The Politics of Fair Trade: Moving Beyond Free Trade and Protection 9780199337644

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THE POLITICS OF FAIR TRADE

 

THE POLITICS OF FAIR TRADE

 

Moving Beyond Free Trade and Protection

Sean D. Ehrlich

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1 Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and certain other countries. Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America. © Oxford University Press 2018 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization. Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above. You must not circulate this work in any other form and you must impose this same condition on any acquirer. CIP data is on file at the Library of Congress ISBN 978–0–19–933764–4 (pbk); ISBN 978–​0–​19–​933763–​7 (hbk) 1 3 5 7 9 8 6 4 2 Paperback printed by WebCom, Inc., Canada Hardback printed by Bridgeport National Bindery, Inc., United States of America

This book is dedicated to the memory of two people who left the world much too soon:  my father and friend, Michael Ehrlich; and my friend, colleague, and mentor, Will Moore. My father would have loved this book even though he would have disagreed with most of it, and Will would have loved that I finally finished it.

CONTENTS

 

Preface  ix 1. The Many Faces of Fair Trade  1 2. What Is Fair Trade?  21 3. Free Trade, Fair Trade, and Protection: Who Wants What When?  49 4. Latte-​Sipping Liberals and Dumbledore’s Army: Old Protectionist Wine in New Bottles?  69 5. Fair Trade in Congress  121 6. Conclusion  163 Notes  183 References  195 Index  207

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P R E FAC E

 

What is fair trade? Who supports it, and who opposes it? What effect will it have on international trade? How can policymakers respond to demands for it? Traditional academic analyses of trade are ill-​equipped to answer these questions because they tend to view trade policy as little more than a clash between free trade on the one side and protection on the other, while fair trade, at least as I define it in this book, fits rather poorly in either of those camps. Fair traders typically express skepticism toward the benefits of open trade and often support limits to or restrictions on trade and so are clearly not free traders. On the other hand, they often do not support tariffs or bans on imports, preferring more market-​based strategies, and even when they do support such trade restrictions, they do not do so to protect domestic jobs. Thus, if they are to be taken at their word, they appear not to be your garden-​ variety protectionist. So what are they? What do they want? And what can they achieve? This book argues that most fair traders, whether they be members of the general public, legislators, or interest groups, are expressing sincere concerns about the effects of trade on labor standards, environmental conditions, and human rights abroad. This distinguishes them from protectionists, who are concerned with protecting the domestic ix

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economy and society from imports. As a result, the policy preferences of these two groups differ: for instance, protectionists tend to oppose free trade agreements (FTAs) with countries that export products that might compete with domestic production, regardless of the type of country the FTA is signed with; fair traders, on the other hand, oppose FTAs with developing countries, whether or not they produce competing goods. However, while fair traders and protectionists have different reasons to oppose open trade, they can and do make common cause in their opposition. Free trade policymakers have tools to manage protectionist opposition to trade, namely, compensation for economic harm, but there has been little research to suggest ways to reduce fair trade opposition. Fair trade, thus, poses a potential threat to free trade but perhaps not as existential a threat as protection does, in that protectionism views trade as a zero-​sum game where gains to foreign countries must come at the expense of domestic workers. When I first began this project more than a decade ago, fair trade was of little more than academic interest. I was motivated by the broader debates in political science and economics about the determinants of trade policy preferences. While I knew fair trade had practical aspects given its basis in product labeling, I did not expect the research to have much relevance to current political debates because trade policy has rarely been at the center of modern political fights. Then the debate over the Trans-​Pacific Partnership happened in 2015, followed by the 2016 presidential campaign. Trade policy not only has become a major political issue but also has been a misunderstood political issue as observers try to shoehorn the trade debate into the traditional left-​right dimension. Thus, the odd claim was sometimes made that Donald Trump was running to Hillary Clinton’s left on trade policy. This book argues that trade policy is best understood as multidimensional. From this perspective, it makes more sense that Trump and Bernie Sanders took superficially similar positions on trade policy. Given the newfound political relevance of trade policy and fair trade, I have endeavored to write this book to appeal to a broad audience while retaining all the academic features expected in a book presenting original research. I hope this book will be of interest not only to political

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scientists and economists but also to people in the policy community, members of the general public interested in globalization, and students. As such, the main chapters are written in a more narrative format and contain only descriptive statistics and correlations. The appendices to ­chapters 4 and 5 contain more rigorous statistics that lay readers can skip without losing much information related to the basic argument of the book. I have accumulated far too many debts over the years of working on this project to properly thank everyone here, but I will attempt to do so as best I can. First, I wish to thank my editor at Oxford University Press, David McBride, for believing in this project and supporting it throughout the years. He and his team at OUP are fantastic, and it has been a true pleasure to work with them again. Second, a number of research assistants have helped me on this project. David Abitbol, Joseph Bommaritto, Allison Cantrell, Marialena Dias, Kim Fruge, Eddie Hearn, Eryn Jones, Lindsay Lassaso, and Jacek Stramski all provided valuable help collecting data, creating figures and graphs, editing and proofreading, and preparing the references. In particular, I’d like to thank Lindsay, who nearly got kicked out of the local Publix for trying to figure out how many grapes fit into a cubic meter. Third, I  am extremely grateful to Leanne Powner, who graciously read nearly every word in the book and gave me exacting and valuable feedback. This was done out of the goodness of her heart, as she received no compensation for the task, and to this day I do not understand why she agreed to do it. Leanne tried her best to reduce the jargon and the dense, academic-​style writing in this book, though, through no fault of her own, much of it remains. (She would hate the preceding sentence, for instance.) Leanne also provided helpful advice on how to present my ideas and also provided challenging substantive criticisms. This book would not be nearly as good as I believe it currently is without her help. Many other people have read portions of the book, provided feedback on some of its arguments, or helped the project in some other way. Cherie Maestas helped inspire the public opinion sections of the book and taught me a lot about political behavior and political psychology. Matt Petriekya and Brad Gomez also both answered lots of

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questions about these topics and methodology. Charles Barrileaux, Bill Berry, Bill Clark, Justin Esarey, Matt Golder, Raymond Hicks, Angela O’Mahoney, Stephanie Rickard, John Scholz, and Jeff Staton all read or heard me present portions of the book and gave me valuable feedback. Ken Schultz provided hours of distraction on Twitter. Quinton Beazer gave me the opportunity to present parts of ­chapter 5 at the “Politics and Markets in the Developing World” conference at the DeVoe Moore Center at Florida State University; I thank him and the many conference participants for their feedback, especially Jennifer Gandhi, Andrew Kerner, Eddy Malesky, Joel Simmons, and Jane Sumner. In 2013, Susan Aaronson invited me to present portions of what became c­ hapter 4 at the Institute for International Economic Policy’s conference “Is Fairer Trade Compatible with Freer Markets?” at George Washington University. I thank her and the many conference participants and attendees, particularly Shareen Hertel and Michael Hiscox. I would also like to thank Jeffry Haines for allowing me to present my book to his group on global poverty reduction, which enabled me to crystallize my thoughts for the conclusion. The Department of Political Science and the College of Social Sciences and Public Policy at Florida State University have given me a welcoming and inspiring home at which to conduct this research and also provided research funds for the surveys in c­ hapter 4. I thank the chairs of the department, Dale Smith and Charles Barrileaux, and the deans of the college, David Rasmussen and Tim Chapin, for their help and support. The 2012 survey discussed in ­chapter 4 was also partially funded by the National Science Foundation, Award No. 1225750. Lastly, I  would like to thank my family and friends. My mother, Carol, my sister, Kim, my brother-​in-​law, Elliott, whose name I hope I spelled correctly this time, and my nieces, Mollie and Violet brought much joy, entertainment, and comfort during the many, sometimes difficult, years of working on this project. Among many other reasons, I  thank them for not mocking or guilting me too much when I  sat poolside working on this book while on a family vacation at Disney World instead of spending more time with them. I also benefited from the support and patience of many friends. Because I cannot possibly name them all, I will highlight only a few. Mark Greeley shared many

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a beer with me as I  agonized over parts of the books. Carol Rogers gave me valuable advice and a sympathetic but demanding ear. Corrine McConnaughy has had a tremendous and lasting influence on my career and intellectual development. Becky Ruck continues to inspire me to be better. Finally, I’d like to thank Popcorn, who eventually got off of the Stata printouts so I could write c­ hapter 5’s appendix. I promise I’ll use R next time instead.

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The Many Faces of Fair Trade 

On April 24, 2013, several thousand garment workers arrived at their factory in Rana Plaza in Dhaka, Bangladesh, probably somewhat apprehensive but certainly not expecting what was to come. The day before, the building where the factory was located was evacuated when cracks were found in its walls. The owner, though, assured everyone the building was safe and ordered the workers to return the next day (Nelson 2013). The building was evidently not safe, as only an hour after the workday began, the entire structure collapsed. Some workers were trapped inside for days, surviving within air pockets in the rubble. One woman gave birth during the time she was trapped, and although she and many others were rescued, the death toll eventually reached more than 1,000, with another 2,500 people injured (BBC News 2013), making this the worst garment industry disaster and the worst accidental structural failure ever, far eclipsing the New Triangle Shirtwaist Factory Fire, where “only” 146 people died in New York City in 1911.1 This disaster also came on the heels of another industrial accident only the previous November, when 117 garment workers were killed when a factory in Ashulia, Bangladesh, was struck by a fire (CNN 2012). Even before these dual garment factory disasters, Bangladesh had been in the crosshairs of Western labor activists for its poor workplace safety. In 2007, the AFL-​CIO filed a petition with the US government requesting that it increase pressure on Bangladesh to improve working conditions and to stop harassing unionization efforts. In April 2012, though, Aminul Islam, a Bangladeshi labor leader involved in 1

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unionizing garment workers, was found dead, with indications that he had been tortured first (Manik and Bajaj 2012). A  year later, the Bangladeshi government named as a suspect a former garment worker who was believed to have become a thug for the garment industries, but arrests have been made (Hossain 2013). Although these earlier events generated some attention, they did not lead to many changes. The Rana Plaza disaster, in contrast, led to revised corporate practices in the European Union (EU) and the United States and caused the US government to suspend some of Bangladesh’s trading privileges until its labor standards improved. In late May 2015, police in Malaysia responded to reports from the border town of Wang Kelian that injured strangers had been wandering into town begging for food and water (Yi 2015a). Searching the jungles near the village, the police soon found twenty-​eight recently abandoned human trafficking camps with cages where prisoners, including children, were held. They also discovered more than 130 graves; some of these were empty, but others held multiple bodies (Yi 2015b). Investigators believe the sites were related to the ongoing Rohingya refugee crisis, in which thousands of members of that ethnic minority group have fled Myanmar and Bangladesh. The refugees paid traffickers to smuggle them through Thailand and into Malaysia, but the smugglers instead turned them over to other traffickers, who held them captive until their families ransomed them, or until they died (Lewis 2015). While heartbreaking, this story would unfortunately have largely gone unnoticed in the United States if Malaysia had not simultaneously been part of the Trans-​Pacific Partnership (TPP) negotiations. As will be described in more detail below, the TPP is a large trade agreement between 12 countries, including both the US and Malaysia. The discovery of the camps brought Malaysian membership to the forefront of already existing controversy. Concerns over the inclusion of Malaysia even reached the US Congress, with Senator Bob Menendez (D-​NJ) introducing an amendment that would bar from TPP membership any country rated too low on the US State Department’s annual report on human trafficking, as Malaysia was. Ultimately, the political maneuvering and public pressure were unsuccessful; they might even have backfired, as Malaysia not only was included in the agreement but also had its status upgraded in the State Department trafficking report.

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3

In 2010, a large Harry Potter fan group, known as the Harry Potter Alliance (HPA), announced that it would no longer purchase official “chocolate frogs” sold under the Potter brand. It would, instead, produce alternative frogs until Universal Studios, which owns the Harry Potter theme park in Orlando, and Warner Bros., which holds the rights to the Harry Potter movies, and both of which were responsible for the marketing of the frogs, changed the sources of the chocolate in the frogs to ones that were certified not to be made with child labor. Chocolate frogs, which play an important role in the first Harry Potter book, are chocolate candies packaged in a decorated box that also includes a trading card inside. The HPA is a hardcore group of fans who might not be expected to forgo Harry Potter–​themed merchandise, but the group was formed in 2005 explicitly to put the social justice values it saw in the franchise into action and started campaigns focusing on genocide in Sudan, body-​image awareness, literacy, and more, such as the production of the chocolate frogs. On the surface, this example may appear silly, seeming to compare the desire of fans of children’s literature for chocolate candy shaped like frogs with prison camps for human trafficking and industrial accidents that killed hundreds of people. But what provoked the frog boycott was every bit as serious as the other examples. The use of children as labor on cocoa plantations in West Africa had become an important issue since a BBC documentary on the subject aired in 2001 (Off 2008). Although precise figures do not exist, at the time of the documentary, up to 2 million children worked on cocoa farms in Ghana and Côte d’Ivoire alone, mostly without being paid. These children were sometimes as young as five years, were often engaged in hazardous work, and sometimes had been trafficked from other countries. All told, probably millions of children were engaged in what the International Labor Organization called the “worst forms of child labor” (Payson Center 2011), all so that chocolate could come to market cheaply. After the BBC documentary aired, a number of steps were taken, in both the public and the private sector, to curtail these abuses, as will be detailed later, but child labor was still being used as of 2010. Some chocolate companies used independent certifiers to demonstrate that their chocolate had not used such labor; Universal Studios and Warner Bros. did not do so, but they assured the HPA that no children had been

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The Politics of Fair Trade

exploited to make chocolate frogs. The HPA, which was not satisfied with this response, demanded to see the report Universal claimed it had commissioned on the topic and also insisted that Universal either switch suppliers or certify its current suppliers before the HPA would start buying frogs again. Perhaps the most amazing part of this story is that this strategy worked. What these stories have in common is that they all represent important recent examples of fair trade. Usually thought of as little more than a label on specialty coffee products, I argue that fair trade is actually a larger movement centered around the effects of trade on labor standards, environmental conditions, and human rights.2 Briefly, I define “fair trade” in this book as a desire to limit or regulate trade based on concerns that trade with certain countries may lead to worse environmental conditions and violations of human and labor rights abroad. Fair traders express this concern both through private action, like boycotts of products made with child labor, and through government regulation, such as canceling trading privileges with Bangladesh. Usually fair trade is thought of either as a label on a small number of products or, according to economists and many policymakers, as nothing more than protectionism in disguise. For instance, Jagdish Bhagwati, one of the leading trade economists of the past fifty years, wrote that “protectionists see great value in invoking ‘unfairness’ of trade as an argument for getting protection:  it is likely to be more successful than simply claiming that you cannot hack it and therefore need protection” (1995, 746). Bhagwati is not alone is this conflation of fair trade and protection. Indeed, befitting his stature in the discipline, his view has been accepted as conventional wisdom within economics in the twenty-​first century. Arguing against this conventional wisdom, this book shows that much of the support for fair trade is actually sincere concern about labor and environmental conditions in other countries. As a result, fair trade is a more complicated and potentially more powerful concept than it is usually considered by both its supporters and its detractors, as is apparent from the preceding examples, each of which involved more than just product labeling and none of which was motivated by a desire to protect American jobs. Though these examples are particularly dramatic, the truth is that the conditions detailed here are not

The Many Faces of Fair Trade

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appreciably worse than in many other developing countries, where industrial accidents, environmental disasters, and the violation of human rights, particularly labor rights, are all too frequent. What has given these particular stories staying power has been the consumer and political response to them, particularly in the United States and Europe. And what has led to the response in the developed world is the fact that the garments made in the destroyed Bangladeshi factories were largely being exported to the United State and Europe, that Malaysia was trying to join a free trade agreement with the United States, and that the chocolate was being used in products bearing a beloved Western brand. A quick examination of the reactions to each of these examples demonstrates the reach of fair trade and its possible effects on trade policy around the world. Fire in Bangladesh Despite the fact that previous industrial and workplace disasters had never led to major policy change in the developed world, the Bangladeshi case has been different. The high-​profile nature of the event caused consumer protest, which in turn led to retailer-​led efforts to improve Bangladeshi labor standards. While even this corporate response was unusual, it was not the end of the story. Many of those upset by the disaster were not satisfied with a corporate solution, particularly the one offered by North American retailers like Walmart. More than 200 mostly European apparel companies signed the Accord on Fire and Building Safety in Bangladesh, a legally binding agreement with labor unions that committed the companies to inspect suppliers’ factories and provide up to half a million dollars a year for safety improvements in them. A number of US retailers, such as Walmart, Target, and the Gap, did not like the legally binding nature of the agreement and feared it would open them up to lawsuits. Thus, they signed the Bangladesh Worker Safety Initiative, which also pledged money but had weaker inspection standards and was not binding.3 Activists, though, continued to push for stronger action, perhaps even government involvement. In June 2013, the United States obliged, suspending Bangladesh’s special privileges under the Generalized System of Preferences (GSP). The GSP is a World Trade Organization (WTO) program that allows

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one-​sided free trade for the poorest countries in the world, meaning that Bangladesh could continue to have tariffs on US products while the United States exempted Bangladesh from tariffs. (Normal WTO rules require free trade agreements to be reciprocal.) Textiles are actually excluded from the GSP, so this action by the United States did not directly influence trade in that industry, but the United States stated it was suspending the privileges because of poor worker safety in that industry. Because the primary Bangladeshi export to the United States was not covered, this action affected trade valued only at $35 million, including tobacco, sporting goods, and porcelain. The United States also provided technical assistance to help improve working conditions in Bangladesh. Despite this, though Bangladesh had made progress, the United States still was not willing to lift the sanctions as of the beginning of 2018 (United States Trade Representative 2015). In this moment, the fair trade movement, previously associated largely with consumer labeling efforts and handcrafted niche products, had scored a major policy success. This heralds the possibility that fair trade concerns can lead to real government change, but it also underscores the economists’ own concerns about fair trade, namely, that it will only lead, possibly by design, to government limits on trade. The Bangladesh disaster has also caused increased consumer activism throughout the developed world and a rebirth of student activism in the United States similar to that of the 1990s. As will be described in more detail in c­ hapter  4, various high-​profile news articles reporting on sweatshops and child labor in the apparel industry led to creation of United Students Against Sweatshops (USAS) in 1998. The efforts of this group, which protests the use of sweatshop labor in the creation of apparel with college and university logos, eventually led to the creation of the Workers’ Rights Consortium (WRC), an independent organization that investigated labor conditions in apparel factories. Nearly 200 universities and colleges joined the consortium to certify that their apparel was not made under sweatshop conditions. The USAS and the WRC remained in existence for the last two decades but were largely out of the news until recently. First, the building collapse in Bangladesh led to renewed calls by the USAS to bring more colleges into the WRC, most recently succeeding at Kent State University. In addition, Rutgers University increased pressure on

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its suppliers by requiring them to sign the Accord on Fire and Building Safety or lose their license to produce Rutgers-​ branded apparel (Heyboar 2014). Second, Nike withdrew from the WRC, which has led to campus protests and activism by the USAS to either force Nike back into the consortium or cease purchasing from Nike. As of the time of writing, this campaign is ongoing, with Nike refusing to back down (Teare 2016). Its refusal highlights that while the Bangladesh disaster has led to increased political and consumer pressure, fair trade concerns are not always victorious. Graves in Malaysia The issue of human trafficking re-​emerged in the public consciousness around the same time as the issue of sweatshops. In the mid-​1990s, increased media and popular attention focused on the issue of cross-​ border sex trafficking, particularly in Eastern Europe as an unintended side effect of the end of communism. In 1998, the United Nations created an ad hoc committee to begin developing international laws regarding sex trafficking. When the committee finished its work two years later, the issue of human trafficking had expanded beyond just sex crimes, and its Convention Against Transnational Organized Crime included additional protocols on both trafficking of women and children for sex work and smuggling of migrants for more general labor. A similar transition occurred within the United States, which in 2000 passed the Victims of Trafficking and Violence Protection Act (TVPA), which, among other things, mandated that the State Department release an annual report on other counties’ anti-​trafficking attempts (the Trafficking in Persons [TIP] Report). The first such report focused only on sex trafficking, but by the end of the decade, the reports had expanded to include all forms of human trafficking.4 As knowledge of and concern for human trafficking grew, so too did those concern about the links betweenhuman trafficking and trade, leading to the inclusion of human trafficking issues among the concerns of fair traders. Given how new the issue is and how our understanding of it has been rapidly evolving, it is useful before discussing Malaysia in particular to provide some definitions and an overview of the topic. At its most general level, trafficking is the illegal sale of some good. Thus,

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human trafficking would be the illegal sale of humans, although any sale of humans is inherently illegal in most countries. The legal definition within the UN protocol, which is similar to the definition used in the TIP, specifies that human trafficking consists of three elements: an act, a means, and a purpose. The act is the recruitment, transportation, harboring, sale, or purchase of a human being. The means are coercive, including the use or threat of force, fraud, or abusing a position of authority. The purpose is for exploitation, including prostitution, forced labor, slavery, and removal of organs. Thus, completely consensual activities are not included, so that migrant workers who pay someone to smuggle them across the border and who are not defrauded are not counted as being trafficked. Also, international trafficking can occur even if the individual is not actually moved across a border, for instance, if the money used for the purchase crosses borders. This is an intentionally broad definition, but it also has important (and often controversial) restrictions. The definition also intentionally conflates sex trafficking with labor trafficking. Although popular attention typically focuses on sex trafficking, for instance, as seen in the follow-​up books to the novel The Girl with the Dragon Tattoo, most human trafficking is not for sex work. Rather, the most common form of human trafficking is labor trafficking, in which workers are smuggled across borders to provide cheap labor. If the workers receive the pay they were expecting and are not defrauded, pressured, or abused in any way, this smuggling is not technically considered trafficking. However, all too often, workers are put into abject situations in which they are subject to abuse or receive less pay than expected. Frequently, their passports are confiscated so they cannot leave the country, and they have difficulty bringing complaints to the authorities, thus enabling abusive conditions. A growing form of trafficking is the smuggling of refugees across borders. As with labor trafficking, this does not count as trafficking if no force or fraud is used. Again, though, refugees frequently find themselves at the mercy of traffickers who do not intend to deliver them to the promised destination and instead take advantage of their vulnerability to extract more money from them or to use them for cheap labor or sex work. A common tactic is to take the refugees hostage and demand a ransom from their families.

