International Trade Theory and Policy
by Steven M. Suranovic

Trade 125-6

Golden-Rule Fairness

The Golden-Rule is a behavioral rule-of-thumb that has guided moral behavior for several millennia.  Simply stated it says, “Do unto others as you would have them do unto you.”Actions that violate the golden-rule are typically viewed as being unjust, immoral or even sinful. In essence the rule suggests that if you would prefer that others not do things that harm or hurt you, then you should not take similar actions that will harm others. The golden-rule implies a “do no harm” moral imperative.For example, murder is an action that clearly violates the golden-rule and is also unanimously accepted as an immoral act.  The golden-rule also suggests that if you would prefer that others act in a way that is kind and helpful to you, then you should take similar actions to be kind and helpful to others. In this case, the golden-rule implies a “do good” imperative.  Thus, actions such as giving to the poor are generally viewed as moral and righteous acts.

I recognize that applications of the golden-rule seem to have more to do with morals than with the concept of fairness.  For example, murder is not an action that one would typically describe as being “unfair.”  In a sense, the seriousness of murder makes it much more egregious than anything one would use fairness to describe.  Nevertheless, for many other, less egregious, violations of the golden-rule, fairness is sometimes applied.

For example, it is very common to describe cheating in a game as unfair behavior. Cheating means that that person violated the accepted “rules” of the game.   Cheating is an attempt to take advantage of the other people playing the game by raising the chances that you will win while consequently lowering the chances of winning for all of the others.  In other words, cheating implies that harm, or potential harm, is caused to others.  In that sense it is a “mildly” egregious action that is often described as unfair.

In an international trade context golden-rule unfairness arises in several situations. First of all, many different countries commit themselves to various types of behaviors or actions when they sign treaties or international agreements.  One can view a country’s participation in these as accepting the “rules” of a game.  When a country violates these agreements, as will sometimes happen, it is common for other countries that are negatively affected to charge the former with unfair behavior since it is cheating on its agreement.  In the WTO, countries that bring a case before the Dispute Settlement Board (DSB) are arguing that another country is violating its previous promises or commitments made in the Uruguay round of trade talks. In other words, a country is charged with violating the “rules” …  something generally considered unfair.   In general, charges of unfair behavior as a result of rule of law violations, is a very common application of the golden-rule fairness principle.

A second example of golden-rule unfairness arises when businesses engage in predatory dumping.  Predatory dumping occurs when a business sells its product at a price that is less than its cost of producing it and undercuts its competitors for a sufficient length of time to force them out of business.  After that occurs, the company can raise its prices to monopoly levels and recoup its previous losses.   The unfairness of predatory dumping occurs because the business is causing harm to its competitors in order to secure a greater advantage for itself.    This clearly violates the ‘do no harm” directive.

Although golden-rule unfairness can arise when actions cause harm to others, it can also arise when individuals or countries fail to do good. An example is the low regard in which the US is sometimes held when it is noted how little the US donates to poor countries in the form of foreign aid.  Many have suggested that it is unfair that the US gives such a small percentage of its national income to assist poorer countries.

In general, golden-rule unfairness arises when actions are seen as causing harm to others, when actions are inadequately helpful to others, or most commonly when countries or businesses are charged with violating some agreed or implicit set of rules.

International Trade Theory and Policy - Chapter 125-6: Last Updated on 8/2/01

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