Apsa07 Proceeding 209633

8/8/2019 Apsa07 Proceeding 209633

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Are Fair Traders Actually Protectionist?

The Economic and Political Bases of Support for Fair Trade in the European

Union1

Sean D. Ehrlich

Assistant ProfessorDepartment of Political Science

Florida State University

559 Bellamy HallTallahassee, FL 32309

[email protected]

Abstract: The embedded liberalism thesis argues that governments can build support for

free trade by compensating economically those hurt by trade, usually with welfare or

education policies. This strategy depends, though, on opposition to trade being driven by

economic factors, such as job or income loss because of increased competition. The

current fair trade movement raises many non-economic criticisms of trade such as

concerns about the environment and labor standards. Many scholars dismiss these

concerns as traditional protectionism in disguise. This article argues, instead, that for

many these concerns are sincere and that this presents a growing challenge to the

compromise of embedded liberalism. The article demonstrates this by examining survey

data in the European Union and showing that those who support fair trade tend to have

characteristics that are opposite those who support economic protection.

1 I thank Charles Barrileaux, Bill Berry, Justin Esarey, Matt Golder, Cherie Maestas, Will

Moore, Angela OMahoney, John Scholz, and Jeff Staton for helpful advice and

comments.
mailto:[email protected]:[email protected]


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Research on trade policy typically assumes that individuals preferences for free

trade are largely determined by economic factors. Those who are expected to see an

increase in income due to increased trade should support free trade while those who are

expected to lose income should oppose it. As a result of this assumption, most research

tends to conflate all opponents of free trade as protectionists, who desire to limit trade

to protect the economy from competition and, thus, protect their job. Recent critics of

free trade, though, have often focused on other possible downsides of trade, such as

worsening environmental and labor standards both at home and abroad, a critique often

labeled fair trade. Economists have largely dismissed these criticisms as repackaged

protectionism and not as sincere expressions of environmentalism or labor support. In

other words, fair traders are presumed to be protectionists in disguise.

This presumption has critical implications for how policymakers should respond

to the fair trade critics. If they are protectionists in disguise, then the typical policy tools

discussed in the embedded liberalism literature (Ruggie 1972), such as unemployment

insurance and job retraining, should suffice to maintain support for free trade. If the

critics are motivated by sincere environmental and labor concerns, though, then these

policies are likely not to work. Is the standard presumption correct? Previous research

on the topic (Ehrlich, 2007) has found that in the United States, fair traders tend to be

sincere and not protectionists in disguise, thus calling into question the economic

arguments and suggesting that compensating those who are harmed by trade may no

longer be sufficient to maintain support for free trade. This article will further support

this contention by demonstrating that the previous finding is not country-specific but is,

instead, a general result among developed countries and also by examining the cross-

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country determinants of fair trade support. Thus, this article further calls attention to the

possibility that the compromise of embedded liberalism may not longer hold and provides

insight into which countries are most in danger of seeing support for free trade crumble.

In order to make this case, the rest of this article is organized as follows: First, I

summarize two distinct literatures: the literature on maintaining support for free trade and

the emerging literature, mostly in economics, that typically views fair trade as

protectionism in disguise. Second, I summarize previous theoretical and empirical work

discussing who supports protection and provide hypotheses to test if protectionists and

fair traders comprise the same groups of people and discussing what the determinants of

cross-national support for fair trade should be. Third, I introduce the survey data and the

statistical methods used to test these hypotheses. Fourth, I present the results of these

tests, showing that protectionists and fair traders are, in fact, largely, though not entirely,

different groups of people. Fifth, I conclude by returning to the questions raised by this

research about the embedded liberalism literature and by discussing future research

possibilities.

I. Embedded Liberalism and the Fair Trade Challenge

Prior to the interwar collapse of the international economy, most countries

pursued a classically liberal policy of free trade and adherence to the gold standard that

prioritized international economic stability over domestic economic stability.2

After the

experiences of the Great Depression and World War II, countries learned that free trade

2See Simmons (1994).

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needed to be paired with domestic policies that compensated workers for the increased

risks that came from openness. Ruggie termed this compromise embedded liberalism,

in that the classical liberalism of free trade was embedded within policies designed to

mitigate the negative aspects of free trade. (Ruggie, 1982) The most important element

of embedded liberalism is that policymakers are concerned about managing public

support for free trade: the methods to do this have varied between countries and over

time, and have included unemployment insurance, job retraining programs, and more

general welfare state programs, but the underlying desire of proponents of free trade to

increase support for free trade by compensating those who lose from free trade has

remained the same. This concept of embedded liberalism has been used to explain why

government size has increased since World War II (Cameron 1978; Rodrik 1998) and

public opinion studies such as Hays, Ehrlich, and Peinhardt (2005) have found that

increasing unemployment and education spending can, in fact, increase support for free

trade even among those most at risk to suffer the negative employment and income

effects of trade.