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This is largely what has occurred in Malaysia as part of the Rohingya refugee crisis. The Rohingya are a Muslim minority group living within the Rakhine Province of the majority-​Buddhist Myanmar. The more than 1 million Rohingyans have been essentially stateless since the 1982 Citizenship Law of Myanmar failed to include them. This statelessness has opened them up to discrimination and abuse (Brinham 2012). In 2012, this situation spurred violence on both sides as riots erupted in Rakhine Province, leading to the deaths of more than 150 Muslims and Buddhists and the displacement of about 100,000 Rohingyans (Amnesty International 2015). This initially internal displacement quickly led to external migration attempts as the Rohingyans sought to claim refugee status in nearby countries, such as Thailand, Malaysia, and Indonesia. Many of them took to the sea to leave Myanmar (leading to common media references to them as “boat people”), only to be turned away at their destination Malaysia was one of the primary destinations for the Rohingya refugees, many of whom turned to third-​party traffickers in their attempts to be smuggled in. Undoubtedly, some of the smugglers did exactly that, but others took advantage of the refugees who found themselves in their power, holding the refugees in mass prison camps on the Malaysian border until their families paid ransoms for their release. Many whose families could not or did not pay were left to die and were buried in mass graves, such as the ones discovered in May 2015. Though the Malaysian government did not conduct the trafficking or operate the camps, its was still blamed due to its existing poor record related to human trafficking. In fact, the previous year, the US State Department had downgraded Malaysia to Tier 3, the lowest rating, in the TIP report, putting it at the same level as North Korea and Saudi Arabia, among others. Malaysia was downgraded because it had failed to correct problems noted in the previous four reports in terms of preventing trafficking, protecting its victims, and punishing the traffickers. The biggest relevant issue raised in the TIP report was that Malaysia does not grant refugees formal refugee status. This limits the protections refugees have and prevents them from legally working, thus making them easy prey for those who wish to exploit or abuse them. Victims of trafficking are also detained by the government, receiving minimal services and often for more than

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The Politics of Fair Trade

a year, limiting their ability to escape from their oppressors. Further, the government rarely prosecuted traffickers, providing little disincentive to conduct trafficking. As a result, although the discovery of the prison camps and mass graves was horrifying, it was not particularly surprising. Horrible as this story is, it likely would have been barely noticed by the public, media, and politicians in the United States if not for the fact that Malaysia was part of the negotiations for the Trans-​Pacific Partnership. The TPP was an attempted multilateral trade agreement between twelve countries in Asia and the Americas, including both Malaysia and the United States as well as other large countries like Japan, Canada, and Australia.5 The TPP was already controversial in the United States, with opposition from both Democrats and Republicans despite President Barack Obama’s support for the agreement and Republicans’ long-​standing support for free trade. Much of the opposition focused on the inclusion of poor countries like Vietnam, Brunei, and Malaysia in the agreement, and thus the discovery of the graves became a political weapon used by the opponents of the TPP. Leading this charge was Senator Menendez of New Jersey, who introduced language within the TPP preventing countries that were in Tier 3 of the TIP report from joining the agreement, which could have kept Malaysia out or even scuttled the entire deal. As I  discuss in more detail in ­chapter 5, it does not appear that Senator Menendez was concerned about imports from Malaysia hurting jobs, since very few jobs in New Jersey compete with Malaysian imports. In fact, New Jersey probably would have benefitted from the TPP because the state’s economy is based heavily on tradable financial services, as well as the export of pharmaceuticals and other chemicals. It is thus more likely that in supporting the TPP, Senator Menendez was motivated by sincere concerns about human rights. Fair traders won a seemingly huge victory when language preventing certain types of human rights–​abusing countries from joining the trade agreement was included in the final bill authorizing fast-​track status for the TPP. This apparent policy victory for fair traders quickly backfired, though. In the next round of the State Department’s TIP, Malaysia was elevated to Tier 2b, which once again made the country eligible to join the TPP. Though the State Department and the Obama

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administration claimed that this re-​ranking was not motivated by the TPP, most observers did not believe that Malaysia had done anything to warrant the improvement in its status, and even the State Department’s own justification was rather strained. We see here an apparent victory for fair trade backfiring as Malaysia would now have less reason to improve its protection of trafficked individuals than it would have if Senator Menendez had not included his language in the fast-​track authorization bill. Chocolate in Hogsmeade Next to coffee, chocolate is probably the most prominent product in the fair trade movement ,in part because chocolate production has a well-​documented recent history of labor abuses, centered on concerns about child labor on African cocoa plantations. After attention was first called to this issue in the West, governments, corporations, and individuals have attempted to reduce if not eliminate these abuses, with varying degrees of success. Even in the present day, however, child labor is rampant on cocoa plantations, and the fight against it continues, taken up in part by Harry Potter fans. In 2001, Brian Woods and Kate Blewett’s documentary, Slavery: A Global Investigation, aired on the BBC and exposed slave labor on cocoa plantations and advocated for its elimination. Woods and Blewett claimed that slave labor was so rampant that they could simply walk onto a plantation and find dozens of people who would admit to being slaves. In describing the production of the documentary, Carol Off said, “they encountered teenagers and boys who told them they had not been paid even after a year’s work. The young people described beatings, starvation diets and foul living conditions, and they revealed their lacerated backsides” (2008, 133). In 2001, the BBC reported a story about a ship bound from Benin to Côte d’Ivoire containing more than 200 children, some just six years old, who were being delivered to work on the cocoa plantations. This was followed only a few months later with an even more extensive series of investigative reports by Knight-​ Ridder (Off 2008, 136–​137). The documentary and the news reports generated much publicity on the topic, aided both by the public’s love of chocolate and

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The Politics of Fair Trade

by the disturbing details of the accounts. In 2002, the US Agency for International Development (USAID) estimated that about 300,000 children, more than half of whom were younger than fourteen, were working in dangerous conditions on cocoa farms in West Africa, particularly in Côte d’Ivoire. Most of these children were related to the owners of the farms but were being prevented from attending school and were being subjected to hazardous conditions. About 12,000 were unrelated to the farmers whose farms they worked on, and about 6,000 were not paid for their work, essentially making them slaves (Tiger 2003). Off describes young boys, many not yet teenagers and many coming from neighboring countries such as Mali and Burkina Faso, leaving their families voluntarily in search of the rumored wealth to be had working on cocoa farms in Côte d’Ivoire. Traffickers, though, would sell them to farmers after smuggling them across the border. There, these boys worked without pay and with little food, being beaten if they complained (Off 2008, 123–​129). As these facts became better known, nongovernmental organizations and international governmental organizations, such as the Child Labor Coalition and the United Nations International Children’s Emergency Fund (UNICEF), began to mobilize to fight child exploitation in cocoa production. So, too, did the US Congress, led by Elliot Engel (D-​NY) in the House of Representatives and Tom Harkin (D-​IA) in the Senate. The House attached an amendment introduced by Engel to an agriculture bill that would create a “slave-​free” label for chocolate and force companies to certify their products to receive the label. As Harkin geared up to introduce the amendment in the Senate, the chocolate industry, led by Hershey’s, Nestlé, and Mars, mobilized, hiring former senators George Mitchell and Bob Dole to lobby on their behalf. Mitchell and Dole managed to broker a compromise, convincing the chocolate manufacturers that some sort of deal was necessary by telling them, “Too many reporters are willing to go to Africa and get kids on record that they’re slaves” (Tiger 2003). The compromise, eventually known as the Harkin-​Engel Protocol, was a private, voluntary agreement, though backed with the threat of government intervention and with financial support from the government. The protocol committed the chocolate industry to acknowledging the existence of the child labor problem, funding efforts

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13

to reach out to farmers and provide “remediation” to reduce their use of child labor, agreeing to a common set of production standards, and creating a voluntary system to certify that these standards were met. While significant progress was made on most elements of the protocol, the certification system never fully materialized. In the end, the Harkin-​Engel Protocol may have helped reduce child labor, but it certainly failed to eliminate it, as the manufacturers had agreed to do. In 2010, surveys conducted by the Payson Center at Tulane University found that while about 2 million children still did some work on cocoa plantations, nearly all of them were either working on family farms or being paid for their labor. Fewer than 10,000 children were estimated to be working without pay and under duress. Further, most of the children who were working on the farms were also attending school, a marked difference from the previous decade (Payson Center 2011). Thus, the situation had improved, but much of the chocolate on the US (and European) market was still made with cocoa harvested with child labor and sometimes slave labor. Although the public-​private experiment of the Harkin-​Engel Protocol failed, third-​party labeling initiatives stepped into the breach. The Fairtrade Labeling Organization certifies cocoa plantations just as it does coffee plantations. In addition, the Dutch label UTZ provided similar certifications that became quite common on chocolate, with more than 10 percent of all global cocoa certified by the UTZ by 2012. A total of about a quarter of all global cocoa was produced under some sort of labeling system in 2012 (Potts et al. 2014). Of course, this left three quarters of all cocoa uncertified, including the cocoa used in chocolate frogs, candies that played a small but important role in the Harry Potter novels. When Universal Studios’ Wizarding World of Harry Potter theme park was created, a real-​world version of these frogs, along with a host of other merchandise, was made available. The chocolate frogs were about five ounces of solid chocolate, sold in an elaborate box that also included a holographic trading card depicting a witch or wizard. The frogs were, of course, popular with fans, but as the ongoing problems of child labor in cocoa production were documented, one group of fans began to wonder whether their precious frogs were so contaminated.

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The Politics of Fair Trade

The Harry Potter Alliance was founded in 2005 by Andrew Slack to call attention to the ongoing genocide in Darfur. Slack believed there was “a potential army of activists among Harry Potter fans, betting that many share[d]‌his passion for the social justice themes that underscore” the novels and movies (Snyder 2007). After raising $15,000 for the survivors in Darfur, the HPA expanded its mission by collecting books to distribute to poor areas of the United States and elsewhere, raising more than $100,000 for medical supplies after the earthquake in Haiti in 2010, fighting for LGBTQ rights, advocating for net neutrality, and pursuing a host of other social justice issues. One of the HPA’s largest campaigns focused on child labor in cocoa production; it called the campaign “Not in Harry’s Name,” under the assumption that Harry Potter would not have supported the use of child labor to produce his chocolates. The HPA is almost certainly correct in its claim that Harry Potter would have opposed child labor, especially child slave labor, in the production of chocolate frogs. Slave labor played a significant role in the fourth book of the series, Harry Potter and the Goblet of Fire, and continued to play a role in later novels. In the Wizarding World, house elves were servants kept by wealthy wizarding families. They were bound to the family generation after generation, received no pay, and were often beaten and kept in horrible working conditions. This appeared to be accepted as normal practice within the Wizarding World, and for the most part the house elves themselves seemed content with the situation. Hermione Granger, one of Harry Potter’s best friends, who was born to a non-​wizarding (Muggle) family, was appalled when she discovered the existence of house elves. She formed the Society for the Promotion of Elvish Welfare (S.P.E.W.) and throughout much of the book badgers others to join the society and support its goals. Harry did indeed join, though at first he seemed largely indifferent to the plight of the house elves. As the novel and the series progressed, Harry began to treat house elves more kindly and became supportive of Hermione’s quest. Given his distaste for house elves being unpaid and poorly treated, it seems fairly certain that Harry would have been outraged by human children being so treated. Indeed, J. K. Rowling, the author of the series, herself supported the cause and signed the HPA’s petition.

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15

Dissatisfied with the response of Universal Studios and Warner Bros., the HPA conducted independent investigations of the cocoa suppliers for the frogs and determined that they were not meeting fair trade standards and likely used child labor. This led to petitions, letter-​writing campaigns, and boycotts to pressure Warner Bros. and Universal to change their sourcing policies.6 Universal insisted that its cocoa was ethically sourced but, when pressed by the HPA, refused to release a report it claimed proved this. At this point in 2011, the HPA began producing alternative fair trade chocolate frogs; it spent the next few years selling these frogs and pushing Warner Bros. and Universal to “release the report.” The report was never released, but at the end of 2014, Warner Bros. notified the HPA that by the end of 2015, all chocolate used in Harry Potter products would be UTZ or FairTrade certified. A group of diehard fans had forced a major corporation to change its production practices by exerting ethical pressure and maintaining a steady drumbeat of media attention all because their love of a fictional character inspired them to oppose the use of child labor in products they purchased. The Many Faces of Fair Trade Each of the preceding vignettes shows fair trade in action. None of them, with the possible exception of chocolate frogs, resembles what we normally think of as fair trade. When most people use the phrase “fair trade,” they mean one of two things. First, they might mean that their trading partners are cheating or getting an unfair advantage due to operating under different rules. This was the dominant meaning of the term in the 1980s and 1990s when many accused Japan, for instance, of practicing unfair trade by dumping artificially cheap goods on the US market and keeping barriers to American goods while the United States had lower barriers to Japanese goods. This usage is still common in political rhetoric. For instance, Donald Trump and Bernie Sanders both argued in their presidential campaigns that we needed fairer trade to protect American jobs, meaning that countries like China manipulated their currency or Mexico had lower labor standards, which hurt American workers. Second, people might mean FairTrade labels, such

16

The Politics of Fair Trade

as on coffee, that signify the product has been produced following certain labor and, to a lesser extent, environmental standards. This latter meaning is closer to, and indeed part of, what I mean by fair trade in this book. However, as shown in the vignettes, it is overly limited. The concept of ‘fair trade’ in this book means that one has concerns about the effect of trade on human rights, labor rights, or environmental standards in one’s trading partner or the desire not to engage in trade with countries that do not have these rights or standards. This concern is moral, not economic. Fair traders are not worried that child labor or slave labor unfairly competes with American and European workers and hurts domestic jobs. They are worried that their consumer behavior might support actions they view as immoral or unethical, or they may wish to use their actions to rectify bad behavior. One way to do this is with FairTrade labels: consumers can avoid products that do not have the label so that they do not support exploitative labor practices, or they can buy goods with the label to send money to those working under higher standards. But individuals can also boycott or protest firms that violate their standards, or they can push for political action, such as restricting trade with countries that violate certain standards. The key here that differentiates this meaning of fair trade from prior meanings is that policies and purchasing behavior are not motivated by concerns about the state of the domestic economy. They are not designed to protect local jobs. This is in stark contrast to how fair traders are usually described by economists, who view any restriction on trade as protectionism and thus call fair traders “protectionists in disguise.” In other words, fair traders want to save their own jobs, but instead of arguing that they need government help against superior foreign competition, they claim they are being hurt by unfair practices. This tension between viewing fair trade as self-​interested protection of your own job (or your country’s jobs) versus altruistic concern for conditions in your trading partner motivates this book. I  argue that while some fair traders may be protectionists in disguise, many are sincere. This is apparent because many fair traders are not personally threatened by trade; they don’t have anything to protect, so their desire for limits to trade must be due to some other motivation. Because these individuals are exactly the sort who support labor standards,

The Many Faces of Fair Trade

17

environmental protections, and human rights more broadly, I  argue that it is likely that their concern for these issues in their trading partners is actually sincere. This is more than just a pedantic distinction. Supporters of free trade have long developed strategies to increase support for trade, mostly by compensating those who are harmed economically. These compensation policies, known as the compromise of embedded liberalism, can reduce protectionist opposition to trade but are unlikely to do anything to ameliorate fair trade opposition. Thus, treating fair traders as protectionists in disguise might be dangerous for free traders. In addition, protectionist policies may not be the best option for fair traders. Cutting off poor countries from trade with developed economies like the United States and the EU might only worsen conditions for workers. For these reasons, it is crucial for us to understand why people oppose trade and to stop assuming that all opposition to trade is the same. This book presents a theory that enables us to distinguish between different types of opposition, to determine who is a sincere fair trader and who is a protectionist. Using this theory, I derive specific, testable hypotheses about the determinants of trade policy preferences and then proceed to test these hypotheses by looking at public opinion polls in the United States and the EU, congressional voting records and rhetoric, and lobbying behavior. In the end, I find that sincere fair traders might make up as much as a third of the population of rich, developed countries, too large a group to be ignored or miscategorized. Free traders do so at their own risk, but in this book I offer policy suggestions to mitigate this risk and suggest a way forward that combines free trade and fair trade. The Structure of the Book The rest of the book is organized as follows. Chapter 2 provides a richer definition of fair trade, contrasting it with both free trade and protectionism. The chapter also provides a brief history of fair trade, sketching the term’s development from nineteenth-​century Britain to the present day. It then discusses how economists and political scientists typically view fair trade, setting up the tension between “protectionism in disguise” and “sincere fair trade” that motivates the rest of the book.

18

The Politics of Fair Trade

Chapter  3 presents my multidimensional theory of trade policy preferences. The central argument of the theory is that trade preferences are not simply a single dimension running from complete support of free trade to complete support of protection. While it is common to describe politics along a single dimension (typically the left-​right dimension), this is an admitted simplification that, while often providing good insights into politics, also sometimes obscures more than it illuminates. Trade policy is one of those times, as can be illustrated by both Bernie Sanders and Donald Trump running on platforms opposing trade in the 2016 presidential election. These two candidates were nowhere near each other on the left-​right dimension, and they opposed trade for different reasons. Any one-​dimensional theory of trade preferences would struggle to accurately predict both of their positions. The multidimensional theory, which includes both an economic dimension and a values dimension, can explain not only Sanders’s and Trump’s positions but also Senator Menendez’s opposition to the TPP, Hillary Clinton’s tepid support of (or tepid opposition to) trade, and Marco Rubio’s full-​ throated defense of trade. The chapter also provides specific testable hypotheses to determine the accuracy and usefulness of the theory. The core hypotheses suggest that sincere fair traders will be highly educated, high-​income liberals, while protectionists will be either low-​education, low-​ income liberals or low-​ education, low-​ income conservatives, depending on the flavor of their protectionism. Free traders will tend to be high-​education, high-​income conservatives. Chapter  4 provides the first set of tests of the multidimensional theory, exploring public opinion on trade policy. This chapter shows how “latte-​sipping liberals”—​rich, educated, liberals—​tend to support fair trade, which is what would be expected if fair trade preferences are sincere. This is demonstrated by examining surveys conducted from 2006 to 2012 in the United States, looking at trade policy preferences, support for free trade agreements, and support for fair trade products. This US-​centered analysis is supplemented by an examination of a survey conducted in the 1990s in the EU about support for fair trade bananas. The body of the chapter presents descriptive statistics and correlations and is intended to be read by those with limited or no statistical or mathematical background. The appendix to the chapter provides rigorous statistical tests of the data and

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19

shows that the patterns found in the simple descriptive statistics are still supported. Chapter 5 provides the second set of tests, examining elite rhetoric, congressional voting, and lobbyist activity on trade. The chapter begins by examining floor speeches by US senators and House members, as well as their official and campaign websites. Here, we see that Democrats from blue-​collar states, like Sherrod Brown of Ohio, tend to oppose trade either on protectionist grounds alone or on a combination of protectionist and fair trade grounds. In contrast, Democrats from wealthier states, like Bob Menendez from New Jersey, tend to take a more fair trade approach, opposing trade only when labor rights or environmental rights are at stake in the trading partner. This section provides a detailed description of the politics surrounding the TPP that demonstrates these different types of opposition to trade, as well as a discussion of trade policy in the 2016 elections. The chapter continues by demonstrating that this difference is not confined to rhetoric but also is apparent when examining voting patterns on various free trade agreements. Democrats who represent poorer and less educated constituencies tend to oppose all free trade agreements, while Democrats who represent richer and more educated constituencies tend to oppose only agreements with countries that have poor labor or environmental standards or human rights records. The appendix to the chapter shows that these findings hold when subjected to rigorous statistical analyses. Chapter 6 concludes with a discussion of the implications of sincere fair trade, both for the academic study of trade and for the practical politics and policies of trade. The most important policy implication is that, since many fair traders are sincere, they are unlikely to become supportive of trade if they are compensated for their (often nonexistent) losses from trade. Thus, the primary policy tool available to free trade policymakers to increase support for trade is unlikely to work on this large voting bloc. This raises the threat to the free trade consensus that has existed in most of the developed world since the end of World War II unless policymakers can find other tools to win over fair traders (or increase the amount of compensation to win over additional protectionists). While fair traders are not protectionists, they can make common cause with protectionists. On the other hand, research has

20

The Politics of Fair Trade

shown that trade and foreign direct investment in developing countries can improve their labor and environmental standards and their respect for human rights, so fair traders might actually be hurting their own goals if they succeed in cutting off trade with these countries. Rather, the best path forward for both free traders and fair traders is to craft trade agreements that have strong and enforceable labor, environmental, and human rights protections. Agreements with strong human rights commitments, often signed by the EU with developing countries, have been shown to improve human rights in these countries. Expanding these commitments, as the TPP begins to do, might be the best hope to continue the policy of free trade while also improving working and living conditions around the world.

