Fair Trade, Free Trade? What Kind of Trade is Fair.

fair trade and ethical businessJust as not all aid is harmful, not all trade is beneficial.  Let’s consider the workings of ‘Free Trade’ as it is advocated by global institutions today.  We’ll consider the cases of two corn farmers living on either side of the global railway tracks:

Before Free Trade Farmer John lives on the right side of the tracks.  He has 500ha (a conservative size) under corn each year.  His family of four survives from the income from this farm.  He has to buy seed every year (because he plants genetically modified corn and thus cannot use this season’s harvested corn as seed) as well as the fertilizers and herbicides to keep his production at maximum yields.  He also uses no extra labour to prepare his fields, plant or harvest because he owns a plethora of machines that he can operate alone.  This equipment and the fuel it uses are quite expensive.  Finally, his fields are irrigated because his farm occupies land that would normally be semi-arid plains and wouldn’t support crops like corn.  Despite the high costs of running this farm Farmer John gets by because his government is committed to buying his crop at a fixed price, well above the world average.  This represents a direct transfer of tax dollars to subsidize farming in John’s country.

Farmer Juan lives on the wrong side of the global tracks.  He has 5ha (a generous size) and supports his family of eight from the proceeds of the farm.  The majority of his land is planted in corn, but his wife keeps a small vegetable plot for self-subsistence as well as chickens and pigs.  He carefully keeps seed corn from each year’s harvest, let’s his chickens eat fallen corn from the harvested fields and uses the corn stalks for pig food, cooking fuel and fertilizer.  The family works together to harvest the corn by hand and Juan borrows the neighbour’s mule to plow the fields in spring.  In return Juan supplies his neighbour with eggs.  Juan and his family sell their surplus corn each year to buy other necessities like oil and sugar, but since their staple food is corn flour, they also consume some of their crop. Juan’s yield depends on the weather and his careful tending of the fields – he rotates them through fallow periods so that they may regain their nutrients.  When a field is fallow, he lets his neighbour pasture cows and mules on the field so that their dung fertilizes the land.  Juan would like to irrigate his land but can’t get credit from the bank, and his country offers no agricultural development loans – it used to when Juan’s father had the land, but now the foreign debt is so high, there’s no money left over for small farmers.

Free Trade arrives Farmer John carries on as before because his government is powerful enough to maintain agricultural subsidies despite the fact that they are antithetical to the Free Trade jargon his country is spouting at global conferences and summits.  Juan is not so lucky because his country is relatively weak and needs the approval of a variety of foreign institutions in order to keep its financial head above water.  Global bodies like the IMF and World Bank tell Juan’s president that the only way to make enough foreign currency is to export something useful to the north while opening his markets to northern products.  This, he is told, will allow ‘market forces’ to eradicate unproductive sectors and boost those that earn more foreign currency.  So, Juan’s president signs the Free Trade Agreement and Farmer John’s corn floods Juan’s markets.  Ironically, John’s far more expensive corn is sold cheaper than Juan’s despite the now even higher costs from long distance transportation.  Juan finds he can no longer make enough on the sale of corn to survive and after borrowing for a couple of years to make ends meet, has his farm taken over by wealthy lenders.

Five Years Later Juan and his family moved to the ‘Free Trade Zone’ where northern companies opened assembly plants.  Juan heard that there were jobs here.  When they arrived, they set up ‘house’ (really just a lean-to made of cardboard) with the thousands of other corn farmers who lost their land.  It turns out that Juan can’t get work because the assembly plants prefer young, unmarried women who are, they claim, more submissive and less likely to unionize.  Juan’s eldest daughter finally gets a job and is the sole breadwinner for the family.  Her wages are too low to support everyone because the plant owners will argue that young girls only work for ‘pin money’ and don’t have to paid as heads of households.  Her younger siblings work the streets selling candy and shining shoes and her mother makes snacks to sell to factory workers at lunchtime.  Juan can find nothing to do and takes to drinking out of shame that he no longer supports his family.

Juan’s farm has been combined with many others by the money lenders to form a large cattle ranch (bought by a meat packing company from John’s country) which employs only 5% of the workers who used to subsist from this land.  The animals are shipped to John’s country where they will be fattened on local corn.

John is farming pretty much as before, heavily subsidized by his government, but now there are more markets for the corn so less is kept in stockpiles.  As well, he and his family are living a little better these days because many products have got cheaper since assembly plants moved over the tracks where labour costs are lower.  When he goes to the polls, John is very careful to vote for the politician who supports farm subsidies and the politicians know it, so little is likely to change despite the rampant charge of ‘Free’ trade across the planet.  In fact, John is pleased to hear that his government is trying to open even more markets for his corn so his future is sunny indeed.

Conclusion Our scenario is not exaggerated in the least.  John represents a typical US grain farmer, while Juan illustrates the plight of Mexicans.  The free trade deal is known as the North American Free Trade Agreement (NAFTA) and the US is currently pushing to expand its scope beyond the US, Canada and Mexico to include all the countries of the Americas (except Cuba) under the Free Trade Agreement of the Americas (FTAA).  After witnessing the effects on Mexico, many countries are having second thoughts about joining the FTAA which will not lower US agricultural subsidies either.

This type of trade benefits no one in the south and to be fair, workers who used to make a living wage in assembly plants in the north are also hung out to dry.  Clearly, the benefits accrue to already wealthy corporations and middlemen who handle transport, but not to the poor.  In fact, this type of trade actively impoverishes once self-sufficient producers in the name of global efficiency.  But how efficient can it be to ship staple foods thousands of kilometres to people who once were capable of growing them locally?  How efficient is it to use thousands of tonnes of fertilizer, herbicides and pesticides to produce food that can be produced organically on small family farms?  Is it beneficial in the long run to permanently deplete underground water reserves to grow crops in areas not designed to support them?  Should ‘efficiency’ in the global economy be directly correlated with unemployment?  Is cheaper always better when the real environmental and human costs are accounted for?  Would ‘cheaper’ really be cheaper if we had to pay those costs here and now instead of defraying them to future generations or to other people?  These questions have to be addressed before free trade as we know it can be made morally and environmentally acceptable.

In order for trade to be beneficial, fair (unsubsidized or equally subsidized) prices must be charged and paid.  Small producers must be given a chance to compete – especially since they are often more productive and thus more competitive, and middlemen corporations should be bypassed whenever and however possible.  Globalization can have a sunnier side if it means that small producers in any country gain access to global markets and are given a fair chance to compete in them.  ‘Free trade’ might be the ultimate solution when we are prepared to honour our half of the bargain and make trade truly free.

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