Is free trade fair trade?

Jagdish Bhagwati: You see fairness is a very funny concept in the sense that fairness, as we all say all the time, is in the eye of the beholder. So when you look at fairness, take it in the context in which you __________.

Now let me take the rich country context, and particularly the United States. I grew up in India, studied in England, and went back to India. I have studied European countries. I have lived in the United States. I would say there’s a difference between Europeans, for example, and the Americans; that the Americans worry more about fairness and less about justice because we think we have mobility. So if we have a fair competition, we can get there.

So if somebody even in Harlem, if you were to have Mr. _________ or Mr. Ruben, who was a former U.S. Secretary of the Treasury, if their wealth doubles, it is conceivable that somebody in Harlem will think, “Aha! The size of the lottery ticket has gone up because I have a shot at it, too.” So if you believe in the mobility, whether it’s true or false, objectively, American mobility is not as dramatic as people think. But most Americans believe in it. That being the case, they believe not in equal outcomes, but they believe in equality of opportunity.

Take England. England is more static, more structured, more futile in many respects. This is why many Indians who come from a similar futile country take to England like a duck to water. You know you feel perfectly happy there.

America just challenges you. America is a country where you go to a butcher shop and the guy will talk back to you. I mean that’s never done in countries like England and India. So there you find your chance of being able to make it to elite ranks is much, much less.

And that being the case, you want to use justice arguments rather than fairness arguments.

So in America, fair trade has become a way of saying, “I really want protection.” Because protection ________ fair trade arguments. So I’m talking about contextualizing the notion of fair trade.

Over here, when someone says, “I want fair trade,” and Mexico isn’t fairly trading with us because its democracy is not good enough, or its union rights are not good enough, or you can take any number of arguments and say, “That’s not good enough.”

Therefore if it is unfair trade, that is ________ fantastic political salience of this country. Because how could you ever say, “I don’t want fair trade”? Because fair trade is central to our psyche and personality. Everything is around that. So these protections are very smart.

But there’s another sense in which fair trade is being used elsewhere. And that is the one which Oxfam, etc. have been pushing. Because they come from 19th century views of fairness. The British also had the same fairness as we do. Because at the end of the 19th century, Britain was open, and U.S. and Germany were rising with protectionism in place. So they thought protectionism was really making these countries grow. And they said, “Ah, they have protection, we have free trade, so that’s unfair trade.”

So there is a huge peril between what broke out in the United States under fair trade kind of protectionism when Japan was competing with us like we were a Rottweiler. Seeing a Rottweiler coming down the road, we are petrified.

The Brits had the same thing at the end of the 19th century. But the current notion of fair trade outside the United States mainly propagated by Oxfam is on 19th century where Roundtree, who was also manufacturer of what we would call M&Ms today or something, Cadbury, _________. These Quakers were into slavery abolition, and a whole variety of good causes. So Roundtree basically was behind the notion of paying people a fair wage when they were buying cocoa beans and so on and so forth. So that’s what Oxfam, which knew nothing about the way fair trade was being used for protection’s purposes, they used the term “fair trade.”

So you’ll occasionally find fairness being treated as a way of saying, “Are people getting a fair shake for whatever they’re producing?”

Recorded On: Aug 14, 2007