2

 

What Is Fair Trade? 

Fair trade is neither a new idea nor a new term. The current fair trade movement, though, has appropriated the term (which used to mean something else and still does to many) and contains numerous novel features. This chapter will provide a detailed definition of the term “fair trade”; a history of the use of the term as well as a history of the modern fair trade movement; an examination of how fair traders view themselves and how they are described by academics; and a discussion of the policy importance of fair trade. Definitions of Fair Trade, Free Trade, and Protectionism The term “fair trade” means different things to different people, but except when otherwise noted, in this book it refers specifically to the current connotation of the term related to fair trade–​labeled products and not to other connotations. Further, I  usually will employ an even more restricted definition that I believe gets at the root of what differentiates the current fair trade movement from alternative views on trade. Specifically, I define fair trade as expressing concerns about the effects of trade on the environment, labor standards, and human rights abroad combined with the desire to take action to ameliorate those effects. The term “protectionism” is often used to refer to any opposition to trade, but the whole point of this book is that such a broad definition obscures more than it illuminates. Therefore, I  offer a more specific 21

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The Politics of Fair Trade

definition that highlights the standard economic reasons to oppose trade:  protectionism is the support for limits on trade either to protect your own economic situation or to protect the national economy. Wanting to limit imports that compete with the industry you work in would count as protectionism. So, too, would wanting to limit imports out of fear that they would increase unemployment in the country, thus hurting the national economy. I  also include opposing trade for fear that competition would force the lowering of domestic labor and environmental standards, which could hurt your employment experience or that of others in the country. The book’s definition of “free trade” is more conventional. Free trade is support for the reduction of barriers to trade with the ultimate goal of the complete removal of these barriers, be they tariffs, embargoes, quotas, trade-​restricting regulations, or the like. An ideal world to a free trader would include no government restrictions on what can be traded (or with whom) and no government policies providing preferences to domestic products. Even this conventional definition, however, contains oversimplifications. No one would suggest that supporting a ban on the trade of human slaves prevents one from being a free trader. In fact, the World Trade Organization even permits countries to ban imports made with slave labor, and this is not viewed as a protectionist element of the WTO. Bans or restrictions on trade in certain dangerous materials, such as nuclear weapons or narcotics, are also viewed as not violating the principles of free trade. Thus, even the most doctrinaire free trader accepts certain moral or strategic limits on trade. However, putting these specific and exceptional limits aside, a free trader supports the elimination of as many barriers to trade as possible. My definition of free trade should not be controversial. Nor, really, should my definition of protectionism except that it may be viewed as too narrow by excluding fair trade. My definition of fair trade and my specific exclusion of fair trade from protectionism are controversial, so allow me to justify them. Both fair trade and protectionism involve desiring limits to trade. What distinguishes the two are their motivations. If trade is with high-​income countries that have good labor and environmental standards, then fair traders should not oppose it, though protectionists should. If trade is with a low-​standard

What Is Fair Trade?

23

country that does not export products that compete with domestic products, then protectionists should not oppose it, though fair traders should. While both fair traders and protectionists might answer the question “Do you support limits to trade?” the same way, their different motivations would lead them to different answers to more specific questions. Because trade policy debates are only rarely about trade in general and are more often about trade with certain countries or trade in specific products, these differences have the potential to be politically meaningful. Others may criticize this definition of fair trade because it is too broad, including both consumer choices and policy goals. Fair trade is most closely associated with labeling, and most famously with Starbucks fair trade coffee. Fair trade labels certify that a product is produced under certain ethical conditions, such as good working conditions, sustainable production techniques, profit-​sharing with employees, and the like. Third-​party organizations investigate the production of goods that companies wish to attach the label to, thus providing consumers with unbiased information about whether the products they wish to buy meet these standards. Fair trade labels are most commonly seen on agricultural products and food and beverage products as well as handcrafted items, but they recently have expanded into other manufactured products such as clothing and furniture. Although this consumer-​based labeling element of fair trade is important, this book contends that it is only part of the broader concept of fair trade. Even the groups involved in the labeling process seem to believe that labels are only part of the story. For instance, FINE, an umbrella group formed by four major international fair trade organizations, defines fair trade as a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers—​ especially in the South. Fair trade organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.

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The Politics of Fair Trade

In this definition, fair trade is about equity in international trade, and though FINE suggests that, organizationally, this equitable system will be achieved through consumer-​driven action, the goal of this action is to change “the rules and practice” of international trade, suggesting that policy change (in other words, “rules” changes) might be a goal of fair trade organizations (World Fair Trade Organization 2009, 6). We can see a similar dynamic in the related, high-​profile area of corporate social responsibility (CSR), which is typically viewed as involving private actions but can also be linked to public policies. The World Bank defines CSR as the “commitment of businesses to behave ethically and to contribute to sustainable economic development.” This commitment usually takes the form of stronger environmental protections and labor standards than required by law and is usually defined as being voluntary.1 Sometimes this is accomplished through the creation of voluntary international standards that businesses sign on to and certify their compliance with.2 Thus, like fair trade, CSR is typically associated with voluntary, nongovernmental behavior that often involves international cooperation. The CSR movement, though, can also manifest itself in public policy. Perhaps most prominently, the UN’s Human Rights Commission examined the role of multinational corporations in the protection of human rights starting in 2005. Secretary-​General Kofi Annan appointed a special representative to lead the investigation, naming to the position John Gerard Ruggie, a professor of international affairs at Harvard University’s Kennedy School of Government and the originator of the concept of embedded liberalism, which will play a crucial role in the story of fair trade, as I  will discuss later. Ruggie’s task initially was simply to investigate what human rights norms applied to businesses. His appointment had come after the failure in the 1990s of an attempt to create a binding set of rules that “would have imposed on companies . . . the same human rights duties that states have accepted for themselves” (Ruggie 2013). States and companies both balked at the idea of legally binding rules for corporations, but human rights groups believed that any agreement that was not binding would be useless. Ruggie managed to negotiate a middle course, creating a set of Guiding Principles that

What Is Fair Trade?

25

both multinational corporations and human rights groups accepted. He summarized these principles as follows:  “States must protect; companies must respect; and those who are harmed must have redress” (Ruggie 2013). Essentially, the Guiding Principles obligated states to protect individuals from human rights abuses committed by corporations within their borders or under their jurisdiction. Corporations agreed that they had an obligation to respect these rights, and if corporations did violate them, those harmed could sue the corporations or otherwise receive justice. In sum, the UN created a framework intended to institutionalize CSR and provide it with both normative and legal teeth through a change in international law (albeit soft law rather than binding hard law). Fair trade also includes demands for government policy change. For instance, Global Exchange, a prominent progressive advocacy group and leading critic of the WTO, promotes fair trade as an alternative to neoliberal globalization and runs a “Fair Trade Store.” But it also advocates opposition to additional free trade agreements and opposition to continuing the WTO, both public policy positions.3 Lori Wallach, a leading activist against globalization who played a key role in the anti-​WTO Seattle protests in 1999, has also pushed for policy responses to fair trade issues. Tucker and Wallach (2009) argue that fair traders oppose extension of fast-​track authority, and Wallach and Woodall (2004) argue that the WTO should be reformed to make it more hospitable to environmental and labor concerns, or else the United States should withdraw from the WTO. Among the reforms suggested by Wallach and others are the creation of environmental or social dumping provisions that would enable countries to raise tariffs on trading partners with low standards. Finally, there have been calls for domestic legislation to ban or limit imports of products made with poor standards, including the successful implementation in the United States of the Trade and Development Act of 2000, which included requirements that trade partners adhere to international standards for child labor. Each of these public policy proposals is ostensibly designed to improve standards abroad or, at least, limit domestic complicity with the poor standards. On the other hand, critics of these policies, such as the economists discussed

26

The Politics of Fair Trade

later, often argue that the policies will be ineffective at improving standards or that the real motives of the policies’ supporters are to protect domestic jobs. And, as the example of Bangladesh in ­chapter 1 demonstrates, the United States has already implemented some fair trade policies. Given that the products the United States imports from Bangladesh through the GSP do not compete directly with many domestic products, this is hardly about protecting American jobs. Nor is it an isolated case of fair trade concerns entering into government policy. Labor and environmental standards are often included in trade agreements, although these parts of the agreement are often weak or only weakly enforced. In the United States, for instance, President Bill Clinton negotiated side agreements to the North American Free Trade Agreement (NAFTA) on the environment and on labor standards to ensure its passage in a Democratic Congress. These agreements, though, only obligate member states to enforce their own domestic environmental and labor laws. On the other hand, the European Union frequently includes human rights protections in its trade agreements, including certain labor rights provisions such as the right to collective bargaining, that require the EU’s developing trade partners to raise their standards. As Emilie Hafner-​Burton (2009) shows, these agreements actually seem to be effective in raising human rights standards in the EU’s trading partners. So, fair trade not only can include policy change but also can succeed in achieving its goals. Support for labeling products that meet high standards (and the willingness to pay extra for these products), and support for policies that limit imports of products that fail to meet these standards are certainly different. Though many activists support both, there is no necessary logical connection between the two, and a person could support one without supporting the other. This book defines fair trade as encompassing both by arguing that the same underlying concerns motivate both—​concern for the effects of trade on labor and environmental standards abroad—​so there should be significant overlap between supports of each. This is an empirically testable assertion, and the survey data used in c­hapter  4 provide the opportunity to do so by including questions that ask respondents about both policy and labeling opinions.

What Is Fair Trade?

27

A Brief History of Fair Trade and How Fair Traders View Themselves Though the definition of fair trade provided in the previous section is broadly similar to conventional understandings of the fair trade movement, the current movement is not the first time the term has been used, either by activists or by academics. In its broadest usage, fair trade means that trade is conducted where both sides play by the same rules. In its earliest usages, this meant that if one country increased its imports, then the trading partner should as well. It would be unfair to allow imports if the other country did not reciprocate. This usage dates back at least to nineteenth-​century Britain, where the Fair Trade League was formed in 1881 to lobby against new free trade treaties with other countries (Howe 1997). Although members of the league did not always state outright that Britain should raise tariffs if other countries did not allow British imports, opponents of the league often challenged them on this topic. For instance, Henry George Grey, the Third Earl Grey (son of the Earl Grey, of tea fame), a Member of Parliament and a secretary of state for war and the colonies in the early to mid-​nineteenth century, wrote about the rising usage of fair trade in the 1890s. He argued that “there ought to be no concealment, and the advocates of ‘Fair Trade’ . . . are bound to state distinctly whether they do, or do not, mean that this diplomacy should be supported by adopting what has been called a ‘retaliatory’ policy towards nations that reject our demands for a freer admission of British produce” (Grey 1892, 56). In other words, if the Fair Trade League was advocating for protection, they should just admit it. This usage of the term continued throughout the twentieth century. Gawande and Hansen (1999), for instance, examine whether the threat or use of retaliatory tariffs can lower levels of protection in other countries, labeling this process the “pursuit of ‘Free and Fair’ Trade.” The term “fair trade” also evolved over the century into complaints not necessarily that a country prohibited trade or had high tariffs but that, despite agreeing to lower tariffs through the General Agreement on Tariffs and Trade (GATT), a country was using subsidies and regulations to continue to protect its industries. Goldstein (1986) argues that post–​ World War II US trade policy was “a hybrid of ideas defending both free

28

The Politics of Fair Trade

and fair trade” (161) and pointing to such elements of US policy as anti-​ dumping and countervailing duties as the fair trade elements. These duties are taxes that the WTO allows counties to place on imports from countries engaged in such “unfair” practices as selling goods below cost to drive out competition (dumping) and subsidizing exports. Nollen and Quinn (1994) offer a typology of four different trade policies that specifically includes a fair trade category. In keeping with the traditional definition of the term, they state that “the objective of fair trade policy is to combat unfair trading practices by other countries in order to restore outcomes that would prevail under free(er) trade” (495). Typically, though, economists have followed in the footsteps of Earl Grey and labeled this traditional type of fair trade nothing more than protectionism. How did this definition of fair trade that is more than a century old turn into our current understanding of the term? The traditional definition is not completely obsolete, and the two definitions are not as far apart as they might seem, especially if one includes a broader view of the current usage of the term that includes concern about the effect of standards abroad on domestic standards. Goldstein’s and Nollen and Quinn’s definitions, which are similar to many others used in the 1980s and 1990s, focused in part on the domestic policies in a trading partner’s country. For instance, fair trade concerns were often raised in the United States starting in the 1980s about trade with Japan, and similar issues are raised about China today. This usage of the term “fair trade” continues into the present. Lee Iacocca, the former CEO of Chrysler, claimed in a 2007 article titled “Free Trade Has to Be Fair Trade” that the reason the United States had a massive trade deficit with Japan was because the “deck was stacked against us,” accusing Japan of keeping its own market closed, manipulating currency values, and other “predatory” trade practices and accusing China in the twenty-​first century of stealing US patents, manipulating currency, and engaging in corruption that hurt US sales in the country. Donald Trump, during the 2016 presidential campaign, frequently used the term “fair trade,” such as in the following comments about China:  “For free trade to bring prosperity to America, it must also be fair trade. Our goal is not protectionism but accountability. America fully opened its markets to China but China has not reciprocated. Its Great Wall of Protectionism

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uses unlawful tariff and non-​tariff barriers to keep American companies out of China and to tilt the playing field in their favor.”4 Trump emphatically was not expressing concern for the conditions faced by foreign workers. Rather, he was complaining that foreign trade barriers without equivalent domestic trade barriers or lower foreign regulations were unfair to American workers. Taken together, by the end of the twentieth century, the traditional view of fair trade was often, though not exclusively, focused on how domestic regulations could privilege domestic over foreign producers even if the trade policies themselves were relatively free. Among these domestic regulations are labor and environmental standards in developing countries. As a result, in most cases the only real difference between the traditional and current definitions of fair trade is based on the motives—​either self-​proclaimed or assumed—​of the fair traders. Under the traditional definition, the goal of fair trade was to change trading practices in foreign countries for the benefit of domestic producers. Under the current definition, the goal is to improve the lives of those abroad (or, possibly, to protect domestic standards). It is in that parenthetical that we see the clearest overlap between the two usages: raising standards abroad both improves the lives of foreign workers and protects domestic workers from “unfair” competition and the threat of seeing their own working conditions decline. It is also in that parenthetical that the critics of the current fair trade movement find the motives of fair traders, as we will see in the next section. However, an examination of the history of the current fair trade movement, as well as an examination of what fair traders themselves say, demonstrates quite clearly that it is problematic to assume that the current and older fair trade movements are the same, since they have different goals, motives, and tactics. Though one can trace its roots to the immediate aftermath of World War II,5 the current fair trade movement began in 1988 in the Netherlands with the creation of the Max Havelaar label by the aid agency Solidaridad. The label was named after the eponymous character in the nineteenth-​century Dutch novel Max Havelaar: Or the Coffee Auctions of the Dutch Trading Company, by Multatuli, the pseudonym of a former functionary in the Dutch colonies in Indonesia. The novel chronicles the conditions in Indonesia, framed around the efforts of Max Havelaar, a high-​level official in one of the provinces,

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to fight corruption. The book can be thought of as an early, Dutch version of Upton Sinclair’s novel The Jungle, as Multatuli was consciously writing about the horrible conditions in Indonesia to shock the conscience of the Dutch and change colonial policy. Max Havelaar describes a system in which villages had to produce a certain amount of export crops (mostly coffee) or the villagers had to work for free on government plantations. In addition, officials were partly paid by commission for the taxes they raised. In combination, this meant, first, that less food was grown than was needed so that there was widespread starvation. Second, villagers were tied to their village and could be arrested and beaten for leaving it without permission. Third, colonial and native leaders could legally force villagers to work for them for free even before adding in any abuse of this authority. Finally, officials were personally incentivized to expropriate as much as possible from the population. The Netherlands became quite wealthy as a result of these policies, but only at the expense of the Indonesians. It seems that Max Havelaar had its intended effect, as the Netherlands changed its colonial policy to what was known as the Ethical Policy, enshrining what the queen had announced was the ethical obligation to the inhabitants of its colonies. Among other things, the Ethical Policy included increased education for the local population. The Indonesian novelist Pramoedya Ananta Toer called Max Havelaar “the book that killed colonialism.”6 He argued that those Indonesians educated by the Dutch were the leaders of the successful revolution against the Dutch in the late 1940s and that it was this revolution that then inspired colonial revolutions in Africa and elsewhere. Even if this is too grand a claim for the impact of the book, it is clear that the Dutch have a tradition of examining the effects of the coffee trade on the workers who are producing that coffee. It should not be surprising, then, that the fair trade movement began in Holland and began with coffee. The Max Havelaar label signaled to Dutch consumers that the coffee bearing that label was produced under conditions where the workers were paid a fair price and worked under certain standards. Within a year, 3 percent of coffee sold in the Netherlands had the Max Havelaar label (World Fair Trade Organization 2004). This quick, if limited, success inspired fair trade labeling to spread throughout, first, Europe and then to the rest of the world. The Max Havelaar

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Foundation itself is now part of a larger umbrella group, the Fairtrade Labeling Organization International (FLO), which includes more than two dozen national labeling groups. FLO is just one of a number of organizations dedicated to expanding the sale of fair trade products, although it might be the most important.7 It is the primary group that sets the standards a product must meet to be labeled fair trade. These standards include that buyers pay a high enough price to ensure decent profits and wages for the workers, as well as money to invest in social and economic development; industrial democracy whereby workers and small landholders have an equal say in management decisions and the right to unionize; safe working conditions; environmentally sustainable production techniques; and a ban on forced and child labor. In 2004, FLO split into an organization focused on developing these standards, known as FLO International, and a separate organization that inspects and certifies products, known as FLO-​CERT, that is accredited by the International Organization for Standardization (ISO) as an independent certification body, the first such body focusing on social issues. Fair trade labeling has developed so much that there was even a nasty division among the organizations advocating for labeling.8 In 2010, the American arm of FLO announced it was changing its name from TransFair USA to Fair Trade USA, causing significant anger in the US fair trade community, both because the wider community was not consulted about the change and because some believed this signaled an attempt by one organization to brand itself as the sole arbiter of fair trade in America. This concern was heightened when, a year later, Fair Trade USA announced it was leaving FLO International and would use its own certification instead. Paul Rice, the CEO of Fair Trade USA, argued that the reason for the split was that FLO was too focused on a single mode of production—​“small farmers organized in collectives” (Rice 2012)—​but that different types of products were made in different ways, which even FLO recognized by giving certification to large banana and tea farmers though not large coffee farmers. Rice argued that Fair Trade USA split from FLO to apply the same standards across the board, allowing large coffee farmers to become fair trade certified, and thus expanding the number of farmworkers laboring under fair trade conditions and increasing the chances to “make a meaningful dent

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in global poverty.” Critics of the split, on the other hand, were concerned that this would water down the standards that must be met to become fair trade. They accused Fair Trade USA of going corporate by supporting companies such as Starbucks that were attempting to certify more of their products as fair trade without raising their standards (K. R.  Brown 2013, 14). Thus, the fair trade labeling movement has splintered along a more corporate-​oriented view of fair trade that seeks to bring as much production under the fair trade umbrella as possible and a more hardcore view that wants to preserve higher standards even if fewer workers will be covered by these standards. Product labeling has been at the heart of the fair trade movement from the beginning, but it is a mistake to assume that fair trade is only about labeling. Indeed, FLO has taken great pains to distinguish the label from the movement, referring to their own label with one word—​FairTrade—​and the movement with two—​fair trade. The idea of a trading system that is concerned with labor and environmental standards and potential policies to create this new system predate the fair trade label, and advocates for both quickly made common cause. Sometimes, this more policy-​oriented vision is referred to as “ethical trading” to distinguish it from a conception of fair trade that focuses only on labeling, but I maintain this is an error, as my definition of fair trade provided earlier in this chapter makes clear. Product labeling and policy changes are two sides of one coin: concern about the effects of trade on workers and the environment, and a desire to ameliorate these effects. This can be seen by looking briefly at the history of “ethical trading” and noting how it mirrors, and often dovetails into, the history of fair trade labeling. Perhaps the earliest examples of widespread opposition to trade due to labor and the environment were Canadian protests over the Canada-​ US Free Trade Agreement (CUSFTA).9 Labor unions, environmental groups, church groups, and many other groups within what was called the “popular sector” mobilized in Canada to oppose a trade agreement with the United States.10 The protests culminated in a National Day of Action and propelled the CUSFTA issue into the 1988 parliamentary election debates. The popular sector’s concerns were manifold, including traditional protectionist worries about losing jobs to the United States, as well as skepticism about tying the economy or even culture of

