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This article provides a normative assessment of the international trade regime. It analyzes the question of distributive justice: that is, how the gains from trade get distributed both within and between countries. Following John Rawls, I accept that "justice is the first virtue of social institutions."1 Institutions that are not just-that do not provide, for instance, equal opportunity and equal access to all participants-are unlikely to prove stable or enduring, regardless of their efficiency. This leads to the question: is the trade regime just?
I will argue that justice in trade implies a distribution of gains that participants accept as the result of a fair process; I thus adopt the Rawlsian notion of "justice as fairness." This means that our economic institutions should be designed so that all participants, and especially those who are least advantaged, enjoy the opportunity to compete and profit on equal terms with those who are greatly advantaged. Institutions that discriminate against some players or fail to provide equal opportunity to the least advantaged cannot be considered just, though of course they might be efficient.
Trade negotiators who are concerned with achieving just agreements-if only because they associate justice with system stability-will be sensitive to their distributive effects both within and between nations. If the gains from trade were concentrated in a few countries, or if a large number of countries actually faced deteriorating terms of trade, questions about the structure of the regime might be raised. Countries would ask whether they ought to continue participating in a regime that offers them no tangible benefits.
For that reason, if trade is to be considered a Pareto-optimal policy in which someone is made better off but none are made worse off, the winners will have to find ways of compensating the losers. From a Paretian perspective, the amount of compensation must be sufficient so that, at a minimum, the losers consider themselves no worse off than before free trade. Otherwise, the best we can say for free trade is that it promotes efficiency, but not necessarily social welfare.
What follows is an examination of the international regime governing trade between developed and developing countriesone that demonstrates that the creation of compensation mechanisms within and between countries has in fact been central to...