The problems with free trade Job losses — While some industries may experience increased job opportunities, those that cannot compete with global imports can suffer.
The idea is that lost jobs will relocate to more efficient industries, however this can take a long time to happen and may be difficult for the individuals or communities that are involved. One country may attempt to dominate the politics of another by threatening to deny access to critical goods and services. Tax havens — Countries with high tax rates can see portable industries take their businesses to more tax-advantageous locations so they can turn a greater profit.
With less taxes, governments have less budget for community services like new roads, healthcare or education , which can have an affect on the wellbeing of society. What is Fair Trade? Advantages of Fair Trade Better wages for producers — Global producers with a Fair Trade certification are protected from fluctuating market prices by earning a minimum price for their goods.
This grants them long-term stability and the chance to plan for their future. No child labor — Fair Trade advocates express concern for exploitation by boycotting products that are considered unethical—for example, products made using child labor or slave labor, or created in unsafe working conditions. By providing fair wages for workers, Fair Trade also reduces the need for children in undeveloped countries to work to support their families. Community investment — A Fair Trade premium is paid on top of regular wages, going towards a community fund.
This can be spent on community projects determined by the producers themselves, such as better medical care, schooling, or building projects. Better working conditions — Fair Trade producers have safe working conditions, free from dangerous chemicals and other harmful substances.
Problems with Fair Trade Certification fees — It can be costly for organizations or individuals to become certified as Fair Trade. Joining fees as well as annual fees are charged. This means that some local producers are unable to obtain certification without the help of a larger organization. Higher prices mean limited customers — Fair Trade products tend to be pricier than free trade items.
While this is what allows workers to earn a good wage, it can also limit the customer base of Fair Trade products to those who are able to afford them. Others may be forced to purchase cheaper products of less quality.
Principles of Fair Trade Fair Trade operates under nine principles which govern the operation of its members. These are: Creating opportunities — To reduce poverty and allow for sustainable social and economic development. Encouraging transparency — With relationships based on openness, fairness, consistency, and respect.
In free trade, there are few regulations to exchanging goods and services across borders. Free trade between countries in most cases has no subsidies, tariffs, quotas or regulations. In fair trade however businesses work hand in hand with the marginalized groups hence ensuring favorable conditions in terms of working conditions and environmental factors are met.
Free trade mainly benefits businesses in the export and import industry. Fair trade, however, benefits small scale business owners in the communities whose social and economic ability is limited. Free trade focuses on trade policies between countries while fair trade focuses on trade among individuals and businesses.
Free trade mainly involves bilateral talks between countries; hence the government is more involved. Fair trade, on the other hand, involves small business traders and the communities. Free trade creates change through the market and government policies while fair trade creates change through community improvement.
With the differences highlighted above, fair trade is better than free trade. This is because fair trade aims at producing a product without the exploitation of both labor and the environment.
Free trade, however, aims at generating more profit regardless of the production methods. A thriving economy can ideally be achieved by the coexistence of free and fair trade. Difference Between Similar Terms and Objects.
MLA 8 Njogu, Tabitha. Name required. Email required. Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment. Notify me of followup comments via e-mail. Written by : Tabitha Njogu. See what I mean? The trouble is that the buyer has all the power because of subsidies. Subsidies are government money that is given in order to help out producers.
For example, the United States subsidizes cotton production, so that means farmers can produce their cotton cheaper in the US. Sometimes, what we actually see is that the Indian farmer, desperate to recuperate any money they can, will sell their cotton at a lower price and suffer a loss. You see a lot of exploitation and power imbalance, and the ones hit hardest are the producers. Well, as we discussed above, there is always going to be regulation.
Fighting against it is not the way to improve trade for the environment, for workers and ultimately for consumers. Fair trade does put rules in place because it recognizes that regulation is inevitable and we might as well encourage ethical behaviour with that regulation. You need to pay producers right. You need to protect your workers. You need to work in harmony with the environment. Which is the kind of thing that makes a lot of sense to regulate!
Check it out! This infographic shows just a few differences between fair trade vs free trade. Fair trade means more empowerment, respect and dignity for workers that are in the developing world. Why not make sure they receive the respect they deserve? When we know this, the whole fair trade vs free trade debate is no contest.
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