Fair Trade For All: How Trade Can Promote Development (review)

The foundational assumption of this book is that farmers and traders in developing countries who are given freer access to international markets benefit materially. However the authors also recognise that none of the developed industrial nations achieved their present state of material advancement by granting unfettered access to their markets to foreign producers. Indeed quite the opposite is the case. Britain defended its relatively unsophisticated domestic textile producers from the much higher quality textiles from India in the nineteenth century by imposing tariffs on Indian produced cotton not only in the British market but also in India. In this book Stiglitz and Charlton argue that the present regime of tariffs and agricultural subsidies, dominated as it is still by the interests of the former colonial powers, needs to change. Through micro and macro economic analysis they argue the case that liberalisation of world trade, and the removal of the existing and inbuilt biases towards the developed world, will ultimately be beneficial both to developed and developing countries. However they also recognise that there will be costs in adjusting to a more liberal world trade regime, the lion's share of which will fall not on the rich but on the poorer nations. In addressing this problem Stiglitz and Charlton argue that the World Trade Organisation, and in particular negotiations on the next 'development round', ought to move away from mercantilist priorities where each nation or trading block begins from a position of defending its own economic interests and instead embrace a regime in which active assistance to developing countries in adjusting to a new more liberal international trade regime is offered by the developed world.

In presenting their argument Stiglitz and Charlton recognise that there is a moral as well as an economic case to be made. Most economists favour the abolition of tariffs and subsidies because they hinder efficiency. However protection can aid nascent industries in developing countries and small farms in developed countries neither of which, in a global comparison of equivalent producers, could be said to be efficient. The contest, as Stiglitz and Charlon recognise, is between efficiency and fairness. But economists do not recognise fairness as an intrinsic element in the mathematical models which guide their policy proposals. And international trade negotiators and lobbyists in Geneva and elsewhere are also not known for their prioritisation of fairness. There is nothing intrinsically fair, as Stiglitz and Charlton recognise, about an international institution such as the WTO where the outcomes of its deliberations are guided by the extent to which member nations can afford to provide trade counsellors and negotiators. Where the United States and the European Union can field hundreds of staff to argue their cause, many developing countriescan only afford a contribution to the salary and expenses of one shared regional trade representative. Just as the historical process which led to the creation of the WTO was dominated by the historic colonial trade regime, so the WTO continues in its processes and procedures to offer a playing field which is still weighted toward the rich.

Stiglitz and Charlton suggest that what is needed is a new weighting of outcomes in trade negotiations in which development for the poorest becomes a priority and national self interest takes a back seat to international efforts to improve the welfare of the more than two billion people who live on less than two dollars a day. How likely though is this kind of shift in the priorities of developed nation trade counsellors likely to occur? Stiglitz and Charlton are optimistic, though the news from the recent WTO conference in Hong Kong did not provide much evidence of this kind of moral shift. The reality is that what passes for free trade underthe policing of the WTO is still rigged in favour of those nations – and especially the United States and the European Union – which can and do continue to protect and subsidise their domestic markets while dumping excess agricultural and...