, sets wages and prices, and provides services such as marketing, training, import/export management, and strategic planning. Some countries regulate the process. Some don’t. You can find the label on everything from oriental rugs to chocolate. I have a number of friends who look for it. My church serves fair trade coffee. The US Catholic Bishops have endorsed the practice. Catholic Relief Services operates a well regarded fair trade program.

I have mixed feelings about it. I understand and approve the sentiment. If it really does “break the cycle of poverty” then charity has led to justice. But if it keeps people mired in industries and jobs where they can never be competitive then that is an injustice, however well intended. I wish there were better oversight. I know who CRS is and trust them. But who are some of these other people claiming to be engaged in fair trade? It seems to me there is substantial potential for abuse. But mostly I worry that it is a trade barrier. If the concept is used to oppose trade, as it often is, then it works against the long term prosperity of us all. I am enough of a history student to know the enormous economic progress in so much of the world since WWII has been due in large part to expanding international trade. The world has become not just more prosperous but safer. Freer trade can be made more equitable. It is not in our best interest to see it stopped.