Since the end of World War II, there has, thus, been general consensus among

policymakers that free trade should be coupled with programs designed to allay the

concerns of opponents to free trade. Academic debate, in political science and

economics, has typically centered around the implications or preferred method for

implementing this compromise or the future of the compromise to changing external

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conditions3

rather than on the existence or the political desirability of the compromise.

However, the ability of embedded liberalism to manage public support for trade depends

crucially on the fact that opposition to trade is caused by the negative effects of trade on

job or income security. If opposition to trade is driven by other factors, then the

traditional policies of embedded liberalism will not be able to assuage these opponents.

The rhetoric of fair trade suggests that these opponents are not concerned with domestic

job loss but rather with the effects of free trade on labor and environmental standards

both domestically and in foreign countries. However, many academics have suggested

that this is, in fact, only rhetoric and that fair traders are merely masking their

traditional concern for jobs and incomes with different language. If this view is correct,

then the bargain of embedded liberalism should still work; if fair trade is really not about

jobs and income, though, then the compromise may not hold. Thus, it becomes important

to know who the fair traders are and what they want.

In general, fair trade means that industries in a countrys trading partners are

operating under the same rules of the game under which domestic industries are forced to

operate. In practice, though, fair trade has meant different things at different times. In

the eighties, calls for fair trade were frequently leveled at Japan because U.S. industries

believed that the Japanese market was closed to American exports even though the

American market was open to Japanese imports, thus giving Japanese industries an

unfair advantage. Similarly, anti-dumping and countervailing duties, which GATT and

3For instance, the convergence theory argued that capital mobility would make left-

leaning economic policies, such as unemployment and welfare, harder to maintain. See

Garrett (1998) for a critical assessment of this theory.

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the WTO allow countries to place on imports when the exporting country is accused of,

respectively, selling goods below market price or supporting industries with illegal export

subsidies, are sometimes referred to as fair trade policies as they are designed to force a

countrys trading partners to eliminate unfair subsidies or predatory pricing practices.

In the past decade, though, fair trade has taken on a new, though similar,

meaning: concern that industries located in countries with lower environmental or labor

standards have an unfair advantage over competitors that adhere to higher standards.4

This version still stresses the ability of domestic industries to compete fairly with foreign

industries, but increasingly has also including concerns about how fair the trade is not

just for the businesses competing but for the workers producing the goods and the

environment affected by production. Thus, there has been a rise in fair trade products

which certifies that the product is produced in an environmentally safe manner and with

high labor standards and that the workers have received a fair share of the profits from

production. In the United States, the most common fair trade product is coffee, with

Starbucks specifically marketing a product they call Fair Trade Coffee. In the

European Union, fair trade bananas as well as tea and coffee have been much discussed

products. In addition to these agricultural goods, a number of handcrafted goods have

fallen under the fair trade rubric. In 2002, an international non-governmental

organization called the Fair Trade Labeling Organizations International (FLO) created a

4Economists frequently refer to this type of fair trade as a demand for harmonization

of standards. Much of the economics literature on fair trade is thus about the costs and

benefits of different standards and of harmonizing those standards between countries.

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fair trade label for products meeting certain standards. FLO claims that over one billion

Euro worth of products carrying this label were sold in 2005.5

Fair trade is more than just the labeling of products, though, and also includes

policy demands. For instance, there have been attempts to create domestic legislation

banning or restricting trade with countries that violate domestic standards.6

Also, during

both the abortive Millennial Round and the current Doha Round of the WTO,

environmental advocates have pushed for multilateral rules that enable countries to raise

tariffs on products produced in environmentally unsound ways, a policy sometimes

referred to as Eco-dumping duties, modeled after the anti-dumping duties discussed

above. The common thread throughout these policies and activities is concern for the

effect of trade on the environment, labor standards, and human rights both at home and

abroad. Thus, in the rest of this paper, I will use the term fair trade specifically to refer

to supporting limits on trade in order to protect the environment or the rights of foreign

workers, a definition which is in accord with the self-image of the fair traders.

Despite the claims of the fair traders themselves, many policymakers, political

advocates, and academics have argued that fair trade is nothing more than the new

incarnation of traditional protectionism, a term which usually refers to supporting limits

on trade in order to protect the domestic economy or domestic jobs. This view is

particularly common among trade economists. Rodrik probably best summarizes this

5 See FLOs website, www.fairtrade.net, for more on the labels standards and sales

claims.

6For instance, in 2000 the United States passed the Trade and Development Act which

included requirements that trade partners adhere to international standards for child labor.

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economic conventional wisdom: A common view is that the complaints of

nongovernmental organizations and labor advocates represent nothing but old

protectionist wine in new bottles. (Rodrik 1997, 3) For instance, Srinivasan makes this

argument explicitly: The demand for linkage between trading rights and observance of

standards with respect to environment or labor would seem to arise largely from

protectionist motives. (Srinivasan 1995, quoted in Krueger 1996, 4)7

Other economists suggest only that protectionism is one of several possible

motives and that a sincere desire to protect the environment and labor rights may be

another motive. For instance, Bhagwati (1995, 1996) summarizes what he sees as the

different possible objections to differences between national labor and environmental

standards. One of these reasons is that protectionists see great value in invoking

unfairness of trade as an argument for getting protection: it is likely to be more

successful than simply claiming that you cannot hack it and therefore need protection.

