The Big Question: How fair is free trade?

Updated Thursday 2nd December 2004

Free trade is the theory of trade without restrictions. But that theory is not easily put into practice. Take the billions spent through European Union subsidies to farmers, or the high US import tariffs on foreign steel. "That is not fair", shout critics, "and it's not free trade." The World Trade Organisation exists to ensure countries play by the free trade rules - but who do these rules benefit? The Big Question: is free trade itself actually fair?

Bananas Copyrighted image Icon Copyright: Used with permission

Free trade is the key to prosperity, says Dr Eamonn Butler of the Adam Smith Institute and it is good for everyone. But throughout the history of economic life, he says, free trade has been the exception not the rule. Using protectionist measures such as monopolies, subsidies, tariffs and quotas, governments have stopped the free flow of trade, have reduced choice and excluded potential producers from the market place.

In the 1930s, faced with competition from cheap foreign imports, the United States raised tariffs on 20,000 different imports. Retaliation saw the collapse of the world economy known as the Depression, says Dr Butler, producing the chaos that led to World War II.

In 1995, a GATT replacement was announced: the World Trade Organization. Its remit is the abolition of trade barriers and the promotion of free trade. It oversees the rules of international trade, administers and polices agreements between rich and poor nations, settles trade disputes, and presides over international trade negotiations on issues like subsidies, import tariffs and their impact.

Is it fair to portray - as some do - the WTO as an organisation run by the rich for the rich?

Emma meets Keith Rockwell Copyrighted image Icon Copyright: Used with permission "How many other fora can you identify where a country like Costa Rica can bring a case against the United States and win?", asks Keith Rockwell, the chief spokesman at the WTO. "It does offer the small and developing countries a chance to fight their corner."

But is being able to fight one's corner enough? Ambassador Edwin Laurent is the permanent representative at the WTO of the Caribbean State of St Lucia. Showing The Big Question around the WTO building in Geneva, he points to the many empty seats in the meeting rooms. "The WTO would argue it is open to everbody. But if you dig deeper to consider why is it that certain persons are not able to participate, then you have a different notion of fairness." The small countries can't afford to have permanent delegates, he says. "Where you have certain players so structurally disadvantaged, no, trade is certainly not fair."

Ambassador Laurent Copyrighted image Icon Copyright: Used with permission Ambassador Laurent has felt the impact of WTO decisions first hand. In 1996 the famous banana dispute started when producers in the USA lodged a complaint against the European Union. For many years EU banana imports had been duty-free from the African, Caribbean and Pacific (ACP) nations while producers in the US and Latin America saw their own access to the EU banana market limited by quotas. In 1999, the WTO ruled this system was unfair and incompatible with WTO rules.

"Even if it was strictly in keeping with the rules of the WTO - it was not the right decision," believes the Ambassador. Ambassador Laurent says without preferential access to the EU market, St Lucia's small-scale family-run banana producers could not compete with the larger banana plantations of Latin America and the USA. "It is like being in a race. If you have one leg, or you're blind or if you are in a wheelchair it is very difficult to compete with the Olympic sprinters."

So is this a fair system? Keith Rockwell believes the world would certainly be worse off without the WTO. "There are no saints in our organisation. But I think people here realise that trade will never be a hundred percent free or a hundred percent fair. The WTO objective is to try and establish a system of rules that gives the best opportunity to the most countries."

This edition of The Big Question was first broadcast on 16th November 2004

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