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Free Trade or Fair Trade: That is the question

Mosaic From JordanAn even-handed treatment of the issue of fair versus free trade is greatly needed in the passionate environment of trade activism; and that is exactly what was delivered by Sushil Mohan in the recent paper from the Institute of Economic Affairs. Fair Trade Without the Froth: A Dispassionate Economic Analysis of ‘Fair Trade’ (Mohan, 2010) is well reasoned, thorough treatment of the theory of trade, the benefits and detriments of fair trade, alternatives to fair trade and the potential for a long-term development strategy for the global South. He carefully walks the reader through the logic of free trade, without the theoretical underpinnings, and shows how the fair trade movement is a specialized subset of free trade. His dispassionate analysis dispels some of the public relations myths that surround the fair trade movement by showing some of its paradoxical features including the cartel-like behavior of some of its key organizations and how the political positions many of its adherents have taken are no more than a marketing ploy. Furthermore, he shows how the advocacy position that some fair traders have taken to oppose free trade have, in some cases done a disservice to many entrepreneurs and business owners in both the developing and developed worlds by confusing consumers about the overall benefits of free trade. He carefully inventories some of the other specialized marketing techniques such as the organic foods movement and, again demonstrates that these are only subsets of the free trade agenda.

His bottom line conclusion is that if fair traders are truly interested in reducing the impact of global poverty through mutually beneficial trade, they would do well to recognize their role as a subcategory of a much larger and more profound global and historical movement. The efforts of several fair trade organizations to bring to the forefront such issues of child labor, gender inequality, and poor labor standards are noble and stand on their own. The integrity of these efforts is denigrated through uninformed and uneven treatment of the overall global benefits of free trade.

Juxtaposed to this critique is the more mainstream treatment of free trade that covers multiple dimensions and multiple industries, the Handbook on Trade and the Environment (Gallagher, 2008). The book’s editor, Boston University’s Kevin Gallagher has drawn together an impressive list of contributors that cover three main categories of free trade:

  1. Issues relating to trade and environmental quality;
  2. Articles on trade and environmental politics; and
  3. Discussions on trade and environmental policy.

Specific regional concerns are noted in some articles, as in Frank Ackerman’s article on EU chemical policy or Timothy Wise’s article on the Mexico-US maize trade under NAFTA. In other articles, authors look at theoretical constructs that guide either environmental or economic analysis and show how one or the other single perspective may be lacking from a more systemic point of view. For example, A.Y Hoekstra carefully outlines some of the key considerations of international trade and water resource management, while Steve Charnovitz provides a primer on the institutional responses of the trade/environment interface.

The political science and geographic implications of trade and the environment are not forgotten in this volume either. David Naguib Pellow covers the issue of the global waste trade and environmental justice while Laura T. Raynolds and Jennifer A. Keahey discuss fair trade, gender and the environment in Africa. Transportation linkages are analyzed within a “club-goods” context through a look at global shipping by Elizabeth R. DeSombre.

The last word is given to Alejandro Nadal who takes a stab at outlining a new global trading system, redesigned for environmentally sustainable development. This book, although now 2 years old, is an excellent compilation of some of the key issues that graduate students of resource economics, environmental management should be considering. It does not stop there: informed citizens and thoughtful people concerned about the future of global business, trade and the environment would also benefit from this book.

Sources:

Gallagher, K. P. (2008). Handbook on Trade and the Environment. Northampton, MA: Edward Elgar Publishing, Inc.

Mohan, S. (2010). Fair Trade Without the Froth: A Dispassionate Economic Analysis of ‘Fair Trade’. London: Institute of Economic Affairs.