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Canada too closely to the United States. In addition, though, some issues related to the modern fair trade movement arose, including worries that the comparatively lower labor and environmental standards in the United States would force Canada to lower its own standards or would lead to job loss due to the unfair competition. Steven Shrybman of the Canadian Environmental Law Association even described CUSFTA as an environmental law and not just a trade law and opposed it because of its deregulatory aspects (Aaronson 2001, 112). Although the protests were unsuccessful in stopping CUSFTA, they served as a template for the larger and broader protests over NAFTA in both Canada and the United States. NAFTA expanded CUSFTA to include Mexico, which had even lower labor and environmental standards than the United States. In the United States, protesters included the United Auto Workers, whose members probably protested due to protectionist concerns but also couched their complaints in terms of labor standards in Mexico; human rights groups such as Human Rights Watch, which worried that NAFTA would enable Mexican president Carlos Salinas de Gortari to continue human rights abuses such as political arrests and disappearances; and environmental groups such as the Sierra Club. Even Ralph Nader got involved. His consumer advocacy might have made him supportive of trade, but he was worried that it would increase corporate power at the expense of workers, the environment, and consumers.11 Though the protests against NAFTA proved as unsuccessful as those against CUSFTA, they did slow down passage and led President Clinton to negotiate side agreements on labor and the environment designed to improve standards in Mexico. Similar protests against the Free Trade Area of the Americas in Miami in 2003 and against the WTO in Seattle in 1999 may even have been partially responsible for the failure of those negotiations. Although framed as being about labor and environmental concerns, these protests could easily have been about protecting domestic jobs. Oftentimes, the protesters themselves (or organizations representing themselves as leading the protesters) used both fair trade and protectionist rhetoric simultaneously. Because no data on the composition of the protesters exist, it is impossible at this late date to determine the mix of sincere fair traders to protectionists in disguise to overt protectionists within the protests. But if we find in the rest of the book that fair trade

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supporters today are often sincere, it is reasonable to infer that many of these protesters were as well. There have also been policy-​related elements of fair trade that did not center on public protest. For instance, the WTO has frequently debated the inclusion of a “social clause,” which would allow member states to restrict imports from countries that do not meet minimum labor standards. During the ministerial meetings of the Uruguay Round in the 1990s, there was actually widespread support for such a clause among the rich member states, but it was ultimately scuttled by opposition of the poorer member states, which feared losing their competitive advantage due to cheap labor. The idea of a social clause continues to be brought up during WTO negotiations, and it continues to be defeated largely by the states that would be forced to raise their standards as a result (Chaulia 2002). The policy debate over the social clause raises the same analytical issues as the public protests over trade policy: inclusion of such a clause could be because of sincere concern over labor standards, or it could be a way to protect richer countries from cheap imports from poorer countries. Indeed, as will be discussed in the next section, it was the debate over the social clause that first led economists to argue that fair trade was protectionism in disguise.12 Members of the fair trade movement largely describe themselves in ways that resemble the definition used in this book, though often with loftier rhetoric and often with an exclusive focus on labeling and consumer behavior. For instance, Paul Rice, CEO of Fair Trade USA, stated that those who believe in fair trade are united by “a common mission to alleviate poverty through trade” (Rice, 2012). Equal Exchange states that “by making the choice to buy fairly traded products, you help provide health care, education and technical trainings for farmers, workers, and artisans around the world . . . you join a movement to reclaim the food system—​to make it better for farmers, consumers and the earth” (http://​equalexchange.coop/​fair-​trade). Keith Brown, a sociologist at St. Joseph’s University in Philadelphia, interviewed more than 100 people who produce, sell, or consume fair trade products, focusing mostly on fair trade consumers in Philadelphia. He categorizes fair trade consumers as falling into one of three groups: “promoters,” who are avid fair traders who “organize all their purchases around ‘social responsibility’ ”; “conscientious consumers,”

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who make up the bulk of fair trader consumers and who “like to buy fair trade . . . products but are not committed to organizing all of their purchasing decisions” around fair trade; and “purchasers,” who buy fair trade products not because they are fair trade but just because they prefer the product on aesthetic grounds (K. R. Brown 2013, 25). According to Brown, most of the promoters and conscientious consumers are educated members of the upper middle class. Promoters “view themselves as part of a movement” and “believe that their decisions in the marketplace help to alleviate global inequalities” (25). Conscientious consumers, on the other hand, “do not see themselves as part of a larger movement and do not partake in the rituals or consciousness-​building activities that serve to foster a fair trade identity” (26). They are concerned about the effect of their purchasing decisions, and like to buy fair trade or organic products, but some also occasionally (or even frequently) shop at Walmart and buy cheaper, non–​fair trade products even when fair trade alternatives exist. However, they tend to be aware of the choices they make and even feel guilty about them. The perspective of many of the fair traders is, thus, that they are champions for labor, the environment, and human rights. For them, fair trade is not about domestic jobs, except perhaps as a secondary concern. However, this might merely mean that their disguise is a good one, so we should not simply take their claims at face value. How Economists View Fair Trade Despite the claims of the fair traders themselves, many policymakers, political advocates, and academics have argued that fair traders are nothing more than the new incarnation of traditional protectionists. This view is particularly common among trade economists. Dani Rodrik, a prominent Harvard economist, probably best summarizes this conventional economic wisdom: “A common view is that the complaints of nongovernmental organizations and labor advocates represent nothing but old protectionist wine in new bottles” (1997, 3). T.  N. Srinivisan of Yale University, though, probably makes this case most baldly: “The demand for linkage between trading rights and observance of standards with respect to environment or labor would seem to arise largely from protectionist motives” (Srinivasan 1995, quoted in Krueger 1996, 4).

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Paul Krugman, a Princeton University Nobel laureate in economics who now also writes for the New York Times, makes a similar argument, stating that from an economic view, comparative advantage created by differences in labor or environmental standards are the same as any other type of comparative advantage so that “it does not matter . . . whether other countries have different relative prices because they have different resources, different technologies, different tastes, different labor laws, or different environmental standards. All that matters is that they be different—​then we can gain from trading with them” (1997, 115). Thus, if people in an advanced economy found trading airplanes to developing economies for clothing to be beneficial, it should not matter if they later found out that the clothing was produced in sweatshops or created environmental hazards: “Perhaps you want to impose your standards on these matters, but this has nothing to do with trade per se—​and there are worse things in the world than low wages and local pollution to excite our moral indignation” (115). In Krugman’s view, there is neither a moral nor a national economic case to be made for harmonization: all that is left, it seems, is a selfish economic case, that is, a call for protection. Other economists take a somewhat more temperate view, suggesting only that protectionism is one of several possible motives and that a sincere desire to protect the environment and labor rights may be another motive. For instance, Jagdish Bhagwati (1995), a leading academic on trade in general and harmonization of standards in particular, summarizes what he sees as the possible objections to differences between national labor and environmental standards. One of these reasons is that “protectionists see great value in invoking ‘unfairness’ of trade as an argument for getting protection: it is likely to be more successful than simply claiming that you cannot hack it and therefore need protection” (Bhagwati 1995, 746). Despite granting the possible sincere motives, Bhagwati fears that if the WTO legitimizes what was referred to as eco-​dumping duties—​ which would enable countries to put tariffs on imports to counteract any price advantage they may have accrued due to lower environmental standards—​ this would “facilitate protectionism without doubt” (749) because protectionists would abuse these duties as they do regular anti-​dumping duties.

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Bhagwati does grant that other, more sincere reasons to support fair trade exist. First, people might be concerned with a race to the bottom if lower standards abroad can force countries to lower their own domestic standards, though Bhagwati discounts the existence of such a race. Second, people might have moral concerns: they are opposed to labor and environmental abuses regardless of who suffers from them. Third, people might have moral concerns about the inherent unfairness of competition when one side has a distinct, regulatory advantage over the other. Although he acknowledges the simultaneous existence of these economic, political, and moral concerns, Bhagwati does not provide any suggestions about which one will predominate under which circumstances, and he seems to dismiss even the nonprotectionist reasons out of hand. The most comprehensive economic evaluation of fair trade is the edited volume by Bhagwati and Hudec (1996), although this book focuses largely on economic, rather than moral, justifications for and implications of fair trade. Thus, the essays in the volume edited by Bhagwati and Hudec focus mostly on demonstrating that differences in standards do not have any deleterious effects on efficiency—​meaning, from an economic perspectives, these differences are the same as any other difference that generates comparative advantage. As a result, they do not lead to a race to the bottom—​thus, advocates of domestic standards need not worry that lower foreign standards will prevent environmentalists and labor advocates from advancing standards at home. The authors largely ignore arguments grounded on claims based on the justice of competition between unequal industries. They also ignore moral arguments that exploitation of workers and destruction of the environment are wrong regardless of whether the abuses occur domestically or internationally. In other words, the economists whose essays appear in that volume do not engage fair traders directly on many of the points fair traders are arguing. This would be valid if the fair traders’ arguments are a smokescreen for their true motivations of protection or preventing a race to the bottom, but if their motivations are otherwise, they are not likely to be persuaded by the essays in the volume edited by Bhagwati and Hudec.13 Even when acknowledging the possibility of moral concerns of fair traders, economists have often been dismissive of them. Bhagwati

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and Srinivasan liken those concerns to imperialism, namely, “the old, morality-​driven desire to spread the values to which one subscribes” (1996, 180). In impugning the motives of fair traders, Bhagwati and Srinivasan go so far as to suggest that the real reason for the calls for harmonization of labor and environmental standards is a nefarious plot against developing countries such that they “predict we will also witness increasing attempts at encouraging population control in these countries” (165) to limit economic competition from them. Bhagwati and Srinivasan may be right that environmental and labor concerns are culturally specific and that forcing other countries to adopt your standards may be more ethically challenged than the ethical violations you are charging others with pursuing.14 However, supporters of free trade are unlikely to convince moral fair traders to abandon their demands by pointing out the efficiency gains of free trade or by dismissing their concerns out of hand as self-​serving. The approach in the volume edited by Bhagwati and Hudec is also exemplified by the contributions of Drusilla Brown, Deardorff, and Stern (1996) discussing the contemporary push for the creation of internationally harmonized labor standards. These authors state that “the pursuit of international labor standards has taken on a more protectionist tone. In some cases the protectionist intent is barely disguised. In fact, it is quite commonly feared that countries with below-​average labor standards are gaining an unfair advantage in trade” (D. K. Brown, Deardorff, and Stern 1996, 266). The rest of their essay examines the economic theory of labor standards, concluding that harmonizing these standards would reduce economic efficiency in both high-​standard and low-​standard countries. This dim view of fair trade is not confined to economists. Drezner (2006), in a review of policy choices available to the US president on trade issues, uses the label “fair trade” to denote the alternative policy orientation to a free trade approach. He consciously conflates many aspects of trade policy, only some of which cover what this book refers to as fair trade. For instance, in addition to labor and environmental standards, Drezner also includes anti-​dumping measures and concerns about the distributional consequences of trade. While Drezner occasionally seems to suggest that any opposition to free trade can be carried under the “fair trade” rubric,15 and thus “fair traders” include

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protectionists, at other times he suggests that support for fair trade, including concerns for low labor and environmental standards abroad, only carry the danger of being subverted by protectionists rather than directly being protectionist. For instance, he states that fair trade “carries the danger of mutating into blanket protectionism” and that “because almost any trade barrier can be advocated on grounds of fairness to some group . . . special interest can easily hijack this policy orientation” (Drezner 2006, 3–​4). Fair trade is, therefore, either protectionism in disguise or the possible start of a slippery slope toward protection. Not all academics are so skeptical of the motives of fair traders. For instance, Rodrik, though probably best summarizing the conventional wisdom against fair trade as quoted earlier, by no means shares this view. Instead, he argues that we need to take into account individual concerns about the “procedural fairness” of different labor and environmental standards, stating, “By doing so we can start to make sense of people’s uneasiness about the consequences of international economic integration and avoid the trap of automatically branding all concerned groups as self-​interested protectionists” (Rodrik 1997, 5–​6). Although he acknowledges there may be legitimate cases in which trade is “unfair,” Rodrik is also concerned that organized interests might abuse fairness claims. In other words, not all the new fair trade bottles contain old protectionist wine, but some of them do. Rather than throwing out all the bottles, as others seem to propose, Rodrik is interested in creating ways to distinguish the bottles from each other and throwing out only the protectionist ones. Michael Hiscox (2007) similarly argues that not all fair traders are opposed to globalization as a whole, and it is therefore incorrect to conflate fair trade and protectionism. One might notice from a quick perusal of the citations in the previous few pages that they are largely confined to the mid-​1990s, which was when fair trade labeling, as well as a desire to add social and environmental clauses to the WTO, first came to widespread attention. Since then, little has been written by economists about what fair trade is and who supports it. Bhagwati (2001, 2004), Andre Brown and Stern (2008) and Drusilla Brown, Deardorff, and Stern (2011) demonstrate that most of the earlier proponents of the protectionism in disguise thesis still hold to it. Drusilla Brown (2001) does soften her stand, though, by allowing that some fair traders may be sincere, though

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implying that this should be a small minority of them. More common, though, are economic examinations of the effects of fair trade policies and labeling schemes which suggest that even if the motives were sincere, the effects are protectionist, as argued by Edmonds and Pavenik (2005). At best, then, the traditional economic view argues that fair traders are misguided. The earlier work of Bhagwati and others established a consensus where fair trade is assumed to be protectionism and is thus almost entirely ignored in analyses of trade policy preferences. Somewhat more recent scholarship on fair trade has occurred in political science. The previously discussed works by Drezner (2006) and Hiscox (2007) show that recent political science works on the topic have been both critical and supportive of fair trade. Kim (2012) represents another political scientist arguing that support for fair trade is at least partially sincere. He believes that “fair trade FTAs” actually lead to improved labor rights as developing countries will raise their standards before ratifying the agreements so as to be more competitive in developed markets. Hearn (2013) similarly considers that support for fair trade can be sincere and provides a psychological theory for why some individuals may be fair traders. Aaronson examines the history of popular opposition to trade and argues that “many of these protesters do not appear to have a direct economic interest to protect, but they do have a direct political interest to protect” (2001, 9, emphasis in original), namely, protecting domestic political norms and broader values, including human rights and environmental protection. Aaronson argues that opposition to trade has always contained both economic protectionist and “social critics,” the latter of which includes sincere fair traders but extends beyond them. The economic protectionist opposition usually has dominated the debate, in part because pro-​trade advocates have privileged that critique. Aaronson argues this occurred in the NAFTA debate in 1993, in which proponents of the agreement “continued to characterize all NAFTA opponents as individuals fearful of change and defeatists. In this view, the social critics of NAFTA had become protectionists” (140). Trade proponents have done this because they had the rhetorical and policy tools to fight protectionism but did not have such tools to fight social criticisms as well. That social critics allied themselves with protectionists in the fight against NAFTA, Aaronson considers, made it difficult for them to counter the charge

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that they were just protectionists. Similar dynamics occurred in the fight over the Uruguay Round of the GATT in the early 1990s and the Millenial Round of the WTO in Seattle in 1999. Aaronson thus concludes that not all opponents to trade are protectionists in disguise, though she focuses more attention on opponents who wish to maintain labor and environmental standards domestically rather than on those this books defines as fair traders, that is, those who wish to improve standards abroad. Another more recent approach to fair trade support has emerged, among both political scientists and economists, that one could argue occupies a middle ground between the traditional “protectionism in disguise” views and my own “sincere fair trader” view. This view suggests that, while there may be sincere fair traders in the general population, at the elite level, fair trade policy is only passed because interest groups and policymakers latch on to this language to mask their own protectionist intent. Most prominent in this approach is Hafner-​Burton (2009), who examines the increased inclusion of human rights language in preferential trade agreements (PTAs) in both the United States and the EU. She illustrates her theory with an extended metaphor from the Prohibition era that she refers to as “Baptists and Bootleggers.” According to Hafner-​Burton, the enabling legislation for Prohibition passed in the United States because Baptists, who were morally opposed to alcohol, found common cause with Bootleggers, who realized their profits would increase if the legal sale of alcohol were eliminated. In the fair trade context, sincere fair traders, morally opposed to human rights abuses, play the role of the Baptists, while industries that wish to protect themselves from foreign competition play the role of the Bootleggers. Hafner-​Burton further argues that human rights have been included in PTAs because Bootleggers have successfully used the existence of Baptists in the general population to make their appeals to policymakers more successful and because policymakers themselves have only latched on to this language to achieve their own goals, which include expanding free trade without offending powerful (Bootlegger) interests and expanding broader foreign policy goals. If Hafner-​Burton is correct, then while we should expect to find a large number of fair traders in public opinion polls, we should not find similar sincere behavior among policymakers and interest groups. The argument of this

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book is that, while such a marriage between Baptists and Bootleggers is possible and represents an extreme danger for the future of free trade, there is also significant sincere support for fair trade among policymakers and labor unions.16 While these accounts begin to challenge the status quo view, the dominant approach in both economics and political science remains to treat all opposition to trade as protectionism, either making this argument explicit or, more usually, implicitly assuming that trade policy preferences are unidimensional, ranging from complete support for free trade to complete support for protection. This book builds on the recent works challenging the traditional view but also suggests that they do not go far enough. The standard trade policy analyses nearly all contain a fundamental flaw that causes them to misperceive fair trade: they all assume that trade policy preferences are unidimensional. On the other hand, I  argue in this book that preferences are actually multidimensional, by which I  mean that preferences are more complicated than just being determined by the economic dimension of trade. While it is true that people who are hurt by trade are more likely to oppose it, it is also true that other factors unrelated to the economic effects of trade influence preferences, as the political science literature, such as works by Lu, Scheve, and Slaughter (2012) and Mansfield and Mutz (2009), is beginning to demonstrate. In other words, not all opposition to trade is protectionism:  one can oppose limits to trade intended to protect domestic jobs without also opposing any possible limit to trade. By expanding the analysis of trade preferences beyond just the economic effects and by recognizing that not all opposition to open trade is the same, this book greatly expands our knowledge of the determinants of trade policy preferences. Why Fair Trade Matters Whether fair traders are sincere or are protectionists in disguise is more than just a dry academic debate or semantic nitpicking. I contend that the answer to this question is very important for the future of trade policy in the United States, the EU, and other rich countries; for the lives of workers in developing countries; and for the global

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environment. Only if fair trade is sincere is it likely to have any impact. If fair trade is just a mask for protectionism, then we have little reason to believe that trade policy will change or that consumer behavior will have any meaningful influence on conditions in developing countries. This is because, though the debate between free traders and protectionists has lasted for centuries, the modern world has reached something of an equilibrium on the issue, even though recent political events suggest that this equilibrium may be more fragile than it used to be. The global economy, starting with developed countries after World War II and continuing with developing countries in later decades, has steadily moved toward freer and freer trade. The pace of this movement has changed over time, and there have been local, temporary reversals away from free trade, but the trend is remarkable for how long-​lasting and widespread it is. Each major GATT round, held roughly once a decade from the end of World War II until the WTO was created in 1995, led to a 25 to 35 percent reduction in average tariffs around the world. The average tariff rate in the United States dropped from about 10 percent during World War II to about 7 percent in 1960, 6 percent in 1970, 3 percent in 1980, and about 1 percent today, according to official statistics from the US International Trade Commission available at https://​dataweb.usitc.gov/​. Similar declines occurred throughout the developed world, and even developing countries, which typically have higher average tariffs, have seen those tariffs start to decline. Part of the reason for the success of free trade is the scholarly consensus that has emerged about the superiority of free trade over protection. Another part is that policymakers have learned how to manage protectionist opposition to trade, which allows them to continue moving toward free trade in the face of protectionist opposition. This ability to manage opposition flows out of the economic theories that have led to consensus on the superiority of free trade, so I will consider this consensus first. The economic consensus on free trade dates back at least to Adam Smith, whose book The Wealth of Nations was first published in 1776. He argued that free trade, rather than the dominant and heavily protectionist mercantilist system of that age, would lead to more wealth through the division of labor and allowing the famous “invisible hand”

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of free markets to reign. David Ricardo’s On the Principles of Political Economy and Taxation (1817) laid out the idea of comparative advantage, on which the modern case for free trade continues to rest. The theory of comparative advantage holds that even if a country is inferior to a trading partner in producing all goods, trade is still beneficial for both countries. The inferior country should specialize in the product it is least bad at—​in other words, the product that, relative to all other products that it is bad at, is the one the country is comparatively best at—​and trade it to the other for the product that that country is most good at. Ricardo’s canonical example involved trade between England and Portugal in wine and cloth. Portugal was assumed to be superior in both, but it was more superior in wine. Thus for every bolt of cloth Portugal produced, it would have to sacrifice the production of more wine than a similar shift to cloth would sacrifice in England. As a result, England should specialize in cloth and Portugal in wine, and both will benefit by trading one for the other. England’s cloth costs less wine than Portugal’s would, while Portugal’s wine costs less cloth than England’s would. So, England can get more wine by selling its cloth to Portugal and vice versa. From the theory of comparative advantage flows much of modern trade theory about who is helped and who is hurt by trade. The Heckscher-​Ohlin theorem states that countries will have a comparative advantage in products that intensively use the broad factors of production—​such as capital, labor, and land—​that a country had in relative abundance. Thus, countries with relatively abundant capital will specialize in, and export, goods that use capital intensively, such as high-​technology products and will import goods that use labor intensively, such as textiles. Building on this, the Stolper-​Samuelson theorem argues that any expansion of trade will benefit those who hold the abundant factor of production and hurt those who hold the scare factor, while contractions do the opposite. As a result, in developed countries, where capital and skilled labor are abundant, trade will benefit business interests and high-​skilled workers (the upper and middle classes) and hurt low-​skilled workers (the lower class). The Ricardo-​Viner theorem builds on slightly different assumptions on the state of the economy. It assumes that factors are specific, meaning

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that one cannot simply switch what industry one works in or invests in. Thus, one’s trade preferences are based on the industry one is associated with rather than the factor one holds. People who work in or are invested in import-​competing industries will oppose trade because it will reduce employment and profits in that industry, while those in exporting industries will support trade because it will increase employment and profits. Thus, we see that even though economic theory holds that free trade is good for the country as a whole, it is not good for everyone in the country. The winners can compensate the losers for their losses and still come out ahead, but there is no automatic compensation mechanism inherent within free trade. So it is rational for many, perhaps even most, people to oppose free trade on purely economic grounds. So how can policymakers advance policy that is in the aggregate best interest of the country in the face of such opposition? Given that the world has moved toward freer trade at a fairly rapid pace since the end of World War II, this is more than just a theoretical question: How did leaders avoid a return to the protectionist policies of the Great Depression after the war ended and then again during the many economic downturns of the last seventy years, some of which rivaled, at least in some countries, the Great Depression? John Ruggie’s embedded liberalism thesis argues that policymakers were able to manage opposition to trade by embedding classically liberal policies such as free trade within a larger welfare state. 17 In other words, by actually compensating those who are harmed by trade, policymakers can reduce opposition to trade. As a result, if we are in a Stolper-​Samuelson world, corporations benefit from expanded trade while workers benefit from expanded unemployment insurance and job retraining opportunities. If Ruggie is right, then policymakers have the ability to buy off protectionist opponents to trade and enable trade to continue despite its costs. Recent evidence supports this argument. For instance, Ha and Tsebelis (2010) find that countries with more welfare spending are able, subsequently, to expand their trade. Much of my own previous research demonstrates this at the individual level. In Hays, Ehrlich, and Peinhardt (2005), we found that individuals who would receive more

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The Politics of Fair Trade

compensation if they lose their jobs are more likely to support trade. In Ehrlich and Hearn (2014), we found that knowledge of compensation programs increases support for trade among those who expect to be harmed by trade; and in Ehrlich (2010c), I found that those who believe trade has hurt them are more likely to support trade-​related compensation. Fair trade poses a potentially fundamental threat to this compromise of embedded liberalism, and it is from this threat that much of the policy relevance of this book’s arguments flows. The ability of embedded liberalism to reduce opposition to trade depends on that opposition being motivated by economic threats. If people oppose trade because of worries that increased trade will cost them their job, then knowing that they will be compensated if they do might mollify them. If their opposition is motivated by noneconomic concerns, then compensation won’t matter. If support for fair trade is protectionism in disguise, then compensation should still be effective in reducing opposition, and embedded liberalism should still be effective. If, on the other hand, fair trade preferences are sincere, then compensation will be ineffective: if people oppose trade because they worry about labor standards in the countries from which they buy their goods, then why should compensating them if they lose their jobs because of increased imports matter to them? In other words, if fair trade is sincere, then the most effective tool policymakers have to maintain support for trade will not work on fair traders. Can the post–​World War II free trade consensus survive if support for fair trade continues to grow? Beyond its potential threat to embedded liberalism, there are other real-​world reasons why it matters who supports fair trade. If fair trade is only a rhetorical cover for protectionism, then fair trade is unlikely to be particularly effective in improving labor and environmental standards abroad. Protectionists in disguise might support restrictions on trade from developing countries and might avoid buying imports from certain countries, but they are unlikely to actually support initiatives that improve conditions in those countries. Indeed, their incentive is to oppose some such programs because that might only make foreign goods more competitive.

