President Trump's recent escalation of tariffs on foreign goods has urged Americans everywhere to reconsider what sort of trading relationships are most beneficial for our nation, and for the world more generally. In recent times, the term Fair Trade has been thrown around in the public discourse––mainly erroneously––by the president himself, popular media sites, and others.
But they're usually referring to something entirely separate, and in many ways opposite, from what the term means here. Fair Trade is about teamwork, not tariffs––which can often drive an economic and political wedge between nations. Here's what you need to know next time you hear somebody mention Fair Trade on your favorite News site or elsewhere.
“Fair Trade” in Today's News:
The phrase “Fair Trade” as it relates to international economic policy has a different meaning from the term adopted by the WFTO and other Fair Trade Organizations. As economist Mark Perry said in a recent appearance on Fox News, the phrase “Fair Trade” used in recent political contexts often refers to protectionism. Protectionist economic policies, such as tariffs, have been widely denounced by economists around the world because they tend to prevent the free market from producing the lowest prices for consumers.
Although it's the case that in the current consumer economy, “lowest prices” tend to signify that somebody, somewhere, is being exploited for cheap labor, that doesn't mean you should rush to support tariffs. Since a tariff is a governmental tax, the higher prices consumers pay on foreign goods don't go towards lifting foreign workers out of poverty; they go towards the domestic governments' revenue.
Of course, tariffs do provide economic benefits to some people, namely, those who work in the country that places the tariff, and within the particular industry affected by the tariff. An American tariff on foreign cars, for instance, means that more American consumers will opt to buy cheaper domestically produced cars, thus helping the American auto industry to flourish.
What the Fair Trade Movement Really Looks Like:
Fair Trade as we talk about it at here is all about helping people flourish, and not about competing for international economic policies. Contrary to many tariffs today, which often support large national industries, most Fair Trade guidelines are specifically aimed at helping smaller businesses and their workers rise in the economy. Fair Trade doesn't necessarily make products more expensive, either. In fact, the WFTO's page on Fair Trade Myths explains how Fair Trade can circumvent many critiques that might be made against tariffs such as harming globalization or facilitating job loss.
While Fair Trade Organizations haven't publicly come out against tariffs, they first and foremost seek to cultivate relationships between consumers and the workers they buy products from. The current focus of the movement is consumer-based; Fair Trade certification labels on products allow people to make informed choices and allocate their money where they think it is best spent. Fair Trade does not force everyone to pay higher prices, but rather provides an alternative to goods that are sourced irresponsibly. Rather than being restrictive, Fair Trade labeling can give consumers enhanced freedom of choice by providing more information on where a product came from. Supporting Fair Trade can also integrate otherwise marginalized workers and businesses into the larger global economy.
Can Fair Trade Be Free?
While Fair Trade promotes freedom in many ways, a quick Google search comparing Fair Trade with Free Trade will bring up scores of articles showing how the two ideologies are different. This is an important distinction to make––Free trade and Fair Trade are certainly not the same thing. However, the different emphases of the movements––such as deregulation for Free Trade and sustainability for Fair Trade––does not mean that they cannot coexist. For example, with consumer-based Fair Trade, Free Trade does take place; certification connects producers to a market of conscious consumers, but it doesn't discourage or prevent other kinds of trade from happening.
Still, Fair Trade and Free Trade might not be a perfect fit. While tariffs such as those allowed by the WTO are not always in line with the Fair Trade movement, the WFTO has called for minimum labor conditions and environmental standards to be enforced by governments. Because Free Trade advocates generally oppose workplace regulations, this puts them at odds with Fair Trade ideals.
While recent studies have shown that governmental regulation might actually be good for small businesses and beneficial to the national economy, many arguments have been made against regulation as well. One thing to note is that although governmental regulation is lax in many developing countries, businesses have usually not stepped up to the plate for their workers without outside pressure. In fact, the Fair Trade movement is a response to exactly that: businesses' seemingly impersonal and irresponsible operations when held unaccountable by governments or trading partners.
It is still the case that instituting international trade rules is not the primary focus of authoritative Fair Trade Organizations such as the WFTO. The most feasible interplay between Fair Trade and Free Trade would probably be something akin to what the US already practices now, where the government sponsors agreements opening up international trade but also promotes acceptable business practice at home and abroad. However, fans of Fair Trade might hope to see the US place greater focus on the needs of marginalized workers abroad rather than the current focus on domestic workers (who are already protected by strong labor laws) and national trade imbalances. Debates over the best approach to the global market don't seem to provide concrete answers, but at the very least, supporters of Fair Trade need not be disheartened by criticisms of tariffs or regulatory practices that don't always apply to the consumer-based movement.
As you continue listening to conversations about Fair Trade and Free Trade, it is important to remember what's really at the heart of the Fair Trade movement: teamwork in trading relationships, not tariffs. Fair Trade is about economic empowerment through forming new global trade relationships, and that's certainly not incompatible with freedom. Fairness and Freedom can work together, even if the current state of global trade might not reflect that fact. As the Fair Trade movement continues to develop, we can hope that the relationship between Free and Fair Trade can become stronger and more beneficial for all.