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Free or fair type of trade
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Introduction
Fair trade can be defined as the business transaction in which the producers are paid for the products they produce locally and sell them to the processing companies and get essentials of life in return. On the other hand, free trade involves the sale of goods and services in-between countries without strict imposition of tariffs, duties or quotas. Each type has specific laid down principles that guide the participants through the process. They also implicate the lives in both positive and negative ways. Upon analysis, some countries continue to restrict free trade because of some problems, although some of the problems are not tangible. It is through the various limitations of free trade that a conclusion can be drawn. Therefore, as far as nations restrict trade, especially to the developing countries, fair trade will continue to uphold the living standards of the people. Fair trade is also free for all; hence, it is through fair trade that the families and any nation will stand, furthermore, there would be no free trade, if fair trade is not in place.
The main key principles that characterize a fair kind of trade include trading activities that are not one-sided, but fair to both parties, and the prices are balanced such that the producers or workers are able to earn sufficiently. Besides, the payments are paid in advance to allow the supplier to fulfill the orders. Fair trade normally allows for the producers and the workers to voice out any issue at hand, hence, the freedom of association (Fairy Trade Faqs N.p). Therefore, there are always safe working conditions, without discrimination, and the welfare of children is observed.
On the other hand, a free form of free trade is characterized by its principles where the individuals are free to choose or judge their modes of labor as well as capital liabilities, rather than the government. This means that wealth is not created by the laws enacted on business. This type of commerce ensures that any exchange does not benefit only one party, but there is equality for all (Condley N.p). Also, free trade must be accommodative and the products must be furnished in the most favorable terms. It, therefore, means that the trade is reciprocal. For example, if a country refrains from buying a product from another, then the other country refrains from buying the product, although this indicates a dangerous aspect of free trade because the interests of one country are promoted by the other’s restrictions.
From the comparison between the principles behind free and fair types of trade, clear differences between the two can be defined. One, the main goal of free trade is to improve on the national economic growth, while the aim of a fair type of trade is to improve and economically empower the marginalized groups in a bid to sustain life. Free trade, therefore, depends on the large scale productions such as industrial productions, agribusiness, and exports, in which the business process depends primarily on the government. Contrary, fair trade involves small scale productions in which the products are meant for local use, rather than large masses and exports.
Secondly, free trade is regulated by trade policies and relations between countries while fair trade depends with the agreements between the individuals transacting or the business owners. There must be signed treaties or agreements between interested states in any form of free trade that would enable imports and exports. In the fair trade, the agreements can either be written or verbal. The exchange depends on the satisfaction of both parties by the end of the transaction (Condley N.p).
The primary benefits of free trade are the building up of multinational corporations and powerful business partnership with the countries of interest. The benefit of the fair type of business is mainly the improvement of the living standards of the marginalized people through small scale farm product, artisans’ creatives, and working in the less industrialized regions. This means that free that free trade profits the large scale producers and the government through huge taxes while fair trade has its earning to the common citizens.
In a critical view, free trade has adverse effects on the environment and the poor population, as well as long-term effects on the government. Large scale production is only possible if the available resources are exploited. This exploitation depletes the environment, leading to degradation. The small scale producers are not able to produce anymore, especially in agriculture, resulting to increased poverty. On the other hand, fair trade has a less or even no impact on the environment as well as the government. As a matter of fact, some small scale business activities promotes the environmental preservation, for example, farming without using excessive fertilizers and herbicides helps in maintaining the quality of the soil and reduces greenhouse gas effects.
After a long time in business, countries in trade ties lower the tariffs, the quotas, and labor. Lowering of tariffs and quotas occur as soon as the prices are reviewed depend on the currencies and to maintain the ties. The continued business also lead to exchange of ideas between people of the countries, resulting to no further need for importing labor. In contrast, long-term relations in a fair trade result to variations in prices (Condley N.p). The most common change is an increase in price, and subsequently an increased labor requirement and environmental standards.
In terms of the producer compensation in a free type of trade, the process is determined by the prevailing market and government policies. The global market value of a product is analyzed and a comprehensive compensation plan is developed. This plan also depends on inter-governments policies in which the participants must sign as members. However, the compensation on the fair trade is arrived at by assessing the minimum living wage in a particular time and the economic stability of the country. The compensation value is monitored from the community improvement index in relation to the value of the currency and the production cost.
For a free trade, the supply chain includes various parties in between the producer and the consumers, the governments being the intermediates. There is always a wide range between the producers and the consumers in terms of people or government agencies, and the prices. Contrary, fair trade involves a reduced chain of supply. There are fewer intermediate parties, hence, a more or less a direct type of trade (Condley N.p). This reduced chain of supply reduces the time of delivery from the producer and the consumer, lowers taxes, and subsequently, the prices.