What Is Fair Trade?

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Of course, the arguments of this book should also be of scholarly interest. If fair trade is sincere, this challenges most of our academic theories of trade preference formation, as well as theories and empirical work on compensation and embedded liberalism. How the theoretical perspective of this book relates to existing academic work on the topics at hand will be discussed more fully in the next chapter.

3

 

Free Trade, Fair Trade, and Protection: Who Wants What When?

Traditional theories of trade policy preferences are unable to predict many of the patterns discussed in ­chapter  1:  Why are both well-​educated liberals and blue-​collar unions leading the charge for penalties against Bangladesh? Why were members of Congress from districts and states with high income and education levels opposed to free trade agreements with developing countries like Chile but not with developed countries like Australia? Why are low-​skilled workers often opposed to labeling programs that might increase demand for domestic products made with their labor? Traditional theories would merely predict that high-​skilled workers and holders of capital (namely, the well-​off and well-​educated) would support free trade whereas low-​ skilled workers (namely, the less well-​off and less well-​educated) would support protection. These examples demonstrate, though, that trade policy preferences are more complicated than this simple dichotomy between free trade and protection and that the preferences of the general public, organized interests, and policymakers may be determined by more than just their producer interests (or the producer interests of those they represent). While newer academic work in political science has begun to acknowledge and explore the nonproducer determinants of trade policy preferences, this work still largely views preferences as a black-​ or-​white issue: either you support expanding trade (and are referred to as a free trader) or you support limiting trade (and are referred to as a 49

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protectionist). At most, the work will acknowledge that there may be gradations in support: some people might be very protectionist while others are only somewhat protectionist; some might be enthusiastic supporters of free trade while others are only limited supporters; some might even be neutral on the issue. With very rare exceptions, the academic study of trade policy preferences assumes that every interested party can be placed along this single dimension ranging from complete support for free trade to complete support for protection. Political discourse on the topic is often no more nuanced except by those who self-​ identify as falling outside of this simple framework. That such people exist may lead us to question the accuracy of having only a single preference dimension. A standard response from economists to this self-​identification as neither free trade nor protectionist is that the individual or group is really one of these two types and is either lying or mistaken in believing otherwise. A common refrain is that opponents of trade who claim not to be protectionist are really only “protectionists in disguise.” In other words, despite claims to the contrary, all opponents of increased trade are protectionists, and we need only a single dimension to categorize all trade policy preferences. Is this true, though? The central argument of this book is that this claim is not true: there are various reasons to oppose trade, and different types of individuals and groups are motivated by each of these reasons. Trade policy preferences are more complicated than is normally considered. Just because individuals do not want to raise barriers to trade to protect domestic jobs does not mean they support free trade. Perhaps they support barriers to trade for other reasons. And just because individuals oppose free trade does not mean that they are protectionists. Perhaps they oppose limits to trade for non-​protectionist reasons, too. We need more than one dimension if we want to correctly categorize trade policy preferences, and we need to correctly categorize trade policy preferences if we want to know what policies will be most popular and most beneficial. This chapter introduces a multidimensional theory of trade policy preferences, specifically positing that we need both the economic dimension typically discussed and also a fair trade dimension. Although other dimensions might also exist, this book focuses on only the fair

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trade dimension; the framework introduced in this chapter might be useful, though, for incorporating other influences on trade policy, such as a strategic foreign policy dimension or other value dimensions. The multidimensional theory presented here will provide us with expectations about who should support fair trade in the following chapters. The next section details how existing work assumes a single dimension in trade policy, as well as highlighting those analyses that suggest alternative dimensions. The second section then discusses why more than one dimension might be necessary.The third section introduces the fair trade dimension, builds the multidimensional trade policy preference theory,and briefly presents survey results showing that individuals place themselves into more preference categories than just “free trade” and “protectionist.” This section also explains how the multidimensional theory can account for this. The fourth section discusses how traditional approaches can account for this phenomenon, namely, by claiming that nonprotectionist opponents of trade are really just protectionists in disguise, and then discusses how we can test the sincere preference theory offered by this book versus the disguised preference theory suggested by previous results. Finally, this section concludes by offering hypotheses about who should support fair trade and providing a guide to the empirical results in the rest of the book testing these hypotheses. Existing Studies of Trade Policy Preferences Recent decades have seen an explosion in the number of studies investigating the causes of trade policy preferences. Starting about thirty years ago in economics, these studies began as empirical tests of the economic theories discussed in ­chapter 2, namely, the Stolper-​ Samuelson (SS) and Ricardo-​Viner (RV) theorems, as well as endogenous tariff theory.1 Political science scholars would later use these studies to test theories about foreign policy formation and embedded liberalism. Only recently, debates emerged, informed by the political behavior and political psychology literatures, about the determinants of the preferences themselves. Despite the variety of purposes these studies have been used for, nearly all of them assume that trade preferences can placed on a single dimension, ranging from complete opposition to free

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trade (support for protectionism) to complete support for free trade (opposition to protectionism). This makes sense for the early studies of preferences, which were used to test whether SS or RV more accurately described the state of the economy. Because these theories predict that trade will have an effect on employment and profits as a result of increases of imports and exports, it is logical to investigate support for protection versus support for free trade. Similarly, the analyses investigating endogenous tariff theory were designed to see whether interest group pressure could lead legislators to support higher tariffs, once again an inherent investigation into protectionism. The later political science analyses investigating embedded liberalism were also designed to see whether support for protection could be offset by compensation. As a result, all these studies intended to examine support for protection. As explained later, even in these circumstances, the assumption of a single dimension can lead to incorrect or misleading results. The conflation of all opposition to trade as protectionism is a natural outgrowth of the origins of the research agenda on trade policy preferences. The standard neoliberal economic theories of the effects of trade on individuals, of which SS and RV are the most prominent, tend to focus on the employment effects: Will open trade raise or lower the expected income of individuals based on what factors of production they hold (SS) or what industry they work in (RV)? In the SS model, factors of production—​the basic inputs into the production process like labor and capital—​are mobile across industries, meaning people who work in one industry can easily switch to working in another industry. Providing protection for an individual industry may increase production within that industry, but this will lead to people switching to jobs in that industry, so it is not just the industry itself that benefits from protection. The SS model, on the other hand, applied to trade policy preferences usually assumes that there are two relevant factors of production: unskilled labor and skilled labor (the latter sometimes thought of as “human capital” and a subset of capital overall). In developed economies like the United States and the European Union, skilled labor (and capital) is relatively abundant while unskilled labor is relatively scarce. Increasing trade will lead to an increase in imports of goods made with the scarce

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factor (unskilled labor) and an increase in export of goods made with the abundant factor (skilled labor and capital). This, in turn, will increase demand for the abundant factor, which increases returns to that factor (wages for labor; profits for capital); and will decrease demand for the scarce factor, which decreases returns to that factor. As a result, in a country like the United States, the SS model predicts that increased trade will hurt unskilled workers as a class and help skilled workers and owners of capital as a class. The RV model assumes that factors are specific: individuals cannot change jobs from one industry to another, nor can owners of capital switch their investments. As a result, industry of employment (or investment) will matter. Trade will help people working in export industries, regardless of skill level, as well as the owners of the industry. Trade will also hurt those who work and invest in import-​competing industries, regardless of skill level. Conversely, protection will help those in import-​competing industries while hurting those in export industries. Meanwhile, those working in nontradable industries, such as construction, should not be affected by trade and should be indifferent to it.2 Much of the trade policy preferences literature has been devoted to exploring which, if either, of these models provides accurate predictions. For instance, both Mayda and Rodrik (2005) and Scheve and Slaughter (2001) test to see whether individual-​level support for free trade or protection is determined by factor or by industry. If the SS theorem is correct, we would expect factor, as captured by skill level or capital endowment of the individual, to influence trade policy preferences:  holders of abundant factors (i.e., in developed economies, holders of capital or skills) will support trade because products made intensively with their factor will be exported more; holders of the scarce factor (i.e., low-​skilled workers) will oppose trade because products made intensively with their factor will be imported, and they will be forced to compete directly with these imports. If the RV theorem is correct, we would expect industry to influence trade policy preferences because factors of production cannot move between industries. Thus, workers and owners in exporting industries will support trade, while workers and owners in import-​competing industries will oppose trade.3

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The Politics of Fair Trade

These studies also find that other employment-​related factors influence trade policy preferences. For instance, unemployed individuals typically oppose trade, presumably because they blame trade for the loss of their job or because they believe trade will make it harder to find a job. In addition, older respondents tend to be more opposed to trade, presumably because they have less time to recover financially from lost income and less time to acquire new skills to find new employment before reaching retirement age. Married respondents are sometimes found to be less supportive of trade, presumably because they are more sensitive to the costs of losing income. Finally, conservatives tend to be more supportive of free trade and liberals more supportive of protection. This follows from the economic theory earlier and from the typical concerns of liberals and conservatives: in a mobile-​factor world, free trade in developed countries tends to hurt those with lower levels of education and income (i.e., the already worse off), and liberals, with their greater concern for economic equality, should be more sensitive to these costs. None of these causal stories are directly tested, but public opinion studies usually use these sorts of explanations for their regression results.4 The trade policy preference literatures have also found that nonemployment factors do influence preferences. For instance, O’Rourke and Sinnott (2002) found that nationalism and chauvinism are associated with support for protection. Nearly all studies have found that women are more protectionist than men, and although the reason for this remains unclear, Burgoon and Hiscox (2003) provide evidence that this difference exists even after controlling for average differences in employment status between men and women.5 Baker (2005) also found that, at least in Latin America, trade policy opinions are influenced by the consumption effect of trade in that those who are more likely to consume imports are more supportive of free trade that drives down the price of those imports. Even more recently, the literature has begun to focus on the behavioral and psychological underpinnings of trade policy preference formation. Ehrlich and Maestas (2010) argue that the personal trait of risk orientation moderates the effects of employment factors: risk-​ averse individuals who might be hurt by trade should be especially opposed to it while risk-​accepting individuals should be less opposed.

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Other research explicitly rejects the idea that employment-​ related concerns should be central to the analysis, such as that of Mansfield and Mutz (2009), who argue that concerns about the national economy in addition to in-​group/​out-​group dynamics determine trade policy preferences; and that of Kaltenhaler and Miller (2013), who identify social trust as the key factor. All these studies, even my own, continue to treat all opposition to trade as “protectionism” and assume, either explicitly or implicitly, that respondents desire limits to trade in order to protect domestic jobs. This conflation of trade opposition into a single category has numerous implications. First, it may overstate the support for free trade, especially in those public opinion studies where the question asked refers specifically to limiting trade to protect the national economy. Even respondents who oppose limits on trade to protect the domestic economy may still oppose free trade. Traditional analyses would consider these respondents free traders even if they supported limits on trade for other reasons simply because they would disagree with the statement that trade should be limited to protect the economy. Second, the assumption that opposition to trade is always protectionism makes it difficult to understand why factors such as nationalism and gender affect preferences so strongly. No economic explanation has been found, for instance, for why women tend to oppose trade more than men. Finally, the conflation has strong implications for the embedded liberalism literature as discussed more fully in the previous chapter. The most important element of embedded liberalism is that policymakers respond to the distributional effects of trade in order to increase public support for free trade. The methods to do this have varied between countries and over time, and have included unemployment insurance, job retraining programs, and more general welfare state programs, but the underlying desire of proponents of free trade to increase support for free trade by compensating those who lose from free trade has remained the same. This concept of embedded liberalism has been used to explain why government size has increased since World War II,6 and public opinion studies have found that increasing unemployment and education spending can, in fact, increase support for free trade even among those most at risk to suffer the negative employment and income effects of trade.7

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The Politics of Fair Trade

Since the end of World War II, a general consensus existed that free trade should be coupled with programs designed to allay the concerns of opponents to free trade. Academic debate, in political science and economics, has typically centered on the implications of or preferred method for implementing this compromise or the future of the compromise to changing external conditions.8 The debate has tended to ignore questions about the existence or the political desirability of the compromise.9 However, the ability of embedded liberalism to manage public support for trade depends crucially on the fact that opposition to trade is caused by the negative effects of trade on job or income security. If opposition to trade is driven by other factors, then the traditional policies of embedded liberalism will not be able to assuage these opponents. The rhetoric of fair trade suggests that these opponents are not concerned with domestic job loss but rather with the effects of free trade on labor and environmental standards in foreign countries. However, if the economists’ view that fair trade is only protectionism in disguise is correct, then the bargain of embedded liberalism should still work; if fair trade is really not about jobs and income, though, then the compromise may not hold. Thus, it becomes important to know who the fair traders are and what they want. Why Do We Need More Than One Dimension? It is common to view politics as existing along a single policy dimension. This view has been common at least since the French National Assembly during the French Revolution: supporters of the monarchy sat to the president’s right and opponents to his left. Thus was born the terminology that conservatives were on the right and radicals on the left. Although this original usage was about monarchists versus republicans, the terms eventually began to describe economic ideologies, in part because aristocrats, who supported conservative economic principles to maintain their wealth, tended to support the monarchy while commoners, who supported radical economic policies to increase their wealth, tended to oppose the monarchy. Despite the idiosyncratic nature of the terms’ origination, politicians the world over have often been described by their position on this single left-​right dimension. Modern political science has borne out this view to some extent.

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Keith Poole and Howard Rosenthal (2000) developed what they called NOMINATE scores, which place all members of the US Congress on a single dimension from left to right. Despite the manifold issues voted on in the US Congress, Poole and Rosenthal assert, roll-​call data suggest that these votes are largely determined by this single economic dimension. In other words, members of Congress located near each other on this dimension tend to vote similarly regardless of whether it is an economic issue, social issue, foreign policy issue, or any other sort of issue. NOMINATE scores continue to be used widely within political science as a useful summary of political preferences. On the other hand, politics is not always characterized by one dimension. Poole and Rosenthal also suggest that before the Southern Democrats became Republicans, a second dimension of US politics was salient, namely, over civil rights. We also often speak of social versus economic conservatives on the right or foreign policy hawks on the left. That party leaders rarely bring votes to the House and Senate floors that might fracture their base on these other dimensions does not mean that noneconomic cleavages do not exist within the left or right of US politics.10 In non-​US politics, where multiple parties compete, the expression of different issue dimensions becomes clearer. In Belgium, ethnicity is an explicit second dimension:  every ideological grouping has two parties, one representing the Dutch-​speaking Flemish and the other the French-​speaking Walloons. Many European countries have both a Christian Democratic party, emphasizing both economic and social conservatism, and a liberal party, emphasizing only the former. Green parties, often at odds with Labor parties over environmental issues but united with them on economic policy, have also become more common. European Union politics has both the traditional left-​ right dimension and the, frequently more prominent, pro-​anti integration dimension. Trade politics itself often confounds the traditional left-​right dimension. As Hiscox (2002) points out, only when factors are mobile and both workers and owners can change industries easily will classes be united on trade policy so that the rich will either support or oppose free trade while the poor will take the opposite position. If factors are specific and workers are largely trapped in their industry of employment, trade policy cleavages will break down on industry lines, with

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both workers and owners of exporting industries supporting trade, and workers and owners of import-​competing industries opposing trade. In these circumstances, both the left and the right will be divided on trade policy, and parties (which often represent broad classes) will attempt to keep trade policy from being a prominent issue.11 In the United States, we can sometimes see this divide with pro-​labor left-​wing politicians, such as Sherrod Brown, and right-​wing nationalist politicians, like Pat Buchanan, both opposing increased trade. It is thus common to view political preferences as multidimensional. It is the contention of this book, though, that both overall preferences and trade policy preferences are multidimensional. Not only does the free trade–​protectionist dimension of trade policy preferences crosscut the left-​right dimension of overall economic preferences, but an additional trade policy preference dimension crosscuts the free trade–​ protectionist dimension, specifically the fair trade dimension. Some people who support protection support fair trade while others oppose it; some people who oppose protection also support fair trade while others oppose it. Knowing an individual’s location on one dimension does not mean we know that individual’s location on the other dimension. To see why this matters, let us return to the classic left-​right dimension. Imagine that politics really consists of two dimensions, an economic dimension and a social dimension, but we analyze it using only a single dimension. Further, imagine that though these two dimensions are correlated with each other, they are not perfect predictors for each other. In other words, though an economic conservative may be more likely to be socially conservative than socially liberal, there are plenty of economic conservatives who are social moderates and even social liberals, and there are plenty of economic liberals who are social moderates or even social conservatives. What mistakes might we make if we collapse politics to a single dimension? After listening to a speech by Rand Paul in Congress on domestic surveillance programs, one might have predicted he would support upper-​class tax increases. Milton Friedman’s famous support for drug liberalization would be evidence of his support for welfare spending. Joe Lieberman’s criticism of President Clinton’s sex life and support for the Iraq War would lead us to expect support for conservative economic principles. In short, assuming

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a single dimension would lead to poor prediction of libertarians, liberal hawks, and pro-​life Democrats like Senator Bob Casey of Pennsylvania. Our ability to predict 1950s American politics would be even worse, as we would have trouble classifying both Rockefeller Republicans and Southern Democrats. I believe we make similarly serious category errors when we try to predict trade policy with a single dimension. Pat Buchanan and Sherrod Brown would be indistinguishable on trade policy; doctrinaire free traders would be categorized the same as those who support free trade agreements that open export markets for the industry they work in; and legislators from farm districts, who often oppose trade agreements with agricultural economies but support other agreements, would make no sense. In fact, multiple additional dimensions might be needed, for instance, to distinguish ethnocentrism from protectionism. This book does not argue that there is only one additional dimension, just that one specific dimension—​the fair trade dimension—​is particularly important. Further, the multidimensional theory introduced in the next section can be easily extended to apply to different secondary dimensions or to incorporate more than two dimensions. A unidimensional theory of trade preferences, by necessity, conflates opposition to free trade with protectionism and all opposition to protection with free trade. There are no other categories except, perhaps, neutrality or no opinion, which would be an even more flawed categorizations. A unidimensional theory will place fair traders in both the free trade and protection categories and will be mistaken in both cases. To see this, imagine how various fair traders might respond to a standard trade survey question, which asks respondents whether they want the government to restrict trade. Fair traders who want products labeled to allow consumer choice but who do not want bans or tariffs on imports would answer no to this question, and the survey researcher would classify them as free trade supporters. One might think from a policy perspective that this is not an error: after all, they both oppose tariffs. But tariffs are not the only policy tool on trade. A free trader would likely support a free trade agreement with a developing country, like Bangladesh, but a fair trader, even a fair trader opposed to increasing tariffs, would likely oppose (or at least not support) such an agreement.

