Fair Trade Not Free Trade

Fair trade
Saturday, 28th May 2016

Free trade has now become an untouchable sacred cow, which alongside economic growth and free movement of labour forms a sort of mercantile holy trinity. Without free trade, we are told, we would have a smaller variety of more expensive products and, worst of all, economic stagnation. However, all this assumes an idealised world of free markets and a level playing field in terms of environmental regulations, workers’ rights, welfare provision and taxation. Such a world of laissez-faire entreprise is pure fantasy as the technologies on which our hypercomplex societies rely require a degree of organisation and material resources only available to the largest corporate players. While small players may often innovate, they need a little help from venture capitalists to win the financial resources required to take their ideas to the next level. If our government doesn’t regulate our way of life, other organisations fill the void and regulate human behaviour to suit their quest for greater power. Capitalism, if left unregulated, ultimately destroys itself through its natural tendency to let more successful companies dominate the market, either as oligopoly as in the case of cars and many electronic goods, or as a quasi-monopoly, and as may appear in the case in the productivity software industry. No elected government decided that Adobe Photoshop ™ should be the standard image editing application or that Microsoft Word™ should be the only word processor acceptable in business, education and government administration. Two large software companies first established a market lead in their respective fields and then through an army of sales agents and lobbyists locked key organisations into their ecosystem, largely by enforcing cryptic file formats that other applications had to deconstruct. They can thus charge government and small businesses whatever they can get away with because key decision makers are unaware of alternatives. It’s often hard to work out if one is dealing with public or private organisation and they both behave in similar ways. The prison service has clients rather than inmates and the NHS has customers rather than patients. Both outsource many of their activities to private service companies like Serco, Capgemini, G4S, Virgin Health etc.

The British Isles produces around half of its food and imports most manufactured good and strategic raw materials. We’re no longer self-sufficient in oil or gas and even import coal as it works out cheaper than exploiting our last remaining deep-vein coal pits. To add insult to injury we import thousands of tonnes of Chinese steel while letting the British steel industry, once a pioneering world leader, shed most of its workforce. However, for some spurious reason in the current debate on EU membership, both sides seem to agree on one thing: Free trade is good or is it? On the one hand the Remain crowd keep reminding us how 3 million jobs depend on trade with the EU, while the Leave side have just produced Brexit the Movie which advocates an even more globally integrated future than possible within Fortress Europe, a myth that spread in the late 1990s just before the WTO negotiations had completed under the New Labour-appointed EU Commissioner for Trade Peter Mandelson. I’m not alone in having viewed the European Union as the lesser of two evils back in the heady 1990s. It seemed for a while that it could protect workers’ rights and environmental standards while nurturing a competitive internal market. Southern Europeans, especially entrepreneurial Northern Italians, prospered as their small and versatile businesses adapted to meet demand for niche products in Northern Europe. However, their competitive advantage would not last long as the EU expanded eastwards and forced governments to remove protectionist tariffs and subsidies. Combined with greater automation and the fast pace of technological change and obsolescence, globalisation led to the failure of thousands of small businesses and rapid rise in youth unemployment and that was before the 2008 credit crunch and Euro crisis.

Economic students learn the old mantra that protectionism always fails. One need not look to extreme examples such as Cuba during its special period in the early 1990s or the former Soviet Bloc, most advanced mixed economies, including the United States, had tightly controlled national or supranational markets until the mid 1990s. Governments understood the advantages of competition, but also the need to retain a skills base in strategic industries and more important maintain full employment and social stability. If the local economy depends on hundreds of small textile businesses, it’s no good telling voters they have to adapt to new market conditions with dirt cheap imports from the Far East.

