Leading up to the December 2005 World Trade Organization's (WTO) Ministerial Conference in Hong Kong, Pambazuka News will examine some of the issues regarding the WTO as it affects Africa. This week we look at the concept of fair trade and compare it to the free trade agenda that predominates in Africa.

Many debates exist around the two terms – fair trade and free trade. Neither is actually completely possible, as the world market that they exist in is complex and multidimensional. This article thus proposes to define the terms and situate Africa’s economies within these definitions.

Fair trade is both a goal and a movement, and promotes “international labor, environment and social standards for the production of traded goods and services,” according to Wikipedia. There are many different levels of fair trade – in Western countries there exist a number of organizations that rally for fairer trade in goods such as coffee and fruit. Commodities such as these are targeted because they are imported, yet sold at cheap prices, which means that those people who are producing the goods are not paid adequately. Groups like TransFair USA, The Fair Trade Foundation and Make Trade Fair work to ensure that workers are being paid fair wages, and provide labeling on their products so that consumers are guaranteed that they are not exploiting anyone through their purchases. Many organizations work in Africa to provide people, and women especially, with jobs that provide enough money to support themselves, often producing crafts or art.

But the term fair trade also applies to trade at the level of governments and global bodies such as the World Trade Organization. Groups such as the Trade Justice Movement and the World Development Movement lobby governments and other policy-making bodies to end the policies that are causing poverty and environmental degradation.

Free trade, on the other hand, is both a concept as well as a way of policy making. According to Wikipedia, free trade can be explained as the international trade of goods or services without tariffs or other barriers, free movement of labor and capital between countries and the absence of trade distorting policies (such as taxes, subsidies, regulations or laws) that are advantageous to any one country. The opening up of markets and the privatisation of goods and services have been the results of the free trade agenda.

In terms of trade, the policies and practices that protect wealthy countries under the free trade agenda have played a role in the inability of African governments to carry out substantial and meaningful work in regards to their economic situations. Specifically, trade concerns in Africa centre around the opening of up non-agricultural trade; the subsidisation of the agricultural sector, as well as its accessibility to wealthy countries; the privatization of services; and Economic Partnership Agreements, which threaten to allow the European Union less restricted access to the African market.

Currently, Africa is working within the confines of free trade – but it is not so free for wealthy nations. In a completely free market system, countries such as the United States and those in the European Union would not be heavily subsidising their agricultural sectors, leaving African countries unable to compete in a highly unfair market. This protectionism harms Africa. In fact, the degradation of African economies has been occurring for quite some time. According to DATA (Debt, AIDS, Trade, Africa), in 1980, Africa had 6% of the share in world trade, but in 2002 this figure had dropped to 2%, in spite of the fact that Africa contains over 10% of the world’s population, and has a large bank of natural and human resources. Further, according to Christian Aid, Africa has lost over $270 billion as a result of the “free” trade policies that have been forced on the continent as a result of having to open their markets to imports, mostly due to aid conditionalities. This amount of money is equivalent to that needed to pay back all of Africa’s debt, plus more.

The promises of free trade to lead automatically to growth and the end to poverty are clearly false. Next week we will examine free trade alternatives, including balanced trade and the Tobin Tax.

Further Reading
Christian Aid: The Real Cost of “Free” Trade - http://www.christianaid.org.uk/indepth/506liberalisation/index.htm
Previous Articles

Agriculture in Africa – http://www.pambazuka.org/index.php?id=30139

Women and Trade - http://www.pambazuka.org/index.php?id=30051

On the Road to Hong Kong - http://www.pambazuka.org/index.php?id=29838

Africa and WTO - http://www.pambazuka.org/index.php?id=29857

Researched and written by Karoline Kemp, a Commonwealth of Learning Young Professional Intern with Fahamu.