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On the other hand, a fair trader who does wish to ban imports of products made with child labor, for instance, would answer yes to the survey question. So the survey researcher will categorize that person as a protectionist. Again, if undifferentiated tariffs were the only policy tool, then this conflation would not be problematic from a policy perspective. But a fair trader will likely oppose a free trade agreement with Bangladesh but not one with Japan, where standards are analogous to US standards. A protectionist will likely oppose both. Fair traders may even support free trade agreements with other developed countries if they believe this will divert trade away from developing countries with poor labor and environmental standards. But because they support one specific limit on trade, they are categorized the same as protectionists, who might be expected to supported a broader set of limits. Thus, not only the motivations but also the policy goals differ. To differentiate fair traders from both free traders and protectionists, we must introduce a second dimension to the theories of trade policy preferences that have been presented thus far, a task to which I will now turn. A Multidimensional Theory of Trade Policy Preferences As described earlier, most theories of trade policy preferences assume a single dimension ranging from protectionist to free trade. Usually, they further assume that an individual’s location on this dimension is determined by the anticipated effect of increased trade on his or her employment prospects and expected income.12 If increased trade is expected to reduce employment or income, the individual is more likely to support protection; if increased trade is expected to increase employment or income, the individual is more likely to support free trade. If this is the sole dimension of preferences, we can categorize all individuals as being more or less protectionist, more or less free trade. In other words, individuals can be placed on a line ranging from complete support for protection to complete support for free trade. This book does not suggest that this economic effect dimension does not exist:  indeed, it is central to the multidimensional theory that people are potentially motivated by the economic impact of trade. Rather, the book argues that the economic dimension is not sufficient to explain preferences. People are also motivated by other factors, the

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most important of which, for our purposes here, is concern about the effect of trade on workers and the environment in the country’s trading partners. Following from the definitions offered in the previous chapter, I label this the fair trade dimension. On one end of the dimension are those who support limits on trade to protect worker rights or the environment abroad;13 and on the other end are those who oppose such limits. On its face, this dimension is different from the first one. The protectionist dimension is about self-​interest (will trade help or hurt me personally?) or, at most, national interest (will trade help or hurt my country’s economy?). If it is sincere, the fair trade dimension is about altruistic (or at least other-​regarding) preferences: Will trade help or hurt workers and the environment in our trading partners?14 As discussed in the previous chapter, the concept of fair trade used in this book does not include concerns that trade with low-​standard countries will lead to lower labor and economic standards at home; this is properly conceived of as protectionism. Fair trade is thus explicitly about standards abroad even when they have no direct or indirect effect on you. There is little reason to believe that these other-​regarding altruistic preferences are driven by the same factors as economic self-​interest.15 Thus, it is unlikely that these two dimension are merely different expressions of the same underlying dimension. But is it plausible that trade policy preferences would be altruistic? I believe the answer to this question is yes, and recent research agrees. In addition to the general research on altruism discussed in the preceding endnote, recent research has demonstrated a number of cases where individuals’ trade policy preferences are influenced by other-​regarding elements. Most notably, Lu, Scheve, and Slaughter (2012) found that people are more likely to support protection for industries employing lower-​wage workers than themselves. Naoi and Kume (2011) found that people are more supportive of agricultural protection because of sympathy for poor and hard-​working farmers. Hearn (2014) found that individuals who inherently prioritize fairness in outcomes are more likely to support trade limits when exposed to information about labor exploitation. Of course, that other-​regarding preferences are plausible does not mean that the fair trade dimension exists, but demonstrating its existence is the task of the next two chapters. Demonstrating

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plausibility should be sufficient to justify building the theory in the rest of this chapter, though. A multidimensional theory simply combines these two dimensions, one on the horizontal axis and the other on the vertical. Here, the more you support protection, the further right you will be, and the more you oppose protection, the further left you are. The more you support fair trade, the higher you will be, and the more you oppose fair trade, the lower you will be. Notice that I have refrained from calling those who oppose protection “free traders.” As discussed in ­chapter 1, free traders oppose all limits on trade. In the multidimensional theory, one can oppose limits for protection but support other limits and, thus, not be a free trader. Indeed, that is the whole point of the theory. Only those who oppose all limits would be free traders. We can more easily categorize individuals if we assume dichotomous preferences. Instead of thinking of individuals as more or less protectionist, we can assume that they either support or oppose protection. Similarly, individuals either support or oppose fair trade. This dichotomization creates four categories of trade policy preferences, as shown in Figure 3.1. The people in the upper left cell oppose both protection and fair trade and therefore fit this book’s definition of free traders. Those in the bottom left cell support fair trade but oppose protection and are thus fair traders. Those in the bottom right cell support both types of limits and might be called anti-​traders. Those in upper right cell support limits to protect the economy but oppose limits for value reasons and might properly be called protectionists, though c­ hapter 4 will demonstrate that anti-​ traders are largely motivated by protectionist concerns. As a result, I refer to those who wish to protect the economy but who oppose fair trade as “pure protectionists” and use the more general term “protectionist” to

FIGURE 3.1  Trade

Policy Preference Categories in 2006

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describe all those who support limits to protect the economy regardless of whether they support or oppose fair trade. Figure 3.1 also shows that each of the preference categories has its adherents. The data in this figure are drawn from a 2006 survey conducted within the United States, which categorizes respondents based on how they answered two different questions: Do you support limits on trade to protect the national economy (a protectionist question), and do you support limits on trade to protect the rights of foreign workers (a fair trade question)? Pure protectionists are the rarest category:  only 7.6  percent of respondents, 74 respondents in this sample, fit into this category. Each of the other three categories, though, are nearly equally represented, at least in 2006, with roughly 30 percent, or 300 respondents each. Nearly 70 percent of respondents support some limit on trade, but there is little agreement on which limits. Only 40 percent of the respondents supports protection; and, while 60  percent of respondents support fair trade, half support it alone, but half support it together with protection. One more interesting piece of information that can be drawn from this figure should be noted before discussing how the multidimensional theory (and more traditional theories) explains who would fall within each cell. Namely, existing findings regarding trade policy preferences likely overstate support for free trade when they only offer a protectionist reason to oppose trade. Survey researchers use different questions, but the one used in the 2006 survey mirrors the question used by the extensively studied International Survey of Social Preferences that specifically asks if the respondent supports limits on trade to protect the national economy. As seen here, this question misses 30  percent of those who support some limits on trade, and thus analysts overstate support for free trade by nearly 100 percent when using this question. Other surveys use different questions about trade policy which might overstate support for free trade to a lesser degree, but both the National Election Survey in the United States and the World Values Survey specifically mention the job costs of imports, although they also mention the consumer benefits. The problem of overstated support for free trade might, therefore, be quite widespread.16 Though this overstating of free trade support is important, the more relevant question raised by this figure is, what explains why people

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The Politics of Fair Trade

fall into each of the cells? Does the fact that people support fair trade without supporting protection necessarily mean that fair trade support is sincere and traditional economic interpretations of fair trade are wrong? I  turn to these questions, and generate hypotheses to distinguish between sincere and feigned fair trade preferences, in the next section. How Would We Know If Support for Fair Trade Is Sincere? The most important information in Figure 3.1, at least for the purposes of this book, is that the answer one gives to a question about support for protection does not completely predict the answer one gives to a question about support for fair trade. An individual can claim support for protection without also claiming support for fair trade; and an individual can claim opposition to protection while still claiming support for other limits to trade. This seems to be strong evidence for the multidimensional theory and the assertion that fair trade and protection are different, but how do we know people’s answers are sincere? After all, the standard economic explanation is that fair trade is protectionism in disguise. It wouldn’t be much of a disguise if protectionists came right out and admitted they were protectionists. So how can we tell if they’re telling the truth about their support for fair trade? One way to tell is to examine who falls into each of the different preference categories, particularly the fair trade category. The two perspectives—​the sincere preference perspective of the multidimensional theory and the protectionist in disguise perspective of traditional economic approaches—​predict different types of people would identify as fair traders. The traditional view suggests that the people in the fair trade cell of the figure would be those who support economic protection (although this view provides no explanation to differentiate between those who fall within this cell and those who fall within the anti-​trade cell). This book’s view suggests that the people in this cell would be those who support environmentalism and workers’ rights. The forces that tend to explain support for protectionism and environmental and labor standards vary, providing the crucial leverage needed to test the two views against each other.

Free Trade, Fair Trade, and Protection

65

If fair trade is nothing but protectionism in disguise, we should expect the same type of people who support protection to also support fair trade, that is, people would fall in the fair trade cell if they had the attributes usually associated with support for protection. As discussed earlier in the chapter, there is an extensive literature examining who supports protection and why. Economic theory tends to focus on how increased trade will influence an individual’s income.17 Thus, we would expect those who work in export industries and those with high levels of skill and capital to oppose fair trade, and those who work in import-​ competing industries and those with low levels of skill and capital to support fair trade. Unfortunately, the surveys used in this study do not include questions about the trade orientation of industry of employment, so the effect of industry on support for fair trade is not tested. Variables for skill and capital are included, though, so we can test the effect of factor endowment. Typically, skill is indirectly measured by either education level (assuming that education imparts job-​related skills) or by income (assuming that increased skills increase demand for the worker and, thus, the worker’s income).18 Income can also be seen as a proxy for capital. According to economic theory, if fair trade is protectionism in disguise, we should expect low-​skilled workers, whether measured by education or by income, to support fair trade, and high-​skilled workers and owners of capital to oppose it. In addition, as discussed previously, if fair trade is the same as protectionism, we should expect women, the elderly, the married, and the unemployed to support fair trade. The existing literature provides less clear answers to the question of what fair traders would look like if their support is sincere because there have been fewer studies examining public opinion on environmentalism, labor standards, or human rights. The research that does exist suggests that the same factors used to explain trade policy preferences can also explain preferences for these policies. Konisky, Milyo, and Richardson (2008) found that ideology and partisanship are the strongest predictors of support for environmentalism, with conservatives and Republicans tending to oppose environmental policies. Coan and Holman (2008) found that wealth and education are also strong predictors of environmentalism. McFarland and Mathews (2005) suggest that while education and ideology are strong predictors of some elements of human

66

The Politics of Fair Trade

rights support, the more important elements are fundamental attitudes like moral reasoning and dispositional empathy.19 Despite limited prior research on preference formation in the specific areas of environmental and labor standards and human rights, there is a general theory of attitudes that can explain support for all of these and, thus, sincere support for fair trade, namely, Ronald Inglehart’s theory of post-​materialism (1977, 1997). According to Inglehart, as societies become wealthier and people’s material concerns are more likely to be taken care of, individuals in the society (and the society as a whole) will begin to prioritize “quality of life” issues and personal autonomy and self-​expression over more material concerns like economic growth and crime prevention. Post-​materialist societies, thus, tend to spend more on arts and culture; have better protection for foreigners, the LGBTQ community, and racial and ethnic minorities; have more gender equality; protect freedom of speech and other individual freedoms more; and have better environmental protection. Environmentalism is, therefore, a central component of both post-​materialism and fair trade. Labor standards and human rights are less central to post-​materialism. However, the focus of post-​materialism on personal autonomy suggests greater concern for state violation of personal integrity rights, and the focus on quality-​of-​life over economic growth mirrors debates about high labor standards versus economic efficiency. Sincere support for fair trade can be seen as support for important elements of post-​materialism. As a result, sincere fair traders should be more likely to be post-​materialists and should have the same characteristics previously identified for post-​materialists. Inglehart and others have found that post-​materialists tend to be young, highly educated, and wealthy and to have liberal ideologies. Also, economic security is often a prerequisite for expressing post-​materialist values; thus, unemployed individuals should be less likely to be post-​materialist, and single individuals should be more likely because they are less likely to have dependents to support and, thus, have a lower threshold for security. Women have also been found to be less post-​materialist, although, as with the gender difference on trade policy, the reason for this is not entirely clear.20 Overall, except for ideology, these characteristics of post-​materialists are the exact opposite of the characteristics of protectionists. In addition, union members might be expected to be

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67

more supportive of fair trade, especially because collective bargaining rights are often considered a core element of labor standards. On the other hand, unionized workers often support protection because they view free trade as a threat to their jobs. If fair trade is sincere and distinct, there are four possible policy orientations, as shown in Figure 3.1. What prediction can we make about why respondents fall into any one of the four categories? Many of the predictors for why someone would support fair trade are the same as for why someone would support free trade. For instance, economic theory predicts that people with higher levels of education and income should be more likely to support free trade because they will benefit from it economically. This book suggests that those with higher levels of education and income should also be more likely to support fair trade because they are more likely to be post-​materialist. These two effects might cancel out, and we might expect these variables to have no influence when distinguishing between a free trader and a fair trader. However, we would expect fair traders to be more educated and have higher incomes than protectionists. What might explain the difference between fair traders and free traders? Only two variables have different predicted effects for support for these two orientations: conservatism and union membership. We should expect fair traders to be less conservative and more likely to be union members than free traders. Finally, for similar reasons, we might expect economic protectionists to be more conservative and less likely to be union members than anti-​traders. Numerous factors, therefore, can predict who is likely to hold which trade policy preference. Three variables, though, are especially important because their combination helps us distinguish all four preferences:  education, income, and ideology. These factors are often important in politics, and they are especially so in trade policy preferences. Oversimplifying the discussion, if fair trade is sincere, we would expect the following: free traders are well-​off and well-​educated conservatives; fair traders are well-​off and well-​educated liberals; economic protections are poorer and less-​educated conservatives;21 and anti-​traders are poorer and less-​educated liberals. In the next two chapters, I  will explore these three factors, focusing mostly on those individuals who fit all three elements and on legislators who represent districts containing many of these individuals. The next chapter

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The Politics of Fair Trade

demonstrates with public opinion data that the simplified pattern just described accurately explains who fits into these four trade policy preference categories among the general public. Chapter 5 then shows that legislators often vote in concert with whether their constituents have fair trade, free trade, or protectionist characteristics.

4

 

Latte-​Sipping Liberals and Dumbledore’s Army: Old Protectionist Wine in New Bottles?

What could make Harry potter fans boycott chocolate frogs? Why did students protest their own colleges’ apparel across the United States in the 1990s, with renewed action against Nike and H&M in the past few years? Why does Starbucks offer coffee certified as being produced in sustainable ways that provide relatively high wages to farmers? The short answer is that people are concerned not only about the quality of the products they buy but also about the quality of how the items are produced. They care about working conditions in factories and on farms. They care about whether children are making their products. They care about how green their products are. Well, some of them do—​ enough to create a market for “fair trade” products. The existence of this markey raises at least four interesting questions. First, how many people care? Second, who are they? Third, why do they (and not others) support fair trade products? And, finally, does their support for fair trade products translate into fair trade policies? This chapter answers these and related questions by examining polling data in the United States and Europe, and begins testing the theory laid out in the previous chapter. For support for fair trade to be meaningful—​both politically and academically—​it must be distinct from both support for protection and support for free trade. If the multidimensional theory presented in the previous chapter is correct in stating that substantial support for fair trade is sincere, we should expect to see not only that some people prefer 69

70

The Politics of Fair Trade

fair trade without also preferring protection but also that systematically different types of people prefer these two different options. This chapter will begin to explore this question by examining public opinion, both in the United States and in Europe, about trade policy preferences. The European data come from a survey conducted in the EU in 1997 that asked about the purchase of fair trade bananas. The American data are more recent, varied, and extensive, coming from a series of nationally representative Internet surveys collected in 2006, 2008, and 2012. The data ask about fair trade product preferences, support for limits on trade due to either environmental or labor conditions abroad, and support for free trade agreements with a variety of countries. Taken together, the data examine support for fair trade across the developed world and for both products and policies. This enables extensive testing of the hypotheses developed in the previous chapter. As we will see, across all these surveys, we consistently see that fair traders are distinct from both protectionists and free traders and that support for fair trade among many is sincere. Recall Figure  3.1 from the preceding chapter, which indicated that roughly 30  percent of the respondents from the 2006 survey supported fair trade while also opposing protection. These results are relatively consistent over time, as can be seen in Figure 4.1, which replicates Figure 3.1 in stacked bar chart form and presents

2006

7.56

30.34

30.75

31.36 Free Trade

2008

26.59

19.59

13.49

Fair Trade

40.33

Pure Protection Anti Trade

2012

24.54

0%

FIGURE 4.1 

20%

16.39

40%

43.3

15.77

60%

80%

100%

Support for Trade Policy Preference Orientations by Year

Latte-Sipping Liberals and Dumbledore’s Army

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the results from similar analyses from the 2008 and 2012 surveys.1 As described in the last chapter, free traders are those who oppose both fair trade and protectionist limits to trade; fair traders support only fair trade limits, and pure protectionists support only protectionist limits; and anti-​traders support both types of limits. There are fewer free traders and fair traders in the later surveys and more pure protectionists and anti-​traders. This is consistent with research that has found that opposition to trade increases as the economy gets worse (Scheve and Slaughter 2004) and in itself suggests that support for fair trade is sincere: poor economic conditions do not lead to an increase in fair trade because it is not viewed as a way to protect the economy. Knowing that people’s answers to the survey questions place them in all four categories is not enough. We also need to know who is falling into each of these categories. Recall from the last chapter our different expectations if fair trade is sincere or instead is protectionism in disguise. If fair traders are nothing but protectionists in disguise, we would expect the people in the three non–​free trade cells to be essentially indistinguishable. The occupants of these cells will be those who expect to be harmed by trade:  low-​skilled workers, typically with low levels of income and education, at least according to preexisting economic and political science research on the determinants of protectionist preferences. If fair traders are sincere, the occupants of the three cells should be different, with only those in the pure protectionist and anti-​trade cells having low levels of education and income, and those in the fair trade cell having high levels of education and income and differing from free traders only due to ideology. This chapter and its appendix will demonstrate that many of the respondents in the fair trade cell are sincere. First, I will go into more detail about the consumer movements discussed earlier, using those stories to demonstrate how existing academic accounts cannot adequately explain consumer movements. Second, I summarize the theory presented in the last chapter and the expectations from it for public opinion. Third, I present the results from the various surveys, showing that fair traders appear sincere. Finally, I  conclude by answering the questions asked in the opening paragraph.

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The Politics of Fair Trade

Consumer Movements and Fair Trade Consumer protests motivated by ethical concerns and intended to influence political and/​or corporate behavior have a long history. The very word “boycott” derives from just such an action during the Irish Land War of the late nineteenth century. Over the course of three decades, Irish tenant farmers took numerous actions against their mostly English absentee landlords to force better working conditions and redistribution of the land. In 1880, Charles Boycott, the land agent overseeing a large number of tenant farms in County Mayo, evicted several farmers who were agitating for lower rents. Rather than resort to violence, locals decided to shun Boycott. Local companies and consumers refused to buy goods from his farms, and workers refused to work the land. Boycott tried to bring in workers from the north, but it was eventually decided that this was too expensive, so Boycott lowered the rents. This concerted action by consumers and workers achieved change in business practices and became a standard tactic as part of a broader movement to create political change in Britain and Ireland. Very quickly, Boycott’s name became synonymous with collective action refusing to do business with someone for political or ethical reasons (Ó Raghallaigh 2011). Collective consumer action is not confined to issues of international trade. And even when it does relate to international trade, it need not be for fair trade reasons, as the Made in the USA label and related Buy American initiatives are clearly related to protectionism. However, consumer action has always been a central element of the current fair trade movement. Indeed, as discussed in ­chapter  1, many within the movement consider fair trade synonymous with the FairTrade label on products. Consumer actions around fair trade extend beyond just a preference for labeled products and have often included boycotts, such as the Harry Potter Alliance’s boycotts against chocolate frogs, but also include more aggressive activities, such as protests against university administrators by students opposed to sweatshop labor. Public and collective consumer action for fair trade–​related reasons first came to prominence in the United States in the 1990s, focusing on sweatshop labor in clothing manufacturing. The most prominent example was protests against Kathie Lee Gifford, who had leveraged her fame as cohost of Live! With Regis and Kathie Lee to have her own

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Kathie Lee–​branded clothing line at Walmart.2 In 1996, the National Labor Committee, a private group focused on labor and human rights abuses, revealed that the Kathie Lee items were produced by children working up to twenty hours a day in Honduras. Protests and boycotts pushed Gifford to consider eliminating her clothing line, but she instead decided to become an anti-​sweatshop advocate, including testifying on Capitol Hill. At the same time, protests against Nike and Michael Jordan became prominent when similar abuses were found in the production of Air Jordans and other Nike products. Though Jordan refused to get involved in the issue as Gifford had, Nike joined with a task force created by President Bill Clinton on the heels of the Gifford scandal to develop the Fair Labor Association (FLA), a nonprofit group that monitors manufacturing to determine compliance with voluntary codes of conduct. The protests against Gifford and Jordan can be viewed as something of a success that led to political change, although the FLA has been criticized for being so weak as to be ineffective. At the same time that these more general protests and boycotts were occurring, more intense and focused activity was taking place on college campuses across the country. The United Students Against Sweatshops campaigns involved groups of students who protested the sale of apparel produced under sweatshop conditions that was being sold on campuses and using a college’s brand. These groups formed the USAS to link these disparate campus movements in 1998, and the organization eventually spread to more than 250 colleges and universities. The USAS formed the Worker Rights Consortium, which monitors and certifies apparel production and is essentially a stronger, independent, university-​focused version of the industry-​supported FLA. Nearly 200 colleges and universities in the United States, Canada, and Britain (but mostly the United States) are members of the WRC, meaning that these student protests and lobbying efforts have led to many universities agreeing to independent monitoring to make sure their branded apparel was not made with child labor or in sweatshop conditions.3 The apparel protests demonstrated that there was a market for products made in factories with better working conditions. In addition to the labeling initiatives discussed in ­chapter 1, corporations also tried to profit from this market. The most prominent of these corporate initiatives was marketing of fair trade coffee by Starbucks. In 2000,