(1995, 746) Further, Bhagwati fears that if the WTO legitimizes what was referred to as

eco-dumping dutieswhich would enable countries to put tariffs on imports to

counteract any price advantage they may have accrued due to lower environmental

standardsthen this would facilitate protectionism without doubt (1995, 749) because

protectionists would abuse these duties like they do regular anti-dumping duties.

Bhagwati does grant that there are other, more sincere reasons, to support fair

trade. First, people might be concerned with a race to the bottom if lower standards

abroad can force countries to lower their own domestic standards, though Bhagwati

discounts the existence of such a race. Second, people might have moral concerns:

7See also Krugman (1997).

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they are opposed to labor and environmental abuses regardless of who suffers from them.

Third, people might have moral concerns about the inherent unfairness of competition

when one side has a distinct, regulatory advantage over the other. While he

acknowledges the simultaneous existence of these economic, political, and moral

concerns, Bhagwati does not provide any suggestions about which one will predominate

under which circumstances and is highly critical of the validity of the non-protectionist

reasons.

Even when acknowledging moral concerns of fair traders, economists have often

dismissed these concerns. Bhagwati and Srinivasan (1996) liken them to imperialism:

simply the old, morality-driven desire to spread the values to which one subscribes.

(180) In impugning the motives of fair traders, Bhagwati and Srinivasan (1996) go so far

as to suggest that the real reason for calls for harmonization of labor and environmental

standards is a nefarious plot against developing countries such that they predict we will

also witness increasing attempts at encouraging population control in these countries

(165) in order to limit economic competition from these countries. Bhagwati and

Srinivasan may be right that environmental and labor concerns are culturally specific and

that forcing other countries to adopt your standards may be more ethically challenged

than the ethical violations you are charging others of pursuing. However, supporters of

free trade are unlikely to convince sincere fair traders to abandon their demands by

pointing out the efficiency gains of free trade or by dismissing their concerns out of hand

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as self-serving or by providing compensation for lost jobs and income, the typical

strategies suggested in this literature.8

This view of fair trade can also be seen in political science. For instance, Drezner

(2006), a review of policy choices available to the U.S. President on trade issues, uses the

label fair trade to denote the alternative policy orientation to a free trade approach. He,

thus, consciously conflates many different aspects of trade policy only some of which

covers what this paper refers to as fair trade. For instance, in addition to labor and

environmental standards, Drezner also includes anti-dumping measures and concerns

about the distributional consequences of trade. While Drezner occasionally seems to

suggest that any opposition to free trade can be carried under the fair trade rubric9

and,

thus, fair traders include protectionists, he at other times suggests that support for fair

trade, including concerns for low labor and environmental standards abroad, only carry

8Discussions about labor standards are similar to these discussions of environmentalism,

as exemplified by Brown, Deardorff and Stern (1996) They state that the pursuit of

international labor standards has taken on a more protectionist tone. In some cases the

protectionist intent is barely disguised. In fact, it is quite commonly feared that countries

with below-average labor standards are gaining an unfair advantage in trade. (266)

9For instance, Drezner states that three political facts of life have caused many

Americans to shift their support from free trade to fair trade. First, during tough

economic times or times of economic uncertainty, public suspicion of free trade policies

explodes into public hostility. Inevitably, foreign trade becomes the scapegoat for

business-cycle fluctuations that have little to do with trade. (p. 9) This passage seems to

imply that fair trade includes any opposition to free trade, i.e. including protectionism.

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the danger of being subverted by protectionists rather than directly being protectionist.

For instance, Drezner states that fair trade carries the danger of mutating into blanket

protectionism and that because almost any trade barrier can be advocated on grounds of

fairness to some group, special interests can easily hijack this policy orientation. (pp.

3-4) Fair trade is, thus, either protectionists in disguise or the possible start of a slippery

slope towards protectionism.

Not all academics are so skeptical of the motives of fair traders. For instance,

Rodrik, though probably best summarizing the conventional wisdom against fair trade as

quoted above, by no means shares this view. Instead, he argues that we need to take into

account individual concerns about the procedural fairness of different labor and

environmental standards. [B]y doing so we can start to make sense of peoples

uneasiness about the consequences of international economic integration and avoid the

trap of automatically branding all concerned groups as self-interested protectionists.

(Rodrik 1997, 5-6) Although acknowledging that there may be legitimate cases in which

trade is unfair, Rodrik is also concerned that organized interests might abuse fairness

claims. In other words, not all the new fair-trade bottles contain old protectionist wine,

but some of them do. Rather than throwing out all the bottles, as others seem to propose,

Rodrik is interested in creating ways to distinguish the bottles from each other and

throwing out only the protectionist ones. This view is, thus, similar to argument

advanced in this article that it is possible to sincerely support fair trade and the results

presented below can be seen as a way to distinguish between the bottles.

