Common ground for free traders and fair traders?

There’s an ongoing debate between proponents of free trade and those who favor “fair trade” (or, alternatively, “trade justice” – not sure of the extent to which the latter two terms mean the same thing). Fr. Jake had a post on the topic the other day, linking to this sermon by Rowan Williams as well as this pro-free trade piece (PDF) by Alex Singleton at the Globalization Institute.

Personally, I found the Singleton piece pretty convincing, but I don’t think one has to buy into the whole free trade argument to see that there could be a considerable overlap between free traders and fair traders.

Part of the debate boils down to whether its unfair to expect producers in poor countries to compete in a global market. Fair trade proponents often argue that poor countries should protect their nascent industries by means of tariffs or other trade restricitions. However, they also think that rich countries should lower their trade barriers, opening their markets to goods produced in the third world.

Free traders, on the other hand, think that everyone will be better off by lowering trade barriers and allowing the free flow of goods and capital.

In fact, the way most of the international trade agreements function is precisely by a kind of tit-for-tat – you lower your tarriffs on textiles, say, and we’ll lower ours on agricultural products. But fair traders criticize agreements like NAFTA and organizations like the WTO on the grounds that they force poor countries to open their markets to goods from richer countries, which supposedly undermines indigenous producers.

But often overlooked is the free trade case against such agreements. According to orthodox free trade theory, we benefit from lowering our trade barriers even if other countries don’t. This is because by lowering trade barriers we gain access to cheaper goods, thus improving our standard of living. There’s no need for high-level trade agreements; we could reap the benefits of free trade simply by unilaterally lowering trade barriers, including tariffs, “anti-dumping” laws, etc.

The insistence on tit-for-tat trade “concessions” only reinforces the notion that trade agreements are really about serving the interests of big corporations who want access to third world markets. But that’s not free trade at all, it’s managed trade or mercantilism.

A true free trader would like to see all countries lower their trade barriers, but if other countries want to shoot themselves in the foot (as he sees it) by engaging in protectionism, what business is that of his? He can still push for his own country to lower its trade barriers since, on his own theory, any country that does this benefits regardless of whether other countries follow suit. On free trade theory, it would be positively irrational to insist that other countries lower their trade barriers (however desirable that might be) as a precondition for lowering ours. As Singleton points out, that would be like throwing rocks into your own harbor just because someone else is throwing rocks into theirs.

But the lowering of trade barriers in the developed world is also a policy favored by fair traders because they want third world producers to have access to markets in rich countries. Thus they favor, for instance, the abolition of agricultural tariffs and subsidies.

So I don’t see any reason, in principle, why free traders and fair traders couldn’t concentrate on their shared interest in seeing rich countries lower barriers to trade, while letting developing countries chart whatever course they see fit.