We’re midway through Fairtrade Fortnight (23rd February – 8th March), and so today and tomorrow Lib Dem Voice is running two articles asking the question, ‘Should liberals back Fair Trade?’, putting two opposing viewpoints to our readers. Today, Lib Dem MP John Pugh makes the case for fair trade.
Why Liberals Should Back Fair Trade
There is no such thing as free trade. All trade is conditioned and controlled by regulation, convention, norm and even tradition. It is a process of social exchange.
Historically, Liberals have seen little benefit in insisting that people buy goods only from a given nation or buy at a price fixed for some socially defined purpose. They argued that the individual would lose out thereby getting goods that were inferior in quality and quantity Suppliers who wanted the terms of trade tilted in their favour were in all probability less capable suppliers and there was no real merit in, or indeed prospect of, keeping these suppliers in business.
This last and disputable claim is where free trade and fair trade part company. There is merit in allowing a less capable supplier – particularly in a developing country – to thrive. A fledgling African utility company is no match for a transnational, utility company with evolved technologies for handling water supply or electricity generation. It can be bought out or out-traded on a unit cost basis. However, the net impact of that will be that there will be no fledgling African utility industry that can grow up to compete toe-to-toe with the multi-national conglomerates – and why is that a good thing? It makes power and water supply dependent on multi-national conglomerates and security of supply less certain.
Similar cases can be made for maintaining agricultural diversity and preventing dangerous, widescale monoculture by international companies. Sri Lanka did not become a more sustainable land by being given over by colonial regimes almost entirely to the harvesting of tea and its erratic world price.
Now, of course, if for good or bad reasons nations insist on cocooning every enterprise their nation engages in there is a serious downside. Goods may be poor and time will be wasted – especially if other nations produce the same or superior tradeable goods with far less trouble. Extrapolating from this we can see that nations that are hopelessly given to protectionism may well beggar themselves before they beggar their neighbour.
However free trade as the path to economic prosperity has never been more than a rule of thumb. It is not an iron law even if it can be made into a dogma.
Consider the hypothetical case of a nation trading with a country where much of the population is kept in servitude, or even slavery, thereby making its labour costs unusually competitive. Free trade will generate strong export growth, loss of domestic jobs elsewhere, cheap goods, etc. Such a social outcome is not obviously a good thing but clearly in line with free trade principles – just as suggesting we buy from a country where labour practices are better conflicts with them.
Free trade dogmatists will respond by pointing out that the slave country will accumulate surpluses that will be spent elsewhere, that the importing countries will specialise in doing what slaves do not do well, etc – and all in the great scheme of things will work out for the best. In the long term enslaving your population may turn out not to pay.
However not only are we all, as Keynes said, in the long term dead, but arguing like this is turning ‘free trade’ in to an irrefutable dogma not a sound empirical generalisation. The unconvinced can only walk away from such a dangerous dogma.
A case can be made for some kinds of free trade generating positive outcomes and some forms of protectionism worsening life for many but that does not excuse Liberals from examining whether in particular cases that actually happens. That is why we can and morally must ask whether free trade is fair trade.
The deification of market forces, the worship of mammon, the free and unregulated movement of labour, capital and trade across the globe prompted only by commercial instinct has not only failed to deliver the universal blessings promised but stands revealed in current times as a special kind of stupidity and abnegation of thought.
* John Pugh is Liberal Democrat MP for Southport.