II. Who Would Fair Traders be if they were Protectionists in Disguise?

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As described above, standard academic views of fair trade tend to fall into two

major camps: those that view fair trade as the same as protectionism and those that view

fair trade as a more acceptable disguise for protectionism. This paper offers a third

possibility sympathetic to Rodriks view: fair trade and protectionism are distinct policies

and many people will (sincerely) choose to support or oppose only one of them. If the

standard views are correct, then we would expect the same factors that determine support

for protection to determine support for fair trade. If, on the other hand, this articles

argument is correct, then we would expect the same factors that determine support for

environmentalism and labor rights to determine support for fair trade. Fortunately, these

factors are very different and often exactly opposite, providing an excellent opportunity

to test this papers arguments against the standard view of fair trade.

If the standard view is correct, then those who are hurt economically by trade

should support fair trade while those who are helped by trade should oppose it.

Economic theory provides numerous answers on who is helped and who is hurt by free

trade and protection and recent empirical research has demonstrated that these theoretical

factors (and other factors not directly derived from theory) are able to predict public

opinion about trade policy and other aspects of globalization. If the traditional view is

correct, these same factors should be able to predict (in the same direction) support or

opposition for fair trade.

Economic theory about trade suggests that the main determinants of support for

free trade or protection are a persons factor endowment, industry of employment, and

the level of factor mobility in the economy. If factors are mobile, i.e. one can easily

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transfer ones skills or capital from one sector of the economy to another, then the

Stolper-Samuelson theory predicts that support for free trade and protection should be

determined by factor ownership: those holding abundant factors should support free trade

since this will increase exports of products produced intensively with the abundant factor

while those holding scarce factors should support protection as free trade will increase

imports of products produced intensively with the scarce factor. Thus, in Europe, owners

of capital and skilled labor should support free trade while unskilled labor and farmers

should support protection. On the other hand, if factors are specific, then the Ricardo-

Viner theory predicts that industry of employment determines trade policy preference.

Those who work in export industries, regardless of capital ownership or skill level,

should support free trade while those who work in import-competing industries, again

regardless of capital ownership or skill level, should support protection. Most of the

research on public opinion about trade policy has found that both factor-ownership and

industry matter, although the results are stronger for factor-ownership.10

Unfortunately, the dataset used in this study does not include a variable for

industry of employment, so the effect of industry on support for fair trade cannot be

tested. Variables for skill are included, though, so we can test the effect of factor

endowment. Typically, skill is indirectly measured by either education levelassuming

that education imparts job-related skillsor by incomeassuming that increased skills

increases demand for the worker and, thus, the workers income. According to economic

10See, for instance, Scheve and Slaughter (2001), Mayda and Rodrik (2002), and Hays,

Ehrlich, and Peinhardt (2005). Since, as Hiscox (2002) shows, factors are both partly-

mobile and partly-specific, this finding should not be surprising.

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theory, if fair trade is protectionism in disguise, we should expect low-skilled workers,

whether measured by education or income, to support fair trade and high-skilled workers

to oppose it. In addition, a variable is also included for whether the respondent works on

a farm: given that land is a scarce factor in Europe, we would expect farmers to support

protection and, thus, also support fair trade if it is protectionism in disguise.

In addition to these theoretically derived findings, the empirical literature has

identified a number of other factors that influence support for protection or free trade.

The studies listed above have found such factors as gender, marital status, age,

unemployment status, national identity, and ideology to be important predictors of

support for free trade and protectionism. Women are consistently more supportive of

protection than men, though the reason for this is still unclear.11

Older respondents and

married respondents are also more likely to support protection, although the theoretical

underpinnings for these findings are also not well specified. Unemployed respondents

are more supportive of protection because they may blame free trade for the loss of their

job or they may believe protection might lead to new jobs in their industry. Those who

express strong levels of patriotism or national identity are less likely to support free trade,

probably because they want to support domestic industries. Finally, in terms of ideology,

those on the right tend to be more supportive of free trade and those on the left more

supportive of protection. This follows from the economic theory above and from the

11 See Hiscox and Burgoon (2003) for more on the topic of gender and trade policy. In

particular, they argue that the reason women are more protectionist than men is that men

are more likely than women to be exposed to economic theory in college and, thus, more

likely to be exposed to arguments suggesting free trade is beneficial.

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typical concerns of those on the left and right: in a mobile-factor world, free trade in

developed countries tends to hurt those with lower levels of education and income, i.e.

the already worse off, and leftists, with their greater concern for economic equality,

should be more sensitive to these costs. The analyses below include variables for all of

these factors: if fair trade is the same as protectionism, then we should expect women, the

old, the married, the unemployed, the nationalistic, and the liberal to support fair trade.

