Alternatives to Free Trade: Fair Trade and Beyond

Shamus Cooke

The global debate around free-trade and its consequences have evolved tremendously in recent years, from tiny circles of leftist critics into a mass international protest movement. Although the movement began to bloom in response to polices of the World Trade Organization (WTO), the biggest demonstrations have been in response to the now-popular “bi-lateral” free-trade agreements that economically powerful countries sign with poorer nations. Once one has become conscious of the problems created by free-trade agreements, whether they are international or regional, an immediate presents itself: finding a feasible alternative.

Yes the trade policy advocated by most corporate-submissive politicians is “free-trade”, and yes this policy has had devastating consequences for people in multiple countries, while filling the already-full bank accounts of the rich. But the issue of “free-trade” alone isn’t sufficient to fully explain the vast social problems so apparent in so many countries.

For example, many progressive minded people make the seemingly common-sense conclusion that, if free-trade is bad, then its opposite, protectionism, must be good. This is not the case (to be explained below). The search, therefore, for a real alternative has lead some to attach themselves to the notion of “fair trade”. This term means different things to different people, as there is no strict definition on what fair-trade is, or what it would look like if actually implemented. The ambiguous definition has attracted a wide range of adherers, from the honest progressive to the dishonest reactionary. There are progressive sections of the fair trade movement that clearly knows what it doesn’t want, but lacks specifics on what it does want, as shown by the Alliance for Responsible Trade:

“This enormous, unified movement is one of people telling those political leaders, financial speculators and the transnational corporations who promote neoliberal policies that their agenda is unacceptable. It is a movement of people demanding their very humanity. They do so by stating that nutritious food, a comfortable place to live, a clean and healthy environment, health care and education are human rights”.

There is extremely progressive content in this quote that should be actively encouraged. But there is something lacking as well. For instance, one might ask, “what exactly is trade, and how do we make it fair”? Ultimately, one can not “trade” what one does not own. What trade under capitalism really means is that corporations buy commodities owned by other corporations on an international level, eventually to be sold to consumers locally. At bottom, what is unfair is that individuals or small groups of individuals can own corporations— the entities that produce society’s vast wealth, not for socially useful purposes, but for profit. Understanding trade must begin here, at the foundation, so that solutions are proposed that don’t merely address the effects of the world economic structure, but its cause. A brief outline of the history of the fair trade movement, along with its various challenges and limitations, will help us gain a better perspective on possible solutions to a problem that goes far beyond trade.

The humble origins of the fair trade movement had little to do with politics. The NGOs and religious organizations that founded the movement in the 1940’s viewed the issue from a humanitarian, philanthropic perspective: third world countries were horribly poor and something needed to be done to help them. The solution the fair-traders devised came from a stark economic fact— people in poor countries seemed to be getting unfairly compensated for the goods they were producing. A hypothetical example is a blanket that took 10 hours to weave, but fetched only three dollars on the world market. To combat this inequity, the fair trade organizations created shops where one could specifically buy handicrafts and culturally unique goods at “fair” prices. The above-market price offered was considered a donation of sorts, and there remain segments of the fair-trade movement that retain this perspective and limit their focus accordingly.

Of course someone should not get paid three dollars for 10 hours of work. The example of the blanket weaver can be used, on a small-level, to explain a crucial economic law that keeps both blanket weavers and poor nations impoverished.

A blanket may cost three dollars to purchase on the international market because machinery was used to eliminate the labor time that makes it more expensive otherwise (in economics this is reflected in the Labor Theory of Value). So, if a corporation is the first to invent a new machine that saves additional labor time, and the blanket can then be sold for two dollars, a new standard is created internationally. But an interesting thing happens when two corporations with unequal machinery compete on the world market: the inferior corporation spends much more man power, i.e. wealth, then the other— wealth is thus transferred to the countries where there exists highly developed machinery; the countries that have the machinery make handsome profits for their blankets while countries with none receive little or nothing.

There can be no fair trade where vast inequalities in productivity exist, especially when the rich nations have such an immense productivity advantage in machinery, due to the tremendous wealth they’ve accumulated in past generations through colonialism, slavery, and more recent imperialist military interventions. The advanced machinery that is one example of this accumulated wealth serves only to further distance the rich and poor countries through competition on the world market.

Once a powerful nation has a productive advantage over the majority of other nations, it becomes a champion of free trade, so that it’s cheaper products may dominate the international market, invading the lesser developed countries and destroying their domestic industries. It was these “deeper causes” to inequality that the founding fair-traders were oblivious to, leading eventually to a need for new ideas.

The “2nd wave” of the fair-trade movement began with a deeper political analysis than its predecessor. An understanding of the international system of trade was developed, including the institutions that helped maintain the unequal status-quo. In fact, an overemphasis was developed towards these organizations, ignoring the above, economic factors that inevitably make fair-trade impossible under capitalism.

The movement’s focal point was Europe, where a variety of progressive organizations worked in conjunction with a coalition of third world nations known as “The Group of 77” in an effort to reform the institutions that governed the capitalist system. The height of success in this movement was its formal recognition by the United Nations, which adopted the slogan of “Trade not Aide”, at the United Nations Conference on Trade and Development. It amounted to naught. The rich countries that control the UN eventually derailed the movement, through a policy of pitting the poor countries against each other through bribes, concessions, and threats

This defeat lead to demoralization of the rank and file activists, who, burned by their attempt to reform a major institution of capitalism, chose to refocus their efforts on the more practical grassroots work of “market access”. This less-grandiose strategy soon encountered resistance. Not only do large corporations own most of society’s wealth, but also the means to transport it. Communities of people in the poorer countries who sought to continue their way of life found it increasingly difficult to market the already-decreasing value of their goods. This was typically limited to agricultural goods only, since the small-scale manufacturers had already been destroyed by the invisible hand of the market.

