Time to rethink what’s fair, and what’s free

April 25, 2005
The U.S. trade deficit is severing the unity of domestic manufacturing interests.

For 15 years I’ve tracked the free-trade versus fair-trade debate across several industries, through various political atmospheres, in good and bad economic seasons. Now, I reluctantly realize that "fair trade" is a dangerous fiction. We have to develop a new understanding of "free" trade in order to achieve fairness.

I’ve always been a free-trade proponent. I still believe it’s the ideal way to conduct business and manage interstate/international trade. Since the 1940s, free trade has helped to extend U.S. influence globally and to liberate millions from corruption, incompetence, and much worse. Notably, it has strengthened U.S. companies and provided options and opportunities to American consumers that no other policy could have done.

It’s critical to understand that free trade has been an extension of our values. Many experts contend that only "free trade" will ensure "fair trade" because it is the only way to keep commercial activity from exceeding public standards for legality, safety, or morality. It’s easy to see the historical advantages of free trade, especially if we continue to compare it to its alternatives — protectionism, socialism, or Marxism — all now discredited.

But, free trade has been undermined by its own breadth. Markets made free by globalized free trade now have advantages in labor, resource, and material costs — and none of the restraints we’ve adopted to achieve "fairness."

Most sensible people acknowledge this, or at least part of it. The difficulty is that this is a truth that does not break down into parts. We recognize the lack of individual and property rights elsewhere in the world; we are made uncomfortable by the certainty that those conditions benefit us by lower the cost of consumer goods. Other factors also make it difficult to sort through this. Our need for security allows us to relax some standards for civil rights abroad. Recent domestic politics has clouded our commitments to lots of bigger principles.

For me, the breakthrough came when the National Assn. of Manufacturers offered its 2005 Trade Agenda. NAM identifies five countries with which it supports near-term bilateral U.S. trade agreements: Egypt, India, Malaysia, New Zealand, and South Korea. NAM also has a special agenda for dealing with China: currency revaluation; protecting intellectual property rights; subsidization and standards issues; and expanding U.S. export promotion to help small companies benefit from China’s growth.

An alternative to NAM is the U.S. Business and Industry Council. Its members include many smaller manufacturers—the sort NAM seeks to help by expanding export efforts. But, USBIC argues that over 20 years of promoting free-trade agreements has been a misguided effort to develop new consumers. Markets open but the consumers never emerge, because the rights of consumers (and citizens) are undeveloped — or unavailable.

There’s a lot of information available from both groups, and others, to get a grasp of these issues. What’s plain is that the expanding U.S. trade deficit is severing the unity among U.S. manufacturing interests.

There’s no satisfying conclusion here: We’ve got an out-of-date understanding of how we present our goods and services to the world, and how we obtain what we need. We disagree on the principles that guide us in this effort, and we’re risking our future security and prosperity while we argue over obsolete terms.