If, on the other hand, support for fair trade is a sincere expression of belief in the

value of environmental and labor rights, then the people who support fair trade should

have the same characteristics as those who support environmental protection and high

labor standards. Support for these positions, for instance, could all be considered

elements of post-materialism (Inglehart, 1977, 1997) where people express greater

concern for quality-of-life issues, such as environmental protection and individual

freedom and self-expression, rather than economic and physical security issues, such as

economic growth.12

Post-materialists are expected to be young, highly educated, and

wealthy and to have left-wing ideologies. Also, economic security is often a pre-requisite

for expressing post-materialist values; thus, the unemployed should be less likely to be

post-materialist and the single should be more likely as they are less likely to have

dependents to support and, thus, have a lower threshold for security. Women have also

been found to be less post-materialist (Inglehart, 1977, 90-91) although, again, the reason

12 If economists are correct that fair trade policies will hurt economic growth or economic

efficiency, then this further reinforces the link between fair trade and post-materialism.

Post-materialists will value such things as environmental protection and industrial

democracy over economic growth.

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for this is not entirely clear.13

Overall, these characteristics of post-materialists are the

exact opposite of the characteristics of protectionists. In addition, union members might

be expected to be more supportive of fair trade especially as collective bargaining rights

are often considered a core element of labor standards. On the other hand, unionized

workers often support protection as they view free trade as a threat to their jobs.

Figure 1 summarizes the expectations about which factors influence choosing

protection and choosing fair trade (assuming the latter choice is sincere.) If fair trade is

protectionism in disguise or the equivalent to protectionism, then the factors in the left-

most columns should not only explain why respondents support protectionism, but why

they support fair trade as well. If fair trade support is sincere, then the factors in the right

most columns should explain their support for fair trade. Thus, Figure 1 lists the

predictions of what characteristics fair traders should have depending on whether they are

sincere or protectionists in disguise.14

The perspectives described above can also be used to determine what national-

level factors might explain why some countries are more supportive of fair trade than

others. First, national-level aggregates of the individual-level factors should have the

same effect. Thus, for instance, if fair trade is protectionism in disguise, wealthy

13See Hayes, McAllister, and Studlar (2000) for more on gender and postmaterialism.

14This article does not argue that all fair traders are sincere. Some may be disguising

their protectionism. If the average fair trader is sincere, though, then the factors listed in

the right-most columns of Figure 1 should explain their choice. If the average fair trader

is a protectionist in disguise, then the factors listed in the left-most columns of Figure 1

should explain their choice.

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countries or countries with low unemployment should oppose fair trade; if fair trade is

sincere, then wealthy countries or countries with low unemployment should support fair

trade. Second, if fair trade is sincere, then we would expect countries that tend to support

environmental and labor protection in other policy areas to also support these concepts in

trade policy. Thus, countries with strong environmental policies and powerful labor

unions should also be more supportive of fair trade. Thus, we can examine data at both

the individual and national level to determine if fair trade is protectionism in disguise or

sincere.

III. Research Design

To test the argument that fair trade support is sincere, we need public opinion data

asking questions about fair trade support. The 1997 Eurobarometer survey asked a series

a questions about consumer preferences for fair trade bananas in 15 European Union

(EU) countries which can provide leverage on support for fair trade. The survey defines

fair trade products as those that carry a label guaranteeing that the products have been

produced ensuring fair working conditions for farmers and employees, and respecting the

environment. Respondents were asked if they were aware of such products, if they had

every purchased any, and whether they would be willing to buy fair trade bananas if, first,

they were the same price and quality as regular bananas, and, then, if the fair trade

bananas were more 10, 20, or 30 percent more expensive than regular bananas. If

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respondent claim to be willing to buy fair trade bananas that are 10 percent more

expensive then I code them as supporting fair trade.15

This question only measures consumer preferences but it should, nonetheless,

serve as a good proxy for policy preferences. This question taps into the willingness of

respondents to suffer a financial cost for their values and, thus, may be a good measure of

whether they feel strongly about the issue. Ehrlich (2007) included both fair trade policy

and consumer preference questions and found consistent results between these questions

in the United States. This probably should not be surprising given that similar questions

asked in previous surveys in the United States about the willingness of respondents to pay

extra to Buy American and, therefore, protect American jobs have found those who

support protection are also willing to pay more for American-made products. (Scheve

and Slaughter, 2001) If fair trade is protectionism in disguise, we might expect

protectionists to similarly answer this question; if fair trade is sincere, we might expect

labor and environmental advocates to be similarly willing to pay extra for goods that

conform to their values. Thus, consumer preferences is only a proxy for fair trade policy

preferences, but these previous results should increase our confidence in the strength of

the proxy.

The analysis below therefore investigates why individuals support or oppose fair

trade based upon whether they are willing to pay extra for fair trade products. Because

the question has a binary choice, probit methods can be used to determine if the

15If respondent are not willing to buy fair trade bananas, they are asked why. If they say

that they do not buy any bananas, I drop them from the sample as it is impossible to tell

whether they support fair trade or not in this instance.

