Last Friday, I was involved in a teleconference between Manchester, Lagos, and Jakarta, organized by British Council, along with a small group of people from NGO, media, artists, and academics, to discuss the so-called Ethical Trade. No, it's not the Fair Trade --despite the ambiguity of this term -- that concerns with the defending the price, of mainly agricultural commodity, not to drop against world market fluctuation; for ET moves beyond this by incorporating notions of ethical values such as animal welfare, social responsibilty, or environmental concerns.
I was expecting some pros-cons to take place, given the diverse ideological stand of that small group participants. But it turns out, surprisingly, that we're all skeptical to the concept. We agreed that ET is still a luxury for us, in domestic trade; and an implicit barrier to trade for our export. The idea of ethical also remains hazy --whose values are we talking about? And animal welfare? Come on, you kid me. We're still in dire need to improve, well, our very own --human-- welfare.
The idea is actually to control MNC not to abuse their suppliers in developing countries. You know, child labour, human right, illegal logging, gender discrimination, etc. But the trade-off isn't between ethical and unethical trade; but trade and no trade (read: export). Moreover, international trade is about economic welfare gains. It won't overcome problems like gender discrimination or child labor. The solutions for the latters should be pursued through other means --not from the trade--, domestically or internationally
Globalization
When two parties trade voluntarily, it's ethical. If there's an impact to a third party, compensation is at play, based on voluntary negotiation. That's ethical. No need to complicate things.
ReplyDeleteLet me then to provoke further debate :-)
ReplyDeleteThe problem lies on that 'voluntarily' feature, particularly for the latter. No room at all for any affirmative action, mate? :-).
Yes but you forget one very important thing:
ReplyDeletethe bargaining power of small suppliers (ie coffee farmers) is extremly low viz a viz multinational corporations which have huge financial muscle.
As such, MNC always get a better deal and are able to screw the poor farmers who have no choice but to sell their produce at low prices or, alternatively, starve to death.
What is needed is mechanisms to give the poor more leverage when dealing with MNC, such as via establihing cooperatives etc.
Bargaining power should not be (exactly) equal. Otherwise, there will never be an agreement. Think about a boxing match that never lasts. Boring. That's one.
ReplyDeleteSecond, it's true that sometime one party has extremely lower power compared to the other. Well, they should not be in the negotiation term in the first place. Again think about a boxing game. You can't force a skinny 45 kgs boxer to fight with a heavyweight. (Unless the former stubbornly wants to do it). The problem is, many times we deny the difference. We think we can help the 45 kgs guy to fight Tyson by injecting the former with some steroid or whatever; so that the "show must go on". (In real life, usually "we" here is government and "steroid" means protection).
Finally, allow me for a word about coffee. I don't believe in fair trade coffee. Who can guarantee that the extra penny we pay for a cup of coffee will be sent by Starbucks to those poor farmers in Africa? In fact I suspect that Starbucks keeps (at least partly) it for itself. As much as I love Starbucks, I definitely prefer "free trade coffee" to "fair trade coffee". If you don't buy my argument, try these:
Tyler Cowen
Tim Harford
To Rizal: affirmative action might be justified. But that doesn't mean it's the government's responsibility. Will talk about this later.
Incentive matters.
Some consumers voluntarily pay premium price for coffee so that some farmers can get a decent price for their product. Some coffee shops voluntarily sells coffee that caters to the preference of these type of consumers.
ReplyDeleteIn the end, some consumers feel less guilty, some MNCs may get more profits, some coffee farmers and workers are happier, and some others may be less so... Still, since everybody voluntarily trade with each other, I do not see why this so called "fair trade coffee" gets such a bum rap.
Fairtrade scheme does not call for any government intervention. So, essentially, it is also free :)
Some consumers voluntarily pay premium price for coffee so that some farmers can get a decent price for their product. Some coffee shops voluntarily sells fair trade coffee that caters to the preference of these type of consumers.
ReplyDeleteIn the end, some consumers feel less guilty, some MNCs may get more profits, some coffee farmers and workers are happier, and some others may be less so... Still, since everybody voluntarily trade with each other, I do not see why this so called "fair trade coffee" gets such a bum rap.
Fairtrade scheme does not call for any government intervention. So, I guess it is essentially free :)
Sarapanekonomi, government role is one thing; free vs fair trade coffee is another. I said nothing about the former when I was talking about fair trade coffee. What I was saying is I just don't trust what Starbucks or others claim regarding their so-called "fair trade" coffee. That the premium goes to the farmers. There are evidence showing that "fair trade" coffee is not what it's claimed. Of course everyone is free to buy fair trade coffee, or whatever its name is, if that makes him feel better.
ReplyDeleteThanks for your comment.
starbucks Syamsul Nursalim owned Starbucks over here. it'll help if the money we give him drinking there helps to pay the billions that he stole from the country.
ReplyDeleteI'd say the whole assumption of ethical trade must be defined properly first: what is 'ethic' and how 'it' will be achieved: the trade conduct itself (whether all parties involved are satisfied with the end result) or the general outcome (eg. how it impact the overall market, suppliers, other parties, other potential suppliers, etc.).
I'm not sure i understand the question properly here, but i'd say that Economics certainly play very significant factor in introducing or shaping certain values and/or addressing certain issues (discrimination or child labor in your example). Economic incentives, as aco noted plays a role too.
Economic by itself probably wouldn't be able to achieve much - or only to create an uneven result - but it definitely has the potential of doing more than anything else.
even the most liberal in this school like Hayek would still favor - albeit very specific - 'affirmative action'. his argument would be the timely progress to which general free market is achieved (free market = no protective schemes from gov't).
or may be i'm wrong and we're just all there for the money... afterall, Greed is good, right?
I would buy the best coffee I can afford. And the S one are either not so good or overpriced :-).
ReplyDeleteYes, I am skeptical to fair trade, too, for the sustainability basis. It sounds like, well, charity, or even worse a soft-blackmail --you know, if you don't buy coffeedirect, you're not fair to the farmers--. And it's hard to defend distorted price.
For that reason, free trade --in terms of eliminating coffee trade barriers as well as bringing the producers closer to the buyers (access, transport cost)-- is preferable.
Treespotter, your last 3 paras say it all nicely.
ReplyDelete(To borrow American Idol's Randy's shout: We got a hot one tonight!)
Treespotter, Econ to address issue, yes. The tools are there. But to introduce/shape certain value is more complicated
ReplyDeleteIf you take two extremes of school of thought--marxian (working men around the world unite!) and neoclassics (greed is good)--,from which you derive the tools of analysis,interestingly, both share quite similar purpose/value/virtue, that is human freedom --and to some extent, justice. Yet, those two schools produce two different, big times different, sets of policy.
And I can imagine that thing may become very tedious, if you put the yet-unsettled values or ethics into analysis of trade.
More on fair vs free trade, today Robert Russell at CafeHayek discusses it. See here. Also, a poster refers you to an article by Kerry Howley at Reason, here.
ReplyDeleteThis may be trivial, but what I am trying to say is: fair trade scheme is compatible with free trade.
ReplyDeleteSo, it is perhaps inappropriate to say that free trade is preferable to fair trade. As long as its proponents do not call for gov't intervention, fair trade is essentially free trade.
thanks to free trade, I can get the only kind of coffee drinkable in the US, the italian espresso ILLY. I gladly pay twice the price, eventhough my wallet seems to be silently screaming every time my hand reaches out to get the can of coffee from Wholefoods.
ReplyDelete