The “Fair Trade” Cringe

Like many economists, I cringe whenever I hear the term “fair trade.” It is not that I am against fairness - who is? - but the word “fair” is so amorphous in this context as to defy definition. Most often, the slogan “fair trade” is little more than a rallying cry for protectionism.

Critics of China say it is keeping the yuan undervalued to gain an advantage in the international marketplace. A cheaper yuan makes Chinese goods less expensive in the United States and American goods more expensive in China. As a result, American producers find it harder to compete with Chinese imports in the United States and to sell their own exports in China.

There is, however, another side to the story. The loss to American producers comes with a gain to the many millions of American consumers who prefer to pay less for the goods they buy.

~Harvard economist Greg Mankinw in today’s NY Times

MP: Mankiw is exactly correct. As surely as night follows day, what follows from someone’s advocacy or support of “fair trade,” is ALWAYS, ALWAYS, ALWAYS a proposal for some kind of government interference in the form of trade protectionism.

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