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independent variables affect this decision in such a way as to support the fair trade as

protectionism in disguise story or the fair trade as sincere preferences story. The

model for this analysis is as follows, with expected signs of the independent variables

detailed in Figure 1:

Purchase = 0 + 1 Income + 2 Education + 3 Farm + 4 EU Support + 5

Female + 6 Married + 7 Union + 8 Unemployed + 9 Ideology + 10 Age +

Income measures in which quartile each respondents household income falls.

Education measures the age at which the respondent left school. Farmeris a dummy

variable equal to 1 if the respondent works on a farm and 0 otherwise. EU Support

measures whether the respondent supports their countrys membership in the EU and can

be taken as an inverse measure of a respondents level of national identity. Two different

trichotomous measures are used, one asking if the respondent believes membership in the

EU is a good thing or a bad thing and one asking if the respondent believes their country

has benefited from membership or not.16

Female equals 1 if the respondent is female and

0 if the respondent is male. Marriedequals 1 if the respondent is currently married and 0

otherwise. Union is equal to 1 if the respondent is a current union member and 0 if not.

Unemployedis a dummy variable measuring whether the respondent is currently

unemployed (out of a job and seeking work) or not. Ideology is a three-point scale equal

to 1 for those on the left, 2 for those on the center, and 3 for those on the right. Age

measures the age of the respondent in years. Table 1 provides summary statistics for

these variables.

16See Gabel (1998) for a discussion of these different measures.

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To investigate the cross-national determinants of fair trade support, I simply

calculate the percentage of respondents from each country willing to purchase fair trade

products, as reported in Figure 2. There is a clear amount of variation in support for fair

trade across countries: over 60% of Luxemburgers and Swedes support fair trade while

less than 30% of Portuguese do. Belgium and Spain are below 40% with the other 10

countries clustered between 40 and 60%. There is no obvious pattern to this data except

for a possible North-South divide if Belgium is ignored, but other factors may be

influencing these cross-national results in less obvious ways which the next section will

determine. Due to the limited sample (15 countries), I only conduct bivariate correlations

with the factors discussed in the previous section.

IV. Results

The results strongly support the sincere view of fair trade. Looking first at the

main model, which includes fixed country effects, listed as Model 1 in Table 2, people

with higher incomes and education levels are more likely to purchase fair trade products

while rightists are less likely to purchase these products, all of which we would expect if

fair trade support is sincere. . Union members are less likely to purchase the products,

which is a surprising result from either perspective: if fair trade is protectionism, we

would expect union members to support it to protect their jobs; and if fair trade is sincere,

we would expect union members to support it because of the increased labor standards

implied by the fair trade label. The negative coefficient may be a reflection of a desire of

union members to buy local products rather than any sort of import. Women are more

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likely to buy fair trade products, which is consistent with both the protectionist and

sincere perspectives. EU support (measured here as whether the respondent believes

membership is a good thing) is negatively correlated with fair trade purchases, which is

consistent with the protectionism in disguise perspective if we view those supporting EU

integration as having lower levels of national identity. On the other hand, the sincere

perspective makes no prediction about this variable. Where the two perspectives make

contradictory predictions about the effects of specific variables and where the coefficients

are significant, the results always support the sincere perspective.

These results are also remarkably robust. Mode 2 changes the wording of the EU

support variable to whether the respondents country benefits from membership. As can

be seen, there are no major changes between the results. The sample size drops in this

model and the effect of EU support increases, but the size and significance of the rest of

the variables in the model barely change at all. Models 3 and 4 repeat Models 1 and 2 but

drop the country-dummies. The results in these models are quite similar to Models 1 and

2 except that the coefficients on EU support are no longer significant.

Returning to Model 1, the effects of the important variables can best be seen by

examining the predicted probability of purchasing fair trade products, as listed in Table 3.

These probabilities were generating using Clarify and setting all variables at their median

except for the variables listed in the table which were manipulated one at a time.

Respondents at the bottom income quartile are only 52% likely to support fair trade,

while those in the top quartile are 63% likely to support fair trade. Education and

ideology also have similar effects to income. Those with an education level one standard

deviation below the mean (left school at age 13) are 54% likely to support fair trade while

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those one standard deviation above the mean (age 23) are 65% likely to support fair trade.

Left-wing respondents are 64.5% likely to support fair trade with right-wing respondents

54% likely. Gender and union status have smaller substantive effects: 3 and 8%

respectively. However, each of these variables are both statistically and substantively

significant.

The results are also consistent if Models 3 and 4 are repeated in individual

country samples rather than in one pooled sample. Doing this cuts the sample size of

each regression into the hundreds, so the variables are frequently insignificant. However,

when the variables that are significant in the pooled sample are also significant in the

country-specific samples, they are in the same direction. In particular, education and

income, when significant, are always associated with more support for fair trade and

ideology is always negative when significant. Interestingly, age is significant in four of

the country-level regressions: it is positively related to fair trade support in the

Netherlands and Luxembourg and negatively related in Denmark and Greece. Farmers in

Germany and Ireland are also less supportive of fair trade. For the most part, though,

these country-specific results support the sincere perspective of fair trade.

