Fair Trade vs. Global Business

The material in this post is another discussion assignment from my Principles of Management class at Umass-Amherst. The two classes I’m currently taking are in finals week right now, so I likely won’t have much time to post new original content here this week but will try to write a post or two unrelated to this series of discussion posts to break up the flow a bit and keep you all interested. Regardless, it’s my opinion that many of the topics covered in the Principles of Management class are timeless and still relevant to today’s world. Tonight’s post especially displays this relevance, as it confronts the differences between Fair Trade and the interests of global corporations.

Before I read the material for this session, I was personally very interested in the debate of the pros and cons of globalization. I was well aware of why critics claimed the World Trade Organization, International Monetary Fund, and World Bank were inefficient and actually hindered the economic growth of poor countries and contributed to the poor conditions many workers still faced across the globe.

It seems Robbins and Coulter take the optimistic view of Globalization, that it unites the world and helps all economies to prosper. Robbins and Coulter believe that globalization opens up new customers for third-world countries and allows them to enrich themselves by finally being able to trade with the rich countries of the world. Whereas the textbook credits the World Trade Organization for isolating the Asian financial crisis of the ’90’s and keeping the rest of the world economy from plummeting into depression, the New York Times article (and by the tone of the Fair trade and Equal Exchange web-sites I’m sure they would agree) cites the IMF’s (the WTO & IMF are very closely interrelated) pressure to free up capital markets as a catalyst for the crisis.

I found this quote in the book "Although a number of vocal critics have staged visible protest and lambasted the WTO, claiming that it destroys jobs and the natural environment, the WTO appears to play an important role in monitoring and promoting global trade." (Robbins and Coulter, 84) to be quite funny. In particular the use of "vocal" and "visible" to describe the critics and protests of the WTO clearly show that Robbins and Coulter are defendants of the old guard of the global economy. Using such light language to describe the massive protests that have occurred world-wide at almost every recent WTO meeting (Seattle in 1999 for instance, well before this book was published) clearly shows Robbins & Coulter’s bias on the topic. Robbins & Coulter use this chapter in the book to show that "Global trade isn’t new. Countries and organizations have been trading with each other for centuries." (81) in order to make a claim that globalization is inevitable and then they go on to describe how we as managers should adapt to the increasingly smaller and more intertwined economic environment.

Right in the same paragraph as the last quote Robbins & Coulter state "When trade is allowed to flow freely, countries benefit from economic growth and productivity gains because they specialize in producing the goods they’re best at and importing goods that are more efficiently produced elsewhere." Ideally, this is how globalization would work. In reality, the IMF, World Bank, and WTO constrain emerging markets by forcing them to adhere to their rules in order to receive loans. Without loans from these organizations, third-world countries have little hope of catching up to the developed countries of the world. However, by accepting the rules and cashing in the loans, these countries’ economies are further degraded by the rules; ironically enough many of the rules the WTO attempts to institute on these third-world countries contrast sharply with how many of the rich countries of the world have gained their wealth. It is a vicious cycle and I wish Robbins and Coulter would have delved more deeply into this portion of globalization. In short, Robbins and Coulter believe in the principles of globalization and that ideally all participants would benefit.

In contrast, the Free Trade and Equal Exchange organizations attempt to remedy many of the problems caused by these global financial regulatory organizations. These two organizations accomplish this by instituting their own rules "By requiring companies to pay above market prices, Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their lot and have more control over their lives.(Fairtrade)" By forcing companies to pay more for goods (in order to obtain the very in-demand FAIR TRADE mark), Fair Trade is giving the poor of the world more freedom. Robbins & Coulter would argue that by providing the poor of the world with opportunities, the WTO and similar organizations, are enabling the poor to enrich their lives.

Unfortunately, the only opportunities these third-world countries are routinely offered are those undesired or unprofitable to maintain in a "rich" country. As the New York Times article points out, Mexico receives car manufacturing jobs, but not the knowledge to manufacture their own jobs. Whereas Fair Trade and Equal Exchange attempt to actually free up the economy, by connecting buyers willing to pay higher prices with producers willing to put in that extra effort to obtain the higher price; the global economy discussed in the textbook is one which only works for the medium to large corporations and in effect keeps the playing field uneven by restricting how developing countries can improve their economies. Fairtrade and Equal Exchange attempt to fix the inefficiencies caused by globalization, they deal with the reality of the situation, rather than citing the benefits the theory of globalization "proves".