《How Fair is Fair Trade》.pdf

How Fair is Fair Trade?1 Robbert Maseland Albert de Vaal University of Nijmegen SOM-theme C Coordination and growth in economics Abstract This paper investigates to what extent fair trade programmes, are indeed ‘fair’. This is accomplished by comparing fair trade with free trade and protectionist trade regimes on their compliance of the criteria set by the fair trade movement itself. This comparison is made using comparative cost based and economies of scale models. It is found that whether or not fair trade is superior to free trade or protectionism is highly dependent on a number of characteristics of the products to which fair trade is applied as well as on the circumstances of international trade. Mailing Address : A. de Vaal, Nijmegen School of Management, University of Nijmegen, PO Box 9108, 6500 HK Nijmegen, The Netherlands; a.devaal@nsm.kun.nl 1. Introduction A long-standing debate in development economics has been the one between advocates of free trade and proponents of protectionism in developing countries. While the former argued that free trade would offer large opportunities for poor countries to improve their situation, the latter considered trade to be harmful to poorer countries and typically preferred a combination of protectionism and development aid. This opposition tended to dominate the discussion about the role of international trade in the Third World. (Bhagwati, 1993; Krueger, 1990) However, in recent years, a third position has come up. This position maintains that international trade can be beneficial to developing countries as long as 1 The authors would like to thank Marcel va