The pattern of support between countries also supports the view that supporting

fair trade products is a sign of sincere support for environmentalism and labor standards,

as shown in Table 4. This table examines how country-level characteristics are correlated

with average support for fair trade products within countries. Due to the small sample

size (at most 15 countries), I only examine the bivariate correlations, so these results

should only be seen as suggestive. Economic aggregates are not strongly correlated with

fair trade support: levels and patterns of trade are not significantly correlated, nor is the

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unemployment rate. GDP per capita is only marginally insignificant, suggesting that

richer countries are more likely to support fair trade, which is what one would expect

from a sincere perspective. GDP is positively and significantly correlated with fair trade

support, which is the only finding that is consistent with the protectionism in disguise

argument: according to optimal tariff theory, large economies are more likely to support

protectionism because they have enough market power to influence the terms of trade of

products that they place tariffs on and can, under certain circumstances, actually benefit

from some tariffs. Small economies, on the other hand, never benefit from tariffs.

However, labor and environmental strength within the country are strongly

correlated with fair trade support. Countries with better environmental conditions, as

measured by the Environmental Sustainability Index (ESI)17

, should be expected to have

stronger environmental movements. As can be seen in Table 4, these countries also tend

to have high support for fair trade products. Corporatist countries, which have stronger

labor unions and are traditionally more concerned with labor rights, also are correlated

with higher support for fair trade, whether measured with Lijpharts (1999) summary

measure of corporatism or a more focused measure of coordinated-wage bargaining.

However, union density is not significantly correlated with fair trade support, although

this may be a result of the small sample size, as there is no data on union density in

Greece, Luxembourg, Portugal, and Spain. (Luxembourg is the missing observation in

17 This measure summarizes 76 environmental indicators including measures of natural

resource protection, pollution levels, and environmental management. It is provided by

the Center for International Earth Science Information Network and is available at

http://sedac.ciesin.columbia.edu/es/esi/.

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wage bargaining and ESI.) Thus, countries with stronger environmental and labor

movements also tend to be more supportive of fair trade, which is what we would expect

if fair trade support is sincere.

V. Conclusions

The results of this article strongly support the view that fair trade is, at least

partially, a reflection of sincere support for environmental protection and labor standards

among the public. Other fair traders may be motivated by economic self-interest, as most

economists and political scientists have suggested, but this is by no means the dominant

reason to support fair trade. What are the implications of this finding?

Most important, this finding changes how academics and policymakers should

respond to the fair trade movement. The standard approaches, as noted above, have been

to ignore or belittle the movement as discredited protectionism or, at best, to reiterate the

economic case for free trade and point out the efficiency costs of any trade barriers. If

support for fair trade does not rest on economic concerns, though, then this economic

defense of free trade is unlikely to be convincing.

This is especially troubling for any supporter of free trade given the embedded

liberalism literature which has held that the post-War free trade consensus has been

maintained by increasing the size of the welfare state in order to compensate those who

lose their jobs or take on increased risk because of free trade. If new opposition to free

trade is being generated by sincere concerns for environmental protection and labor

standards both at home and abroad, then the standard technique of increasing

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unemployment insurance or job retraining programs is unlikely to be able to maintain

support for free trade. In short, without new policy tools, the fair trade movement may

pose a more serious threat to free trade than previous movements opposed to free trade.

This is likely to be exacerbated if the sincere fair traders see their concerns

hijacked by traditional protectionists. Economists sympathetic to the moral concerns of

fair trade, such as Rodrik, still fear that interest groups like labor unions may be able to

use fair trade to achieve their protectionists ends. By wrapping up their calls for

protection in complaints about labor rights abuses, labor unions may be able to increase

the number of people who support their demands. The results presented here suggest that

this strategy may be profitable: there is a large pool of people who support fair trade who

would oppose traditional protectionism. If protectionists can win over these people by

marketing their protectionism as a tool to achieve fair trade, they may be able to craft a

large enough constituency to get their measures enacted. The results presented here do

not demonstrate one way or another whether this strategy would be successful, but it does

suggest that Rodriks fears are legitimate as the conditions exist that would make success

possible. Future research is needed, though, to determine whether protectionist interest

groups are willing or able to exploit this demand.

For which countries are these issues likely to be most problematic? The fair trade

movement seems to be strongest in wealthy countries with strong environmental and

labor movements. In other words, Scandinavian countries like Sweden and Denmark are

likely to have the largest fair trade movements, but other Northern European countries

such as Germany. Mayda and Rodrik (2002) have found that these countries tend to be

the most opposed to protectionism, which might limit the ability of protectionists and fair

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traders to unite in opposition to free trade. However, if the fair trade movement

continues to grow and if no adequate response to it is implemented, then the support of

these and other countries for free trade may begin to diminish which could have

disastrous effects on the global free trade regime.

