Friday, November 2, 2007

"Fair-Trade" vs. "Free-Trade"

Thanks Ray, for posting. It is fair to assume that there is a conflict between "Fair Trade" and "Free Trade" only because it has become fashionable to discredit Free Markets as not "Fair".

Besides, elements which constitute "Fair Trade" such as labour rights re sweatshops must be discussed contextually. A job with a Multinational Company that pays $2 a day is far better than back-breaking ploughing of barren land for days with the certainty of a low yield.

The suggestion that "Free Markets" is not "Fair" is a very callous one. It undermines nations that have laboured to make their citizens prosper through voluntary exchange and accountable governance.

What's worse, even as opposers of free trade sneer at the developed world for erecting barriers, it is instructive to know that there are far higher/difficult barriers to trade within developing countries than exists between developing and developed. Figure for instance , Nigeria, Africa's most populaous nation banning 96 agricultural based products from Ghana entering its markets. Meanwhile, the two countries belong to the Economic Community of West Africa States, supposedly a "Free Trade" area. Try travelling by road from Accra to Lagos and be thankful if you arrive with all your goods and money in tact.

So, developed countries, in Europe especially have reduced trade tarriffs to an average of 5.2% whilsts its between 14% and 17.9% in poor countries.( World Bank data for 2002). It is much worse within Sub-Saharan Africa. At the height of the famine in Niger in 2005, it still imposed an import tarriff of 34% on fertilizers. My country, Ghana, imposes 33% tarriffs on imported medicines, but blames patents on essential medicines as the barrier to accessing quality health care in Ghana.

The main Reason why "Free Markets" will never work for most developing nations is that the foundations upon which "Free Markets" work are at best a shadow of what exists in the West-I'm talking about the rule of law,transparent governance,decentralization of power and ownership of resources, free speech and above all property rights!"Free Trade" is "Fair Trade" as long as it based on the pricinciple or reciprocity; value in exchange for a service.

The fairness of such reciprocity rests with governments who have erroneoulsy assumed trade must be negotiated amongst political leaders rather than ordinary citizens.

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