The large corporations that dominated agricultural production did not want competition from smaller outfits, and used their connections to the corporations that owned the ports and railways—often it was one in the same— to effectively exclude the unconnected. The fair-trade movement focused on the grass-roots buying and selling of goods produced by non-corporate groups, villages, or collectives, who were striving to stay alive in a world dominated by large corporations. Many segments of the fair-trade movement continue to align themselves with this approach, and have achieved more than anyone could have expected of them.

As of December 2006, 569 producer organizations in 58 developing countries were fair trade certified. The fair trade label has now found its ways into the supermarkets owned by the super-corporations. The demand for these products— once again, usually above-market prices— has been enthusiastically received by those able to afford them. A whole political philosophy has evolved from the buying of “socially just” products, known as “consumer activism”. The preachers of this philosophy are of course mainly from the middle-class, and have been largely unable to expand their beliefs beyond select clothing and agricultural goods. Once again, those who considered the concept of fair-trade to be worthwhile searched for new ideas that could elevate themselves above the obvious limitations posed by consumer activism.

The current period in the fair-trade movement has grown to encompass new layers of people with a consistently widening perspective; most notably the involvement of labor unions. This came as a result of “globalization”, an accelerated process of global, economic integration that capitalism required to maintain its existence. The most crucial aspect of globalization involved the working class of the world: world capitalism had created a situation where the majority of the earth’s population lived on actual slave wages; the corporations of the rich countries, constantly bothered by their native workers demands for higher wages, fled to the third world for relief.

This “corporate flight” in search of slave wages has in turn lowered the wages of workers everywhere. A corporation in the US paying unionized workers cannot compete with one in China paying a dollar a day. Jobs and facilities were shipped oversees, union membership sunk to new lows; the once mighty political power of the unions dissipated. This is how organized labor in the developing countries was drawn into the fair trade movement, out of necessity.

But “fair-trade” to the bureaucrats who control the unions is merely protectionism dressed up in radical clothing; it is the extremely limited, nationalistic solution they offer to the outsourcing of jobs and facilities. Once again, protectionism seems like a common-sense solution: if a company produces a commodity that cannot compete with a foreign company, and the workers wish to keep their jobs, the company’s “competitiveness” seems like a priority. And if your political perspective is strictly bound to the tight confines of capitalism, there really is nowhere else to go. It is this slavish submission to the market economy that is proving to be debilitating to workers, while demanding a wider, internationalist solution.

This “company first, workers second” attitude has led to worker-management “partnerships” that continue to be used to destroy the wages and benefits of workers, setting the union movement back decades. The intent of the partnership philosophy aims at fooling workers into thinking that the enemy is not at home, in the plush homes of the stockholders, but abroad— the companies and workers of foreign countries.

This nationalist ideology not only divides workers, but disempowers them, and instead links their fate to governmental policy. If a union’s strategy is to beg congressmen to erect tariff barriers to protect them from cheap Chinese goods, dangerous waters are being entered. The mega-corporations that own these politicians end up asking for the same thing; they view China’s rise as a threat to their “strategic interests”, i.e., profits. And as history teaches, economic threats are often solved by military means.

This is the ultimate problem with protectionism, it leads to war. This relationship is not direct, but nor is it abstract. The link between a nation and the corporations that function within it is unbreakable; as a nation’s politics flows from its economy. A government can be instantly destabilized if its economy goes to pieces, and this can happen quickly if the giant corporations that largely constitute a country’s economy are suddenly denied— because of protectionist policy— access to another country’s market. This is only the most glaring example of how protectionism can cause major economic and political disruptions on an international scale.

Already many countries are developing protectionist tendencies similar to those that erupted before WWI and WWII. After WWII, capitalism experienced a prolonged boom, leading to free-trade cooperation in the WTO. Now, the boom is over, and an “everyone for themselves ” protectionist mentality has taken over. The abandonment of the WTO is itself an expression of this: the rich countries are done cooperating in the WTO, they are instead opting for regional trade agreements where they can secure the resources and trade leverage desired with poorer countries. These now-popular trading blocs are dominated by specific imperialist powers, such as the European Union (Germany), NAFTA (US), CAFTA (US), PARTA (Australia), ASEAN (Japan), and UNASUR (Brazil). History teaches that trade blocs inevitably turn into military blocs, and war soon thereafter.

These very real dangers present an urgent question of clarity to those who align themselves with the notion of fair-trade. As it stands now, the ideas of fair-trade are obscure enough that protectionism is a valid interpretation. This very dangerous perspective must be combated at every opportunity.

Indeed, throughout its history, fair trade has failed to define the clear political principles needed for developing a strategy capable of achieving its lofty goals. Generally speaking, fair-trade has sought to transform capitalism into something it cannot be, demanding a new perspective that can break through the above, inevitable restrictions one encounters while trying to reform the market economy. Capitalism cannot be reformed. In the dog-eat-dog world of profit making and competition, fairness plays absolutely no role. Nor can it. If workers rights, the environment, health care, or human rights restrict profit-making, they will be paid lip-service to but ignored nonetheless

The wealth producing functions of the giant corporations can be transformed into socially useful enterprises, run on a democratic basis, rather than the economic/political totalitarianism produced under private ownership. Running society should be a social task, where everybody has a say into what is produced and how. The political philosophy that best reflects this idea is commonly referred to as socialism, and is the starting point for anyone who wishes to create a truly fair society.

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Originally published June, 21 2007 in Socialist Appeal.

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Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action. He can be reached at portland@workerscompass.org