Wednesday, June 23, 2010

Free Trade Tariff

One of the things that bothers me about free trade is that it promotes outsourcing of jobs to countries that have little to no labour standards because these countries can also produce goods at a lower rate. In a truly free market there is an underlying assumption that competitors are on relatively equal footing. Country 'A' may be able to produce textiles for less but their workers are ought to be treated as well as in country 'B'. Under these circumstances it makes perfect sense for a textile company to set up in country A and I have no problem with that. But suppose that Country A's textiles are cheaper because they demand longer hours from employee working in unsafe conditions, they don't pay them enough to make ends meet, and/or they don't give them benefits that make for fair employment. Is it right to support such business practices just so Country 'B' can buy tube socks for less?

For those of us who have the slightest inkling of humanity the answer should be a resounding NO. We need to create incentives that will encourage corporations to uphold basic workplace standards while not depriving the Country 'A's of the world of the much needed jobs and capital that comes with foreign investment. The answer is to impose a tariff on goods imported that have not been produced with fair labour standards.

If this were done it would still make sense to set up shop in less developed countries because the cost of living is so much lower. This means that even if companies paid employees equal purchasing power parity they would be able to live as well as employees in developed countries, but at lower cost. Similarly, if a company provides benefits in one country it should be reflected in any other country they choose to set up shop in. Any other option is exploitation, which any citizen of a democratic country ought to disapprove of because to exploit is to enslave and no democratic citizen should be a master of slaves.

I understand that I'm greatly simplifying this problem and if this solution were put in place it would quickly be condemned by the WTO and decried by both corporate interests and neo-conservative economic thinkers. But I welcome more detailed conversation in the comments.


  1. Hey David.
    Just thought I'd stop by and see what you were all about.

    That's some pretty heavy stuff, and we really hit the lottery by being born in a have country didn't we?

    While I generally don't think rich countries should be penalized just for being rich, I do think that in a perfect world, expoiting the Chinese by shopping at Walmart would not occur.

    So usually, I get on the topic of leaving the rich alone, but in aspects like this - I think I agree with your argument - don't enslave the poor simply because they're poor and will do what they have to for less.

    There wouldn't be much of a global economy if there was no competition however...

  2. Hey Hinchey,

    Thanks for stopping by.
    I'm not arguing against competition, that would be silly. But I am suggesting that this is a situation where the race for the bottom is exploitative. Setting up shop in China can still be done in a way that has fair wages, safe working conditions, and basic labour standards AND be less expensive then setting up shop in the west.

    This is because the cost of living in many developing countries is so much lower. So a Chinese employee could live as well as a Canadian employee at a fraction of the cost. Which continues to make China a competitive job market but does so in a non-exploitative way.