74

The Politics of Fair Trade

Starbucks signed an agreement with TransFair USA to sell FairTrade–​ labeled coffee. This was not an exclusive deal:  Starbucks was not committing to sell only fair trade coffee, just that it would have a fair trade blend available for customers who wanted it. By 2014, 8.6 percent of coffee beans purchased by Starbucks was certified to be fair trade, although Starbucks claimed that 99 percent of its coffee purchases are “ethically sourced” (Starbucks 2014 Global Responsibility Report). Fair trade products are more than just Starbucks coffee, though; Fairtrade International estimates that fair trade–​ certified products valued at nearly €6 billion were sold in 2014, which does not include goods sold with other certifications or claims of ethical sourcing (Fairtrade International Annual Report 2014–​2015). People—​at least some people—​are willing to spend extra for fair trade products, and they are willing to boycott products made under exploitative conditions. They are willing to protest companies that make such products, and they are willing to push for political changes that improve working conditions abroad. But who are these people? Are they actually concerned with these labor abuses, or are they using the language of fair trade to protect their own jobs? The multidimensional theory of trade policy preferences discussed in the last chapter posits that many of them are sincere fair traders. Who Should Support Fair Trade? The multidimensional theory of trade policy preferences presented in the last chapter states that individuals are motivated by multiple factors when determining their opinions on trade policy rather than being motivated solely (or even primarily) by the effect of trade on their own economic well-​being. In particular, the theory states that some individuals are also motivated by ethical concerns about the effects of trade on those living abroad. While economic concerns might explain support for protection, they will not be able to explain support for fair trade. Instead, support for fair trade is driven by the same factors that determine support for human rights, labor rights, and environmentalism. Sincere fair traders are those who tend to support these ethical issues while not typically supporting economic protection; protectionists are those who tend to support economic limits on trade

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75

while not typically supporting the ethical issues; anti-​traders are those who tend to support both types of limits; and free traders are those who tend to oppose both. While the previous chapter provides significant discussion of the many factors differentiating the four trade policy orientations, at the end I focused on three key factors: education, income, and ideology. Fair traders are expected to be highly educated and wealthy liberals. Thus, the pithiest way to describe sincere fair traders is that they are latte-​sipping liberals. The latte-​sipping liberal has become a cliché in American politics, originally used as a pejorative but increasingly reclaimed by the latte-​sipping liberals themselves as an apparently ironic appellation. The origins of the term are not entirely clear. David Brooks referred to Burlington, Vermont, as Latte-​town in his book Bobos in Paradise (2000), while the Club for Growth, a conservative PAC, ridiculed Howard Dean’s presidential campaign in 2004 with a television ad declaring that he “should take his tax-​ hiking, government-​ expanding, latte-​ drinking, sushi-​eating, Volvo-​driving, New  York Times-​reading, body-​piercing, Hollywood-​loving, left-​wing freak show back to Vermont where it belongs.” Thomas Frank, in his book What’s the Matter with Kansas (2004), noted this trend by conservatives to demean wealthy liberals in this way, using the term “latte liberal” to describe the phenomenon. Although none of these sources used the specific wording “latte-​sipping liberal,” it is this phrase that has usually been used by those on the left to describe themselves ironically or to criticize the right for introducing the smear, and the phrase is still sometimes used unironically by those on the right. Despite uncertainty over its origins and confusion over the exact terminology, the meaning of the phrase is clear. Latte-​sipping liberals are well-​educated, high-​income liberal Democrats, often from one of the coasts or a large urban area. These characteristics are strikingly similar to what we learned in the last chapter are the predicted characteristics of sincere fair traders from the multidimensional theory. If fair trade is just protectionism in disguise, though, then latte-​sipping liberals should oppose fair trade, as their income and education are likely to make them winners from trade and, thus, opponents of protection. The preferences of this much-​derided group therefore are crucial for determining whether fair trade support is sincere or not.

76

The Politics of Fair Trade

Let’s look at the trade preferences of latte-​sipping liberals. To do this, we must first figure out who among the survey respondents should be included in the category. Obviously, they must be liberal Democrats. They also should be college graduates with high income levels, say the top third for simplicity’s sake. Although this might be an overly broad income category, restricting it much further leads to too small a number of latte-​sipping liberals to reach conclusions.4 Latte-​sipping liberals are fairly rare within the sample, accounting for only about 5 percent of respondents in the 2006 sample, in part because most of the respondents identify as moderate rather than as either liberal or conservative. Further, less than half of the sample are college graduates, and, by definition, the upper third of the income distribution contains a minority of the sample, so it is not surprising that not many latte-​ sipping liberals are represented in our data. Actually, any category where we look at the extreme of the income distribution and at nonmoderates is fairly small, across all samples. It will be instructive to compare latte-​sipping liberals to their ideal-​type counterparts in the following analyses, and each of these categories is similarly small. For instance, liberals who are not college graduates and who have bottom-​third incomes could be thought of as the blue-​collar heart of the Democratic Party and certainly are the implicit contrast to the latte-​sipping elitists when the term is used in a pejorative sense. For alliterative reasons, I will refer to these respondents, who make up only about 4  percent in the 2006 sample, as lunch-​pail liberals. On the conservative side, we can once again separate the respondents with college education and top-​third income from those without a college education and a bottom-​third income. The former group corresponds to the wealthy, corporate elite wing of the Republican Party. I call them here fat-​cat conservatives. and they make up another 7 percent of the 2006 sample. The low-​income, low-​education conservatives are the social conservatives, often southerners, who are sometimes considered as voting against their economic interests but who tend to be motivated by identity politics, social issues like abortion and gay marriage, and other value-​driven concerns. For them, I continue to use an evocative term that summarizes the stereotypes surrounding them:  NASCAR conservatives. They make up a surprisingly high 12  percent of the sample. Thus, we see that the majority of respondents fall into none of

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77

these ideal types: they are either political moderates, have incomes in the middle third of the distribution, or have educational attainments that don’t match their income levels. About 70 percent fall into these categories, with one third of the sample, by definition, in the middle income category and 40 percent of the sample moderates (since there is overlap between these two groups, these do not make up all of the remaining respondents). Examining these small categories provides interesting evidence but excludes most of the respondents, so I will also examine how education, income, and ideology influence trade policy preferences across the whole spectrum of those variables. The appendix to this chapter examines the whole sample rather than just the subgroups. Who Does Support Fair Trade? In this section, I present the results from the various surveys, focusing particularly on latte-​sipping liberals but also discussing the other three categories, as well as the overall sample when it is of interest. All told, the results strongly suggest that a sizable amount of fair trade support is sincere rather than just protectionism in disguise. Latte-​Sipping Support for the Four Preference Categories As expected, latte-​sipping liberals are overwhelmingly in favor of fair trade, as can be seen in Figure 4.2, which shows the distribution of the four ideal types in the four trade categories in each of the three surveys, with the preferences of the latte-​sipping liberals depicted in the upper-​ left portion of the figure. In 2006, thirty-​three of the forty-​eight latte-​ sipping liberals were fair traders, ten were anti-​traders, and five were free traders. None were pure protectionists. Thus, nearly 70  percent of latte-​sipping liberals support fair trade, with more than 20 percent being anti-​trade. This compares to the non-​latte-​sipping liberals, where less than 30 percent are fair traders. These results are repeated in 2008 and 2012, although the differences are less stark in 2012. In 2008, the overall number of fair traders dropped to only 20 percent, with much of the drop being compensated for by an increase in anti-​, suggesting that as the economy gets worse, more people oppose trade, as is often argued

78

The Politics of Fair Trade Type of Trade Supported by Lunch Pail Liberals

Type of Trade Supported by Latte Sipping Liberals 10

2006 0 2008 0 2012

69

2006

21

15 14

22

39

6 0

20

40

60

80

8 8

2008

8 7 8

2012 0

29

0

46 53

19 19 20

40

2006

13

2008

12

80

Free Trade Pure Protectionist

FIGURE 4.2 

10

2012 60

60

20

40

60

80

Type of Trade Supported by Nascar Conservatives

39

25

46 24

6

Type of Trade Supported by Fat Cat Conservatives 2006

27

10

2012

33

44

13

2008 0

5

23 23

10

0

39

19 29 31 19

16

33

21 20

52 40

60

80

Fair Trade Anti−Trade

Support for Trade Policies by Affiliation and Year

by authors such as Scheve and Slaughter (2004). However, 60 percent of latte-​sipping liberals were still fair traders, maintaining the 40 percent difference between the latte-​sipping liberals and the overall population. In 2012, fair trade support dropped again to only 16 percent of the entire sample, while anti-​traders again increased. Latte-​sipping liberals are still more likely to be fair traders than any other category and more so than the general public, but with only about 40 percent of latte-​sipping liberals supporting fair trade, the gap is not quite as wide as in previous surveys. The economic crisis seems to have pushed even latte-​sipping liberals toward outright or economic-​based opposition to trade. Compare the latte-​sipping liberals with lunch-​pail liberals. While the latter, too, are less supportive of free trade than the average, they tend to be anti-​traders rather than fair traders. This makes sense given that trade is more likely to threaten their jobs than the jobs of latte-​sipping liberals. In 2006, more than 40 percent of lunch-​pail liberals were anti-​ traders, and another 10 percent were protectionists. Only slightly more than 20 percent were fair traders, below the national average. In contrast to latte-​sipping liberals, lunch-​pail liberals’ support for fair trade actually increased in 2008, with nearly 30 percent supporting it, higher than the average but far less than among latte-​sipping liberals. Support

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79

for the anti-​trade position increased even more, though, with more than 50  percent falling into this category. In 2012, lunch-​pail liberal support remained above average but below latte-​sipping liberal support at 24  percent, while support for the anti-​trade position increased to 60 percent. Fat-​cat conservatives were most likely to support free trade in all three surveys. In fact, their support for free trade increased in each survey, going from 39  percent in 2006 to 48  percent in 2008 and to 53 percent in 2012. As the economy weakened, conservative economic elites became more supportive of increased trade, perhaps as a way to spur economic growth through exports. On the other hand, fat-​cat support for anti-​trade and pure protectionism also increased, though these remained minority positions among fat cats. As the economy worsened, fair trade support went from the second most common fat-​ cat policy position to the least common. In the 2006 survey, NASCAR conservatives were actually equally likely to support free trade as were fat-​cat conservatives, though they were more likely to be pure protectionists or anti-​traders than were fat-​cat conservatives and less likely to be fair traders. As the economy worsened, NASCAR conservatives began opposing trade more and more, as their jobs were more threatened by trade. While more NASCAR conservatives were anti-​traders than pure protectionists, no other group had a higher percentage of the latter than NASCAR conservatives. In summary, we see that the majority of both types of liberals support some type of limits to trade and that this support for limits grew as the economy worsened. However, the type of limit differed based on whether the individual was a high-​income and high-​education liberal or a low-​income and low-​education liberal. The former tended to support only fair trade limits to trade and not protectionist limits while the latter tended to support both. Further, NASCAR conservatives also supported limits on trade, although only when the economy turned poor, and they mostly supported limits to protect the national economy (either with or without fair trade limits as well). Fat-​cat conservatives were the most supportive of free trade and the most opposed to protection. This is exactly the pattern we would expect if support for fair trade were at least partly sincere.

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The Politics of Fair Trade

Environmental versus Labor Standards The latte-​sipping liberal is equally supportive of labor and environmental standards. The 2008 survey contained an embedded experiment to determine if the substantive focus affects fair trade preferences. All respondents were asked the protectionist question used in 2006 and were asked a fair trade question, though not all were asked the same question. A randomly chosen half of the respondents were asked the same fair trade question as in the 2006 survey, namely, whether they agreed or disagreed with the following statement: “The United States should limit the import of foreign products made with low labor standards in order to protect the rights of foreign workers.” The other half were asked whether they agreed or disagreed with the following statement instead: “The United States should limit the imports of foreign products made with low environmental standards in order to protect the environment in foreign countries.” The results presented earlier pooled all respondents and thus assumed there were no differences in responses between the two fair trade questions. Is this assumption valid? Yes, it is. As the appendix to this chapter shows, results are remarkably consistent when we compare across the two samples. We can also see in Figure 4.3 that the breakdown of the percentage that falls into each of the four categories is similar: slightly more people are fair trade when it focuses on the environment (21 percent vs. 18 percent), with that small difference being drawn equally from anti-​traders and free traders. Most important, latte-​sipping liberals are highly likely to be fair traders whether the focus of fair trade is on labor rights or environmental protection, with 56  percent of latte-​sipping liberals being fair traders if it’s about labor standards and 62 percent if it’s about the environment. Even for lunch-​pail liberals, among whom you might expect labor standards to resonate more strongly, the differences are minuscule, although, as opposed to the overall trend, they are slightly more likely to support fair trade when it focuses on labor, with 29 percent support, as opposed to when it focuses on the environment, with 26 percent support. The biggest difference between the two prompts is with fat-​cat conservatives, who are much less likely to support fair trade when it focuses on labor standards, perhaps because conservative economic elites tend to oppose unionization and other labor rights.

Latte-Sipping Liberals and Dumbledore’s Army Latte Sipping Liberals Environmental Prompt

14

0

20

56

40

27 60

17

Labor Prompt

8

20

0

13

Environmental Prompt 0

62 24

Labor Prompt

Lunch Pail Liberals

19

5

60

80

0

20

8

Labor Prompt

0

FIGURE 4.3 

Environmental Prompt

25

13

49 16

20

60

80

35 19

20

27

60

80

0

33 31

12

Labor Prompt

40

40

Nascar Conservatives

46

21

7

29 46

Fat Cat Conservatives Environmental Prompt

81

20

Free Trade

Fair Trade

Pure Protectionist

Anti−Trade

37

40

60

80

Support for Trade Policies by Affiliation and Prompt for 2008

Support for Fair Trade Products The latte-​sipping liberal claims to be more willing to buy fair trade–​ labeled goods even if they are more expensive. In the 2006 survey, respondents were asked the following: Some products from developing countries carry a “fair trade” label. This label guarantees that the products have been produced under fair working conditions and with respect for the environment. Would you be willing to buy the fair trade products if they were 10% more expensive than comparable products?  Yes  No Not sure

About 60 percent of the total respondents were willing to buy such products, which suggests the overall potential popularity of fair trade products. Latte-​sipping liberals, though, were almost universally willing to purchase such products, with nearly 90 percent answering in the affirmative, as shown in Figure 4.4. Lunch-​pail liberals were also more

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The Politics of Fair Trade 44

Fatcat Conservatives Latte Sipping Liberals

56 89

11

Lunch Pail Liberals

67

33 35

Nascar Conservatives 0

20

65 40

Percent Willing

FIGURE  4.4 Willingness

Respondents in 2008

60

80

100

Percent Not Willing

to Purchase More Expensive Goods for US

likely to buy the products than the average respondent, with 66 percent saying they would do so even if the products were more expensive. This is also higher than the percentage of rich, educated conservatives who support fair trade products (only 45 percent), which suggests that ideology is more important than income even though we are explicitly talking about the price of consumer products. One might object that this is only a question about whether the respondents would be willing to purchase fair trade products and not a measure of whether they actually do so. Respondents could simply be lying. Perhaps so, but why make the false claim unless you think you should be buying those products? Those claiming they would buy fair trade products must think that purchasing such products is a good idea if they are willing to lie about it, and those who think fair trade products are a good idea are exactly those we want to uncover with this survey, whether or not they actually make fair trade purchases. In addition, the evidence that does exist on actual purchasing behavior supports the claims made in these surveys. Hiscox and Smyth (2006) found in an experiment conducted in a home furnishing store in New York City that placing a fair trade label on products increased demand for that product especially if the price was also increased when the label was attached. Fair trade products are not simply something people are willing to spend extra for; people seem to demand that they pay extra for such products. Hainmueller, Hiscox, and Sequeira (2015) also found in an experiment that fair trade labels increase the demand for coffee and that having such a label on high-​priced coffee reduces the impact of further price increases on demand, whereas the label does not

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so insulate cheaper coffee. This suggests that wealth is a key component of fair trade purchasing activity. Education has also been found to play a role in fair trade purchasing activity, as shown by Elkins and Hertel (2011).5 Notice that the proportion of latte-​sipping liberals supporting fair trade policy and the proportion willing to buy fair trade products is nearly identical. There isn’t complete overlap between the two groups, though. More than 75 percent of fair traders are willing to spend 10 percent extra for fair trade products, while nearly half of those willing to spend extra are fair traders. The correlation between willingness to spend extra for fair trade products and supporting fair trade positions is .265, which may seem low but is statistically significant. On the other hand, willingness to buy such products is statistically significantly negatively correlated with being a free trader or an economic protectionist and is uncorrelated with being an anti-​trader. Though free traders are as educated and wealthy as fair traders, they are not more willing to buy fair trade products, suggesting this is not merely a function of being part of the elite. Anti-​traders are also not more likely to buy fair trade products, suggesting that willingness to buy fair trade products is not merely a proxy for supporting protection. Further, as will be seen in the appendix to this chapter, the determinants of support for fair trade products are essentially the same as the determinants of support for fair trade policy. In other words, people who express a willingness to buy fair trade products also support policies limiting imports that fail to meet fair trade standards. This suggests that, even though many fair traders focus only on the product-​labeling side of the story, fair trade has the potential to be just as much about policy as it does about labels, as I argued in ­chapter 1. Latte-​Sipping Liberals and Fair Traders Oppose Trade Agreements with Developing Countries The United States has signed a number of FTAs with different types of countries in recent years. Chapter 5 will examine legislative support for these treaties, but here I will examine public opinion on hypothetical future FTAs. The 2012 public opinion survey whose results I have already examined also asked respondents if they supported signing FTAs

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The Politics of Fair Trade

with six different countries:  Brazil, Ghana, Kuwait, New Zealand, Taiwan, and Thailand.6 These countries represent an intentional mix of levels of development and labor and environmental standards and respect for human rights. New Zealand is comparable to the United States on all measures, while Brazil and Taiwan are upper-​middle-​ income countries with strong human rights support and labor and environmental standards only somewhat below those of the United States. Thailand and Ghana are poor countries with poor labor and environmental standards and human rights. Kuwait represent something of an odd case. It has an extremely high per capita income due to oil exports, but labor standards are not particularly high, and human rights concerns, particularly regarding treatment of women, do exist.7 On the other hand, outside of oil, Kuwait does not export anything to the United States. Taken together, if fair traders are sincere, we would expect them to support trade agreements with New Zealand at least as much as free traders do, since trade with New Zealand should not lead to concerns about labor exploitation or environmental degradation. Further, there should not be much difference in fair trader and free trader support with respect to Brazil and Taiwan, since their standards are only slightly below those of the United States and thus raise only limited fair trade concerns. Fair traders, though, should oppose trade agreements with Thailand and Ghana, and perhaps with Kuwait, since these countries all have labor and environmental standards or human rights protections lower than those of the United States.8 Protectionists, on the other hand, should oppose all these agreements because each would increase imports and thus threaten their jobs, and free traders should support them. In addition, latte-​ sipping liberals should support agreements with New Zealand, and perhaps with Brazil and Taiwan, while opposing FTAs with Thailand, Ghana, and perhaps with Kuwait, while lunch-​pail liberals should oppose all of them. Let us look first at support for various FTAs separated by the four preference types, as shown in Figure 4.5. The first column in each group shows overall support for each FTA: the treaty with New Zealand is the only one that receives (bare) majority support, while that with Brazil receives 45 percent support, Taiwan 37 percent, Thailand 30 percent, and Kuwait

Latte-Sipping Liberals and Dumbledore’s Army

85

70 60 50 Overall 40

Fair Traders Free Traders

30

Economic Protectionist Anti-Traders

20 10 0

New Zealand

FIGURE 4.5 

Brazil

Taiwan

Thailand

Kuwait

Ghana

Percent Supporting Hypothetical Trade Agreements

and Ghana each less than 25 percent. Thus, stronger environmental, labor, and human rights standards seem to lead to more support for an FTA, though so, too, do higher wages. Taiwan has lower support than might be expected based on fair trade or low-​wage competition purposes, though, at least as compared with Brazil.9 In the second column, which shows support by fair traders, even more interesting patterns begin to emerge. Fair traders are more supportive than the overall population for all the trade agreements, which suggests both that fair traders are not opposed to FTAs in principle and that, although they have concerns about trade like protectionists do, they are probably not the main source of opposition to these agreements.10 However, fair traders are even more supportive of agreements with countries with better standards. Fair traders are 15 percent more supportive of an agreement with New Zealand and Brazil and 8 percent more supportive of an agreement with Taiwan. On the other hand, they are only 2 percent more supportive of agreements with Thailand or Kuwait, although, interestingly, the increase in support for an agreement with Ghana—​7 percent—​is almost the same as with Taiwan. Compare, though, fair traders’ support with that of free traders: not surprisingly, free traders also are more likely than the average respondent to support FTAs, but they are more likely to support FTAs than fair traders only when the target country has low standards or is Taiwan. Fair traders are actually more supportive of FTAs with New Zealand than free traders, and support for an FTA with Brazil is equal across