Tariffs are effectively a tax on low pay, poor working conditions and minimal environmental standards. If a competitor from another jurisdiction can undercut local producers because they pay their workers peanuts, dump waste in the sea rather than invest in an expensive effluent treatment plant or pay hardly any taxes in their home country, this is unfair competition. You may get cheaper consumer products in the short term, but unless the workers laid off in your high-wage country can retrain or upskill to fill new vacancies in the service sector, you’ll end up paying more in welfare handouts. Thus over the last 20 years of unshackled global trade, the welfare bill has skyrocketed in much of the advanced Western world. While some former manufacturing workers have transitioned to the service sectors, tens of millions have been left behind. Not everyone is cut out for sales, marketing, research, graphic design or informatics. Some can find new niches as personal trainers or dog walkers. Others try their luck with online retail businesses, while others tap into the insatiable demand for instant gratification via sexual services or narcotics. As a result fewer and fewer of us have a direct stake in the real economy responsible for putting food on our tables or a roof over our heads. We simply trade favours and compete for a bigger slice of corporate profits, while in other parts of the world resources are depleted, workers are exploited in slave-labour conditions and natural habitats are destroyed in the name of economic growth.

We could only have free and fair trade if we had a level playing field, i.e. a global minimum wage, global corporation tax, global environmental regulations and workers’ rights. Why should Malaysians make kettles for the British market? Why should Indians process English council forms? The two main reasons are for temporary economic expediency and to prevent workers from holding their employers to ransom. Today few groups of organised workers can trump the power of global corporations to move their operations from one part of the world to another or in the longer term to invest in greater automation.

Infantile globalist leftwingers dream of a world with Norwegian workers’ rights and welfare provision, Tanzanian consumption levels and cutting edge green technology that will enable everyone to enjoy an Australian lifestyle. I recently exchanged tweets with one deluded leftist who believes in free energy, i.e. a conspiracy by oil companies to deny us free and clean water-powered vehicles. With current levels of youth unemployment and ecological destruction, believers in a such utopian vision live in cloud cuckoo land. Each viable community needs to find its own way to reach the ideal equilibrium of technological progress, environmental protection and social justice. More important everyone needs to feel that are stakeholders in the social and economic life of their country, which requires a strong sense of social cohesion, trust and shared values. Free markets empower unaccountable corporations, while fair trade lets each community decide what is in the best interests of its workers.

What is Fair Trade?

Like many other good things Fair Trade has been hijacked by big business as a sort of ethical kitemark (stamp of approval) to mean some external agency has vouched for minimum workers' rights, earnings and environmental standards. We are supposed to place our blind trust in international bodies supported by big business to monitor their compliance with various well-intentioned regulations. This inevitably empowers larger businesses with sophisticated marketing and PR operations who can afford the additional overheads to the detriment of unscrupulous small businesses. Next-generation automation technology will soon displace banana pickers or coffee plantation workers anyway. 

What Fair Trade should mean is trading only when it makes good long-term social and environmental sense. It may be temporarily cheaper to import to apples and tomatoes from Spain, Chile or South Africa, but these fruits grow in the British Isles too and people used to adapt to seasonal fruits and vegetables. As people have grown accustomed to a plentiful supply of seemingly fresh fruit shipped from halfway around the world, we waste much more, offsetting improvements in agricultural yields and preventing the development of feasible alternatives such as the greater use of greenhouses. That doesn't mean we should not import at all, but should aim to be as self-sufficient in staple foods and essential goods as reasonably possible. Certainly it makes little sense to outsource manufacturing of goods mainly consumed here. If kettle production can be fully automated, why should that take place in China rather than in the UK? More important, by insourcing more manufacturing we become more aware of the true environmental consequences of our shopping habits. Why should we keep throwing away cheap imported products just because it's more cost-effective than replacing inexpensive spare parts that are mysteriously unavailable locally? Many recent technological advances such as 3D-printing could actually enable greater localisation. Rather than ship goods thousands of miles, we could simply send a design to a local 3D-printer to produce a customised component. To sum up free trade focuses on short-term corporate profits and their need to maximise retail sales and minimise labour costs without having to invest in new technology or training. Fair trade focuses on identifying products and services that regions can exchange to their mutual long-term benefit without displacing workers overnight or creating unsustainable social and environmental imbalances.

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