Finally, the research presented here suggests that the entire literature on trade

policy in both political science and economics needs to be expanded. Models of trade

policy tend to view policy options as residing on a single continuum from complete free

trade to absolute protection, or autarchy. This papers research suggests that we need to

move beyond free trade and protection: there is at least one other dimension to the trade

policy debate that partly, but does not entirely, overlap with the free trade/protection

dimension. One can oppose free trade without supporting protection and oppose

protection without supporting free trade. Existing theories about trade policy are ill

equipped to explain when and why this will be the case or what the results of fair trade

support will be. As the fair trade movement possibly grows, these theories will become

increasingly incapable of predicting and explaining trade policy outcomes. Before we

can devise new theories or revise the old ones, though, we need to come to more fully

understand what this new movement is, who supports it, and what their demands are, a

process this article will hopefully start.

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Bhagwati, Jagdish and T.N. Srinivasan. 1996. Trade and the Environment: Does

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Mayda, Anna M. and Dani Rodrik. 2002. Why Are Some People (and Countries) More

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Figure 1: Factors Affecting Support for Trade Policy Dimension

Support for Protection Support for Fair Trade+

UnionUnemployed

AgeFemale

Married

Farmer

-

IncomeEducation

Right-wing

+

IncomeEducation

Union

-

Right-wingUnemployed

AgeFemale

Married

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Figure 2: Average Fair Trade Support by Country

Austria

Belgium

DenmarkFinland

FranceGermany

Greece

Ireland

Italy

Lux

Neth

Portugal

Spain

Sweden

UK

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

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Obs. MeanStandard

Deviation

Purchase 12841 0.492 0.500

Income 11722 2.475 1.096

Education 15822 18.027 4.747

Farm 15822 0.043 0.204

EU Membership 14583 1.662 0.773

EU Benefit 13050 1.399 0.490

Female 15822 0.516 0.500

Married 15821 0.603 0.489

Union 15822 0.312 0.463

Unemployed 15822 0.071 0.258

Ideology 13262 2.011 0.803

Age 15822 42.846 17.555

Table 1: Summary Statistics of Independent

Variables

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Model 1 Model 2 Model 3 Model 4

Income 0.097*** 0.092*** 0.088*** 0.084***

(0.015) (0.015) (0.014) (0.015)

Education 0.029*** 0.028*** 0.038*** 0.038***

(0.003) (0.003) (0.003) (0.003)

Farm -0.036 -0.051 -0.071 -0.094(0.076) (0.08) (0.074) (0.078)

EU Support -0.041** -0.064** -0.022 -0.028

(0.019) (0.032) (0.018) (0.030)

Female 0.082*** 0.068** 0.082*** 0.067**

(0.028) (0.030) (0.028) (0.030)

Married -0.024 -0.027 -0.005 -0.01

(0.032) (0.033) (0.032) (0.033)

Union -0.203*** -0.203*** -0.186*** -0.185***

(0.034) (0.035) (0.033) (0.035)

Unemployed -0.074 -0.107* -0.071 -0.104*

(0.057) (0.060) (0.056) (0.059)

Ideology -0.137*** -0.137*** -0.134*** -0.135***(0.018) (0.019) (0.017) (0.018)

Age -0.001 -0.001 -0.001 -0.001

(0.001) (0.001) (0.001) (0.001)

Constant -0.300** -0.188 -0.635** -0.566***

(0.117) (0.128) (0.109) (0.117)

N 8286 7542 8286 7542

Pseudo R-Squared 0.054 0.054 0.037 0.036

Chi-Squared 620.01 567.9 424.32 376.52

Notes: ***p


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Mean

Income

Bottom Quartile 0.517 0.478 0.554

Second Quartile 0.555 0.522 0.587

Third Quartile 0.593 0.564 0.622

Top Quartile 0.630 0.600 0.660

Education

6 Years 0.455 0.408 0.504

13 Years 0.536 0.503 0.571

18 Years 0.593 0.564 0.622

23 Years 0.649 0.619 0.676

59 Years 0.922 0.881 0.956

Ideology

Left 0.645 0.615 0.675

Center 0.593 0.564 0.622

Right 0.540 0.506 0.571Union

Member 0.514 0.480 0.545

Not Member 0.593 0.564 0.622

Gender

Male 0.593 0.564 0.622

Female 0.624 0.595 0.655

95% Confidence

Interval

Table 3: Predicted Probability of Supporting Fair

Trade

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Correlation Significance Observations

GDP 0.659 0.001 15

GDP per capita 0.437 0.103 15

Uemployment -0.346 0.207 15

Imports -0.118 0.676 15

Exports -0.067 0.811 15Balance of trade 0.244 0.382 15

Union density 0.428 0.189 11

Pluralism -0.629 0.012 15

Wage bargaining 0.622 0.018 14

Environment 0.712 0.004 14

Table 4: Correlations with Average Support for Fair Trade

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