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The Politics of Fair Trade

the two groups. The gap between support for FTAs with Kuwait and Thailand is especially pronounced at more than 15 percent. The pattern repeats itself if we look at latte-​sipping liberals, who are more than 20  percent more likely than non-​latte-​sipping liberals to support an agreement with New Zealand and Brazil, 15  percent more likely to support an agreement with Taiwan and Ghana, and only about 5 percent more likely to support an agreement with Kuwait and Thailand. Lunch-​pail liberals, in comparison, are 10 percent less likely to support agreements with New Zealand and Brazil and 5 to 7 percent less likely with the other four countries. Thus, we see that latte-​sipping liberal support mirrors fair trade support, with both of these following the expected pattern of supporting agreements with countries with high standards and opposing those with low standards. European Latte-​Sipping Leftists Also Support Fair Trade The results reported here are not unique to the United States, although fewer data are available for other countries. In 1997, the Eurobarometer project, which regularly conducts surveys of public opinion in the European Union, included questions about support for the purchase of fair trade bananas in each of the EU countries.11 This survey found that, across Europe, there was widespread support for fair trade, with about 47 percent of respondents expressing willingness to pay 10 percent more for fair trade bananas. Further, the European equivalent of latte-​sipping liberals—​let’s call them latte-​sipping leftists—​were the primary supporters of fair trade products. As in the US analyses, I define a latte-​sipping leftist as an individual with higher than average income and education and a left-​leaning ideology. The classification scheme is slightly different because the Eurobarometer asks different questions and measures the concepts differently. As before, though, only those with income in the top third are counted as latte-​sipping leftists. However, the Eurobarometer measures education by the age at which a person stops formal education, since different countries have different educational systems. The downside is that people could take longer to get the same education. I count someone as a latte-​sipping leftist if they stopped their education at age eighteen because that is the age when most people graduate from high school in the United States.12

Latte-Sipping Liberals and Dumbledore’s Army Fatcat Rightists

44

Latte Sipping Leftists

56 70

30 32

Lunch Pail Leftists

68

30

Nascar Rightists 0

87

20

70 40

Percent Willing

60

80

Percent Not Willing

FIGURE  4.6 Willingness to Purchase More Expensive Goods for EU Respondents

As seen in Figure 4.6, the patterns of results for Europe are largely similar to those for the United States. Seventy percent of latte-​sipping leftists claim that they would be willing to spend 10 percent more for fair trade bananas, while only 46 percent of non-​latte-​sipping leftists claim to be willing to do so. Lunch-​pail leftists are not willing to buy more expensive fair trade bananas, with less than a third expressing willingness to do so. Interestingly, they are about as likely as others to be willing to buy fair trade bananas if they are the same price, with 81 percent of lunch-​pail leftists willing to do so and 87 percent of all others (and 96 percent of latte-​sipping liberals) willing to do so. There is also interesting variation across countries in Europe, with some countries more supportive of fair trade than others. Figure 4.7 shows the average willingness in a country to buy fair trade bananas that are 10 percent more expensive, with the average income of the country on the horizontal axis. More than 60 percent of Luxembourgers and Swedes support fair trade, while less than 30 percent of Portuguese do so. Support in Belgium and Spain is below 40 percent, with the other ten countries clustered between 40 and 60  percent, with Denmark, Finland, and the Netherlands falling just below 60  percent support. The figure also shows that support for fair trade is stronger in the richer countries than in the poorer countries, as we would expect if fair trade support were sincere. Belgium is the only clear outlier to this trend, being among the countries that are least supportive of fair trade despite being one of the richest. In addition, countries with higher labor and environmental standards are more likely to have high support for fair trade. This further supports

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The Politics of Fair Trade

0.7 Sweden 0.6

Finland

Greece 0.4 Spain 0.3

Ireland Italy

Denmark

Neth France

0.5

UK

Austria

Lux

Germany

Belgium

Portugal

0.2 0.1 0

FIGURE 4.7 

Percent Supporting Fair Trade by Country

the argument that fair traders are sincere. Countries are likely to have higher standards when there is more support for environmental protection and labor rights among their population; thus, we can infer that countries with many environmentalists and labor activists also have many fair traders. Finally, the overall pattern of latte-​sipping liberals being more supportive of fair trade than other people exists in nearly every country in Europe. The gap between latte-​sipping liberal support and non-​latte-​ sipping liberal support tends to be between 15 and 30 percent. In countries where overall support is lowest, the gap tends to be smallest, and in the country with the lowest overall support, Portugal, latte-​sipping liberals are actually less likely to support fair trade than non-​latte-​sipping liberals. With only this one exception, though, latte-​sipping leftists in Europe resemble their latte-​sipping liberal cousins in the United States in being more supportive of fair trade than others in society. The Determinants of Support for the Four Trade Policy Preference Types That latte-​sipping liberals support fair trade consistently is good evidence that at least some fair trade support is sincere. But the predictions

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89

made from the theory in the previous chapter were about more than just latte-​sipping liberals and also about more than just who supports fair trade. The theory provided more general predictions about each of the four trade policy preference types. It would be stronger evidence for the sincerity of fair trade preferences if these more general predictions also are correct, a task to which I now turn. More rigorous regression analyses of the surveys are contained in the appendix to this chapter, but Table 4.1 lists the correlations between a number of variables and the four trade policy orientations in 2006 though (the results were largely similar in the other two surveys). Positive numbers in the cells mean that high scores on the variable are positively associated with belonging to that trade policy orientation, while negative numbers mean that high scores are negatively associated. For example, in the income cell, a positive number indicates that high-​income people are more likely to have that orientation, while a negative number indicates high-​income people are less likely. A perfect relationship between the variable and the orientation would yield a correlation of 1 or  –​1; for instance, if all women were in favor of fair trade and no men were, the correlation between gender and fair trade would be 1. If there is no relationship—​if the number of fair traders is evenly distributed across the range of the variable—​the correlation would be 0. The closer the correlation is to 1 or –​1, the stronger the relationship between the variable and the orientation.

TABLE 4.1 

Correlations with Trade Policy Types Fair Trade

Free Trade

Anti-​trade

Pure Protection

Income

.112

.07

–​.115

–​.114

Education

.127

.039

–​.126

–​.068

Female

–​.003

–​.057

.097

–​.066

Married

–​.033

.037

.01

–​.026

.009

–​.039

.069

–​.072

Unemployed

–​.064

–​.006

.052

.03

Conservative

–​.169

.192

–​.102

.144

–​01

.036

–​.015

–​.019

Union

Age

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The Politics of Fair Trade

As can be seen from the table, the relationship between these variables and trade policy orientations strongly matches the predictions offered in ­chapter 3. None of the correlations seem particularly large, though this is not uncommon in surveys. And most of the correlations are statistically significant, meaning that it is unlikely they differ from zero merely because of random chance in the sampling of respondents. The pattern of correlations strongly supports the idea that fair traders are sincere. College graduates are more likely to be fair traders and free traders but less likely to be protectionists or anti-​traders. The same is true for income: income is actually more strongly related to supporting fair trade then free trade. Ideology, as expected, is also strongly correlated with fair trade:  liberals tend to be either fair traders or anti-​traders, while conservatives tend to be free traders or pure protectionists. Taken together, these three sets of correlations align perfectly with our expectations from the multidimensional theory presented in ­chapter 3. Fair traders are rich, educated liberals, which one would expect only if they were sincere, while free traders are rich, educated conservatives, and anti-​traders are poor, less educated liberals. The correlations with the other variables also present some interesting patterns. Being part of a union household is associated with not being a pure protectionist but is not associated with any of the other categories. This suggests that if union households oppose trade, labor standards may form part of that opposition, and that they won’t oppose trade just to protect the national economy. On the other hand, unemployed respondents are less likely to be fair traders, but unemployment is not associated with any other category, though the correlation with anti-​trade preferences is almost significant, suggesting that the unemployed oppose trade to protect the economy and improve their chances of finding a job. Women are more likely to be anti-​traders and less likely to be pure protectionists or free traders, but gender is not associated at all with fair trade support.13 Finally, respondents who say they are willing to buy fair trade products even if they cost more are more likely to be fair traders and less likely to be pure protectionists or free traders. However, there is no association between willingness to buy fair trade products and anti-​trade preferences. While these correlations suggest that fair traders appear to be motivated by sincere concerns, anti-​traders (those who support both

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91

protection and fair trade) resemble instead those motivated by concern for their jobs. They tend to be poorer and less educated, exactly the sort of person who is likely to be hurt by trade. They tend to be affiliated with unions, a group often associated with protection. And they are no more likely to buy fair trade–​labeled products if they are more expensive. These anti-​traders may be who economists and pundits are thinking of when they accuse supporters of fair trade of being protectionists in disguise. However, since there are an equal number of fair traders as there are anti-​traders, at least in good economic times, treating all those who claim support for fair trade as protectionists in disguise is clearly mistaken. Anti-​traders and pure protectionists differ in only a few ways: most clearly, and as discussed in the previous chapter, ideology differentiates the two, but so too do gender and union status. For the most part, though, both groups seem motivated by self-​interested economic concerns. Conclusion Let us return now to the questions asked at the start of the chapter and consider whether the patterns uncovered here help us to answer them. Why did Starbucks introduce and heavily emphasize its fair trade coffee? Well, the company’s customers are, essentially by definition, latte-​sippers. Given the price of Starbucks coffee, they’re likely to have above-​average income. Although I  know of no surveys that examine whether Starbucks customers are more likely to be liberal, there is no reason to believe they would be especially conservative.14 So, at least a portion of the Starbucks customer base are the prime targets for fair trade products, and we should not be surprised that the company focused on fair trade.15 What about the Harry Potter Alliance boycott of chocolate frogs? The HPA has fought for an eclectic group of causes, such as countering the narrow body image represented in Hollywood, the fashion industry, and more broadly by popular media and raising funds for earthquake relief in Haiti, but most of its projects read like a list of progressive causes célèbres. The HPA has advocated for immigrant rights and marriage equality rights and opposed the conflict in Darfur. Its other active project, in addition to the fair trade chocolate campaign, is a Hunger

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The Politics of Fair Trade

Games–​inspired campaign against economic inequality called “Odds in Our Favor,” designed to raise awareness of and draw attention to economic inequality in the United States and around the world. Most chapters of the HPA are located on college campuses, often at private universities and the more prestigious public universities. The average member of the HPA, thus, is in the process of obtaining a college degree, supports liberal causes, and—​given that those with higher family income levels are more likely to attend college and those with college degrees earn more money over the course of their life—​either come from or are likely to obtain above-​average wealth. These same considerations also likely explain membership in and support of USAS. In other words, HPA and USAS members are latte-​sipping liberals in training. In addition, Diana Mutz (2016) has found that reading the Harry Potter novels is associated with more opposition to Donald Trump and his policies, even when controlling for ideology and other factors. Given the results presented in this chapter, it should be no surprise that some of the most visible fair trade enthusiasts have literally been latte-​sipping liberals, nor that students and Harry Potter fans should also be likely supporters. And that Harry Potter fans and Starbucks drinkers are fair traders is also strong evidence that fair traders, or at least some sizable portion of them, are sincere in their support for fair trade. Whether this support at the individual level actually influences trade policies is the subject of the next chapter.

APPENDIX The main body of this chapter uses descriptive and bivariate statistics to show that support for fair trade appears to be sincere in many cases. This appendix will demonstrate that the chapter’s results hold up to more rigorous analysis by examining multivariate regressions and other more advanced statistical techniques. As stated in the preface, this appendix can be skipped without much loss in understanding the main argument of the book. However, interested readers will find here much additional evidence for that argument, as well as some more nuanced results.16 This appendix proceeds as follows. First, I summarize the hypotheses drawn from the multidimensional preference theory presented in

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93

c­ hapter 3. Second, I discuss in more detail the data and the measurement of the variables used. Third, I present the multivariate analyses of the determinants of the trade policy preference categories in the 2006, 2008, and 2012 surveys, using multinomial probit techniques described in that section. This third section is the core of the appendix’s analysis. Next, I present the US purchasing results, demonstrating that the same factors that influence policy preferences also influence stated purchasing decisions, which suggests that the policy and consumer labeling parts of fair trade appeal to the same people. Fifth, I describe and present the results from the experiment differentiating between labor and environmental standards from 2008, showing that there is little difference in support for these two elements of fair trade. Sixth, I  present the results from the free trade agreement survey question in 2012. In the seventh section, I  present both the individual-​level and the country-​ level results for stated purchasing behavior in the EU, showing how similar it is to US behavior. Finally, I conclude by linking these analyses together and show how they buttress the argument and findings in the chapter’s main text and support the multidimensional preference theory presented in ­chapter 3. Summary of Multidimensional Preference Theory The multidimensional preference theory presented in ­chapter 3 claims that individuals form their trade policy preferences by placing themselves on two different dimensions:  an economic protection dimension and a values dimension. Placement on the protection dimension will be determined by whether one is helped or harmed economically by trade and is driven by the many economic theories and empirical analyses that have examined trade opinions in the past. Placement on the values dimension—​whether or not one supports fair trade—​will be determined by whether or not one typically supports environmental protection and labor and human rights. Figure 4A.1 summarizes the factors that should determine placement on each dimension. Each of these two dimensions compares support for protection or fair trade with opposition to protection or fair trade. What factors should determine placement in the four different trade policy preference categories? Those listed in the first two columns should show what determines

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The Politics of Fair Trade

FIGURE 4A.1 

Factors Affecting Support for Trade Policy Dimension

support for the pure protectionist and anti-​trade categories relative to the free trade category. Those listed in the latter two columns should show what determines support for fair trade relative to the pure protection and anti-​trade categories. The determinants of support for fair trade relative to free trade can be seen by examining which factors have the same expected direction for both dimensions. Most important, this includes ideology, as conservatives should support free trade over fair trade. It also includes union membership, as they should support fair trade over free trade, at least when fair trade is couched in terms of labor standards. Data and Measurement With the exception of the European Union analyses, all the data used in this chapter come from the Cooperative Congressional Election Survey (CCES), in particular the 2006, 2008, and 2012 waves. The CCES is a multiuniversity online survey run by YouGov/​Polimetrix where each university’s module has 1,000 respondents, and common content (demographic questions as well as numerous questions about politics) is asked of all respondents, usually more than 50,000. The survey runs a pre-​and postelection wave every two years, with different content in each survey. The survey is not randomly sampled but rather is designed to be nationally representative, using a matching algorithm in the selection of respondents. From these surveys, I categorize respondents’ trade policy preferences based on their answers to two questions, one about fair trade and one about economic protection. The standard fair trade question is worded as follows:

Latte-Sipping Liberals and Dumbledore’s Army

95

(1) How much do you agree or disagree with each of the following statements? The United States should limit the imports of foreign products made with low labor standards in order to protect the rights of foreign workers. Strongly agree  Agree Neither agree nor disagree Disagree Strongly disagree

In the 2008 survey, half of the respondents were given this labor standards question, and the other half were given a question that was identical except that the statement read as follows: “The United States should limit the imports of foreign products made with low environmental standards in order to protect the environment in foreign countries.” With the exception of the later section that specifically discusses the difference between labor and environmental support, I pool the respondents who answered either of these questions. The protectionism question is modeled on a standard question about support for free trade versus protectionism included in many previous surveys and is worded as follows: (2) How much do you agree or disagree with each of the following statements? The United States should limit the imports of foreign products in order to protect the U.S. national economy. Strongly agree  Agree Neither agree nor disagree Disagree Strongly disagree

These two policy questions are used to construct the four policy orientations discussed earlier.17 Respondents who agreed with both questions (answered 1 or 2) are coded as anti-​traders. Those who agreed with only one question are coded as fair traders or pure protectionists, depending on the question with which they agreed. If they agreed with neither (answered 3, 4, or 5), they are coded as free traders. The coding of the 3s, those who neither agree nor disagree with the statements, is arbitrary, but the results presented in the following are robust to coding the 3s as supporting, instead of opposing, fair trade or protection.

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The Politics of Fair Trade

In the purchasing results section, I use the following question from the 2006 survey: (3) Some products from developing countries carry a “fair trade” label. This label guarantees that the products have been produced under fair working conditions and with respect for the environment. Would you be willing to buy the fair trade products if they were 10% more expensive than comparable products?  Yes  No Not sure

This question is based on a similar set of questions asked in the 1997 Eurobarometer of respondents in the EU (and, thus, unlike the earlier policy question, includes both working conditions and the environment), which I discuss in more detail later in the section on the EU. This variable is not intended to capture the actual consumer behavior of respondents, as we are only measuring what they claim they would do and not what they actually do. What this variable should capture, though, is the values of the respondents: if they are willing to claim they would spend 10  percent more for fair trade products, even if they would not actually do so, it must be because they think supporting fair trade products is important. The following analyses will determine if respondents who believe supporting fair trade products is important are influenced by protectionist motives or if they are sincere. The following results also include numerous demographic and control variables, all taken from their respective CCES surveys. Unless otherwise stated, the measurement of these control variables is as follows. Income is a categorical variable measuring family income, ranging from 1 (less than $10,000) to 14 (more than $150,000). Education is a categorical variable measuring educational attainment, ranging from 1 (for no high school) to 6 (for postgraduate degree). Ideology is a five-​point scale equal to 5 if the respondent is very conservative, 3 if the respondent is moderate, and 1 if the respondent is very liberal. Unemployment is a dummy variable measuring whether or not the respondent is currently unemployed (out of a job and seeking work). Union is equal to 1 if the respondent is a current union member and 0 if not. Age measures the age of the respondent in years. Gender equals 1 if the respondent

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97

is female and 0 if the respondent is male. Married equals 1 if the respondent is currently married and 0 otherwise. Determinants of Trade Policy Preference Categories To evaluate the expectations described earlier in the policy orientation analysis, we need to know what attributes influence the probability of a respondent falling into one of four unordered categories relative to each of the other categories. As such, the following analysis will use multinomial probit, which estimates the effect of independent variables on the probability a respondent will choose each alternative category over the baseline category. Three of the four categories will be used as the baseline in turn to estimate the probability of choosing every category against all the others,18 leading to the following model:

Policy Orientation = β0 + β1 Income + β2 Education + β3 Female + β 4 Married + β5 Union + β6 Unemployed + β7 Age + β8 Conservative + ε

I will present the results from each of the three surveys in turn. Results from 2006 The 2006 results, presented in Table 4A.1, strongly support the view that fair trade preferences are sincere expressions of support for labor standards. Looking first at what explains why people choose the other policy orientations instead of free trade, which is listed in the first column of the table, the first crucial point is that the factors that influence why people are anti-​traders or pure protectionists are mostly what trade theory and previous public opinion studies have suggested: higher-​income respondents are less likely to be either anti-​ traders or pure protectionists, with conservatives less likely and union members and women more likely to be anti-​traders. The one anomalous finding here is that women are less likely to be pure protectionists than free traders, which goes against previous findings. Only one factor helps explain why respondents support fair trade rather than free trade,

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The Politics of Fair Trade

TABLE 4A.1  Multinomial Probit Results about Determinants of Trade Policy Orientation

Free Trade

Fair Trade

General Protectionist

Coefficient S.E. Coefficient S.E. Coefficient

S.E.

Free Trade Income

–​

–​

–​0.013

0.025

0.052**

0.026

Education

–​

–​

–​0.022

0.057

0.094

0.057

Female

–​

–​

–​0.044

0.15

–​0.324**

0.152

Married

–​

–​

0.085

0.171

–​0.14

0.173

Union

–​

–​

–​0.189

0.272

–​0.594**

0.264

Unemployed

–​

–​

0.692

0.44

0.128

0.377

Conservative

–​

–​

0.432*** 0.08

0.331***

0.08

Age

–​

–​

0.006

0.005

0.003

0.005

Income

0.013

0.025

–​

–​

0.065**

0.025

Education

0.022

0.057

–​

–​

0.116**

0.056

Female

0.044

0.15

–​

–​

–​0.28*

0.15

–​0.085

0.171

–​

–​

–​0.225

0.169

0.189

0.272

–​

–​

–​0.405

0.248

Unemployed

–​0.692

0.44

–​

–​

–​0.564

0.434

Conservative

–​0.432*** 0.08

–​

–​

–​0.101

0.078

Age

–​0.006

–​

–​

–​0.003

0.005

Fair Trade

Married Union

0.005

Pure Protection Income

–​0.093*** 0.034 –​0.106*** 0.034 –​0.041

0.35

Education

–​0.04

0.077 –​0.062

0.077

Female

–​0.363*

0.205

–​0.406** 0.206 –​0.687***

0.205

Married

–​0.175

0.231

–​0.09

0.231

–​0.315

0.232

Union

–​0.633

0.528

–​0.822

0.525

–​1.227**

0.519

Unemployed

–​0.18

0.498

0.512

0.542

–​0.052

0.493

0.11

0.473*** 0.111

Conservative Age

0.042 –​0.011

0.007 –​0.005

0.077

0.053

0.372***

0.007 –​0.008

0.11 0.007

Latte-Sipping Liberals and Dumbledore’s Army

99

TABLE 4A.1 Continued

Free Trade

Fair Trade

General Protectionist

Coefficient S.E. Coefficient S.E. Coefficient

S.E.

Anti-​trade Income

–​0.052** 0.026 –​0.065** 0.025

–​

–​

Education

–​0.094

0.056

–​

–​

0.057

–​0.116**

Female

0.324** 0.152

0.28*

0.15

–​

–​

Married

0.14

0.173

0.225

0.169

–​

–​

Union

0.594** 0.264

0.405

0.248

–​

–​

0.564

0.434

–​

–​

Unemployed

–​0.128

Conservative

–​0.331*** 0.08

0.101

0.078

–​

–​

Age

–​0.003

0.003

0.005

–​

–​

N

741

Chi-​squared Log-​likelihood

0.377 0.005

741

741

96.39

96.39

96.39

–​893.809

–​893.809

–​893.809

Note: ***p < .01; **p