Acton Commentary

Fairly Dangerous: The Church takes a stand against free traders

The Roman CatholicDiocese of Arundel and Brighton in the U.K. is striving to become a “fairtrade” diocese and expects to accomplish this by early next year. In the lastfew weeks, parishioners at a typical church in the diocese will have been askedto sign petitions to parliament, join marches of protest and buy fair tradeproducts. Parishioners would do well to question how their faith in factrelates to the fair trade agenda.

The agenda is pushedright down the age groups and through into connected church groups. At hisBeaver Scouts meeting recently, my six-year old was instructed that fair tradepaid a “fair” price for farmer's produce as opposed to the “market” pricefarmers receive from multinationals. Analysis of the circumstances in whichthere is a distinction between a “fair” price and a “market” price has keptminds better than those of the Beaver Scouts awake at night: St. Thomas Aquinasand a whole school of Spanish theologians in the sixteenth and seventeenthcenturies struggled with these concepts.

Diocesan schools will,no doubt, soon be brought into the campaign. Having listened to fair tradeprinciples being explained to classes, it is clear to me that its proponentshave no understanding that the set of issues being treated can be debated andan alternative viewpoint offered. There is too much political posturing andinsufficient serious reflection.

There are two strandsto the fair trade movement: the political agenda, often represented by thetrade justice movement, and the retail fair trade operations. The Arundel andBrighton diocese is explicitly encouraging both. The political fair tradeagenda, in particular, has the potential to do great harm. Its basic propositionis that free trade rules are dictated by rich nations who pander to theiragricultural lobbies and impose unreasonable obligations on developing nations.It argues that developing nations ought to be able to practice various forms ofprotectionism.

It is certainly truethat developed country agricultural, food, and textiles protectionism is anoutrage that does nobody any good. There can be broad agreement between freetraders and fair traders here.

But, the rest of thefair trade political agenda could cause serious harm. The main obstacle toprosperity in developing nations is internal governance. Such countries need free economies withgovernments that operate under the rule of law and enforce the law justly. Ifsuch a situation existed, multinationals would operate in a more competitiveeconomic environment and they would pay workers and producers more for theirproduce. Workers and producers would be more productive too and everybody wouldbe better off. It is true to say that multinationals sometimes workhand-in-hand with corrupt governments to entrench their market positions. Smallcompanies and indigenous companies often cannot compete in thisenvironment--particularly in the environment of the absence of free tradein food and textiles.

How do we proceed in this imperfect world?

Fair traders look atthis situation, the behavior of some multinationals and the plight of the poor,and campaign for “fair trade” regulations. Such regulations would allow poorcountries to impose restrictions on trade to assist their own industries andregulate the activities of multinationals more heavily. Insofar as suchregulations burden the few competitors there are for labor and produce in thesecountries, they can make life worse. The employment and trading opportunitiesin developing countries do seem pitiful by western standards but they may bebetter than the next best alternative.

The second, and muchgreater, problem of such an approach, is that the rules that the fair trademovement would like to change would give more power to the governments thatabuse power in the first place. Even if such governments used those powers toregulate trade reasonably, they would probably do harm: the protection ofdomestic industry is no way to help a developing economy. But they are unlikelyto use their powers reasonably. Africa's history is one of continent-widegovernment intervention in domestic economies and external trade that islargely responsible for its present dire situation. In matters of economics,the law of unintended consequences is ignored at one's peril!

We have had traderegulation before--up to the early 1990s in the coffee industry, forexample. The results were predictable. The gainers were governmentfunctionaries, bureaucrats, bribe takers, and major corporations. Farmers fromthe poorest countries were excluded from markets.

The diocese of Arundeland Brighton is not acting in a vacuum. The bishops of England and Wales haveproduced policy documents on fair trade. Sadly, clichés are often preferred torigor. It is often the poorest who lose from trade liberalization, they say.This ignores the remarkable progress of East Asia in the last few decades. Manypoor people are getting richer through trade; the most impoverished are gettingpoorer not because trade is “free” rather than “fair” but because of theirdysfunctional governments and their lack of access to trade.

The fair trade agendaalso encompasses the issue of retail fair trade products. One can certainlyunderstand the motivation of those who support retail fair trade. It isunderstandable too why some urge the Church to provide the opportunity forretail fair trade.

Even here there areissues worth deeper thought. Retail fair trade organizations tend to fix theprice they pay their farmers so that the farmer receives a price that does notvary directly with the world price of their produce. But if there is a fall inworld demand or rise in supply then some producers must suffer. If some areprotected, others suffer more. This does not lead to an objection to the fairtrade companies, since they assist the people they are in business to help. Iwas, however, taken aback when a priest of the Arundel and Brighton diocesesaid in the monthly diocesan newspaper, words to the effect of, “when we buyfair trade products we are making a very deliberate and informed choice to helpthe poor and when we choose not to do so we are making the opposite choice”.This kind of admonition should be reserved for matters on which the Church'smoral teaching is clear; it should be not be used in a case in which theeconomic effect (and therefore moral character) of an act is open to debate.

Facilitating those whowish to promote retail fair trade products is something that the parish ordiocese might reasonably do. It would be churlish to object. But to promoteretail fair trade by “badging” the diocese a “fair trade diocese” is absurd andit is made worse by the inclusion of the political agenda, as in Arundel andBrighton.

A diocese is the homeof all the people of God, whatever their political views. Some political viewsare incompatible with Catholicism, but believing in free trade and believingthat the fair trade agenda will do more harm than good are not. Bishops shouldnot adopt a slogan for the diocese that is used by political campaignersseeking to achieve wider political ends. That political agenda is not withinthe bishops' control. Indeed, it is controlled by people who do not have themission of the Church at heart.