Page 1 of 2 The US and the meaning of 'fair trade'
By Devin T Stewart
Globalization is again under attack. Commentators from many perspectives have
argued recently that globalization has reached a turning point and will never
recover. Global inequities, failures of international institutions, and
resentment of US power, they say, will usher in worldwide protectionism,
threatening to end the current era of globalization.
An end to the current state of globalization doesn't have to lead to conflict,
however, as did the pre-1914 era. Indeed, Washington's
new political make-up provides an opportunity to shape a globalization that
benefits all. In the realm of international trade, a starting point may be to
reconcile free and fair trade.
After all, while the freest economies tend to be the richest, trade isn't an
end in itself. Rather it is a tool to help increase living standards, lower
poverty, and advance political freedom and human rights. US Congressman Sandy
Levin, the new chairman of the Trade Subcommittee of the House of
Representatives Ways and Means Committee, recently issued a statement to this
effect, adding that the terms of international competition must be shaped to
achieve both growth and equity.
The concept of freedom seems pretty straightforward, but fairness means
different things to different people. Fair trade is often depicted as
antithetical to free trade, or as protectionism in disguise. Nevertheless,
freedom and fairness are decent principles to guide an ethical US economic
policy, and reconciling the two would help restore US moral leadership.
Fairness in economics is often concerned with offsetting "unfair" advantages
created by lower wages in trading partners, but this notion incorrectly views
the global economy as a zero-sum game.
A new fair US trade policy would aim to give more people the opportunity to
enjoy the benefits from world trade flows. Although the US Congress may attempt
to use the term "fairness" to protect vulnerable domestic industries, doing so
would be a mistake.
Treasury Secretary Henry Paulson recently said: "Giving in to protectionist
sentiment would send a terrible signal. We would be telling developing nations
that while we have benefited from increased trade, we aren't going to allow
them the same opportunity to develop." He concluded that such a direction would
be "morally wrong".
Adam Smith showed that economic freedom allows people to maximize their
potential for the benefit of all society. But total freedom, as Thomas Hobbes
argued, leads to a short and nasty life. The Aristotelian notion of moderation
might help reconcile this paradox: trade should be neither too free nor too
regulated.
This is the puzzle a group of philosophers, economists and practitioners
tackled last month at the Carnegie Council. The question posed was: Is it
possible to fashion a free and fair trade policy that will build a more
sustainable and equitable trading system? And how can the principles of a more
moral trade policy be applied to extractive industries? Three "freedoms" are
worth examining here.
Freedom to trade anything
As philosopher Christian Barry has noted, some goods are unfit for trade. For
example, it is widely maintained that some services, such as those offered by
an assassin, should not be traded. Goods obtained through coercion may also be
deemed unfit for trade. When it comes to the trade in natural resources, it is
not always clear that the sellers are the rightful owners of the goods, as they
may have obtained them through bullying.
The issue of rightful ownership pertains also to trade in intellectual
property. One question under debate is how to protect cultural intellectual
property. For example, Ghana imports traditional African textile prints from
China, exacerbating tensions over Chinese textiles in Africa and the resulting
loss of African jobs. Some scholars have begun to question the fairness of
trade in another country's cultural goods. The answer may lie in determining
whether these vendors are the rightful owners of this property.
The process of producing goods traded should respect human rights and a
country's labor and environmental laws. Slavery, poor working conditions, and
environmental degradation are particularly problematic in illegal mining and
logging operations. As a result, multinational corporations have started
carefully scrutinizing their supply chains. Ford Motor and General Motors, for
example, recently stopped using Latin American pig iron produced by slave
labor. DaimlerChrysler, Ford, GM and Honda joined together last month to train
suppliers to avoid buying materials made by slaves.
Freedom to trade with anyone
Makers of a decent trade policy should remember the premise that trade is meant
to improve people's lives, and they should deliberate when considering the use
of trade barriers, sanctions and embargoes. The record shows that these tools
are blunt and inaccurate in achieving broad security goals. Policy toward North
Korea, for example, is often thought to be a choice between advancing human
rights or a proliferation regime - or both. Instead, we have witnessed nuclear
proliferation and mass famine on the Korean Peninsula despite a politically
gratifying US trade embargo.
The other side of the coin concerns trading partners that fail to enforce their
own labor, human-rights and environmental
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