Free and Fair Trade

by Michael Pasternak (ME ’17)

We’ve all heard of free trade, it’s become a hot button topic in the political sphere in recent times. However, who but the coffee drinkers among us have heard of fair trade? Few likely, yet it’s becoming a real alternative among economists and policy makers. Fair trade is a bit more complex, but free trade is simple in concept and execution: lower as many barriers as possible to international trade in order to allow free movement of goods and services and unlock wider and larger markets for everyone involved.

As a nation, we have to address that
not all foreign labor markets should
be endorsed by trade.

As a general economic principle, free trade means growth. I say this as an absolute truth: there are next to no economists in the mainstream academic sphere who believe otherwise. A University of Chicago poll from 2014 asked a panel of economists from the Initiative on Global Markets if “past major trade deals have benefited most Americans.” Twenty-three percent strongly agreed, 70% agreed, and 7% were uncertain or chose not to respond. There were no panelists who disagreed or disagreed strongly. The debate of free trade versus economic controls and tariffs is purely political and the sides are clear cut. Those on one side interpret data and use history to make decisions; those on the other side choose to only interpret fear and use trade policy as a thinly veiled substitute for xenophobia.

That being said, even once it’s established that breaking down barriers to trade is unequivocally positive, there are other concerns. As a nation, we have to address that not all foreign labor markets should be endorsed by trade. For example, sanctions on nations like Russia, who commit war crimes and invade neighboring countries at will, are appropriate because even though sanctions can hurt trade in the short term, war and instability are barriers to free trade in the medium and long term. It’s hard to trade in a war torn country where roads and bridges are not functioning and the banks aren’t open. Furthermore, you need domestic stability for economic growth. Countries who carry out war elsewhere may still experience growth, but there are few to no examples of countries in which wars are being fought that experience growth in trade. Therefore, it’s in the interest of a nation looking to maximize trade to maximize global and domestic stability. In fact, American foreign policy can be much more easily understood through that lens. Where we are militarily active, it’s usually for the sake of trying to keep regions under control in a general sense. We have a carrier group near China, for example, in order to prevent conflict between them Taiwan or Japan. The more critical a trade partner, the more resources the US is willing to commit to their region’s stability. That’s a big reason why we have such a strong tie with Israel.

However, there does enter another factor: morality and development. It isn’t an explicit duty of the United States to prevent the likes of slavery and war for the sake of preventing human suffering. Nonetheless, there’s a drive from a significant segment of the populace to do exactly that. Fair trade is the movement to address moral concerns of unfettered free trade, mostly driven from the political far-left but economically spread among academic doctrines. For example, slavery is not dead. North Korea uses slavery on a massive scale, and Qatar is known to be using slaves for much of the construction of its upcoming 2022 FIFA World Cup infrastructure. Indonesia, China, and India have problems with slavery or near-slave labor conditions. Fair trade, in theory, accomplishes two things: establish an even playing field for labor and guarantee rights for workers. It accomplishes those goals by preventing countries with horrible regulatory frameworks for human rights to enter trade agreements without concessions concerning guaranteed rights for workers.

There’s a very real debate currently occurring between proponents of the two types of trade; a debate that is philosophical just as much as it is economic in nature. I consider myself a proponent of fair trade, but there’s little data currently available to prove the long term positive effects actually exist. One thing, however, is sure: while particular trade agreements can have issues, we should aim to increase free trade wherever we can as long as we do not have a corresponding cost, and there’s no reason to return to the days of tariff past. ◊

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