As mentioned earlier, there are many key players in the free trade, such as the World Trade Organization, the World Bank, and the International Monetary Funds, among others. Within the transactions, exchange of currencies is also identified because every country uses a different form of currency to the other. In the fair trade, the only major organizations are the Fairtrade International and the Fairtrade Organization. These groups do not interfere directly on the trade between two or more parties, but lays down the ideal trade policies as well as protects the producers from market exploitation.
Upon analyzing the impacts of a fair type of trade, one of the outstanding effects is the environmental impact. It has been that fair trade has positively impacted on the environment by protecting the forests from depletion and preventing global warming, hence, promoting biodiversity. For example, through the assistance of the Fair Trade USA or the Fairtrade Labelling organization, coffee and cocoa have been grown by the small scale farmers within the forest canopy (Condley N.p). This move has made the farmers grow the plants while conserving the forests, rather than letting the land to the large scale farmers who would clear the forests in search for large plantations.
Another impact is the assurance of purely organic products to the consumers, but not the chemically modified products as well as the genetically modified. Most of the products are certified by agencies such as the Fair Trade USA or the Fairtrade Labelling organization. The products are stamped with the organizations’ logo for identification (Condley N.p). Such groups constantly organize Global Exchange Programs and Reality Tours, where an interested person can visit and experience Fair Trade.
Elsewhere, fair trade has assisted the organizations and government to identify areas where anti-ethical trade activities like child and forced labor takes place. Countries like Ghana and Ivory Coast have been noted to traffic children from the neighboring countries of Burkina Faso and Mali to work on the cocoa plantations. This led to the formation of the Harkin-Engel Protocol which was signed between Harkin, Engel and the major cocoa industries. Fair trade, therefore, promotes interactions and a solution to the social problems.
While assessing the social impacts of the free type of trade, organizations such as the World Trade Organization were created, hence, the equality of nations. However, the work of controlling the country’s superiority has been faced by challenges. Such challenges include the power politics, leading to blames, especially from the third world countries which continue to criticize WTO for not being neutral. Some blames are cited as being opaque by hindering public participation, allowing for barriers in some countries on the bases of safety, and laws that undermine the local regulations or constitutions (What Is Fair Type of Trade?” N.p).
The principle of reciprocity encourages the nations to try providing similar concessions among one another. Nevertheless, the rich countries keep on pushing the developing ones. The North and South America, for example, have raised concern about the terms used to describe the countries, that is, whether the country is rich or developing (Fairy Trade Faqs N.p). Differentiation by race has also been evident as some, like the African countries report that they feel no benefit of the multilateral trade.
Free trade also calls for transparency in the negotiations as well as the process in a fair and open perspective, with rules equalizing all. It was noted that negotiations are occasioned by trade-related intellectual differences while addressing issues of privacy, power, and political stands. The effects of the intellectual property rights agencies like the TRIPS induce competition and protection of investments and profit making, especially for the poor nations to develop industries independently (Condley N.p). The sale of the genetically modified foods has continued to rock the markets, knowingly and unknowingly. These developing countries are at a greater risk as the large companies try to find way into such markets. This is because of the wide technological difference between the countries.
The principle of differential treatment has been marked with controversies where the developing countries may require what is called “positive discrimination” because of the historic unequal trade. This would reduce the constraints by the countries to foster economic freedom in corporations and enable activism by the ordinary citizens. However, the Multilateral Agreement on Investment was put into place to oversee the corporations among states, regardless of their economic or political status. It is believed China is on the blink to the entry into the WTO, amidst an intense environment to the USA (Fairy Trade Faqs N.p).
Conclusion
The main difference between free trade and fair trade is that free trade involves the governments and large companies that are able to produce massively, while a fair type of trade involves mainly the local productions that are aimed at sustaining the public. Upon analysis of the differences and the impacts of these types of trade to the social and economic scenes, it is clear that a state embracing the fair style of trade stand a greater chance of economic stability. The large companies always require the law materials that are primarily produced by the farmers, artisans, and the natural sources. Fair trade has few limiting factors as compared to free trade. An example is the freedom experienced by traders as they interact with the market freely, while the free trade depends on the governments involved. The chain of supply is also reduced in the fair type of trade. Fair trade is also free for all; hence, it is through fair trade that the families and any nation will stand, furthermore, there would be no free trade, if fair trade is not in place.
Work cited
“Condley Raguet Lays Out A Set Of Basic Principles Of Free Trade Among Which Is The Idea That Governments Cannot Create Wealth By Means Of Legislation And That Individuals Are Better Judges Of The Best Way To Use Their Capital And Labor Than Governments (183 – Online Library Of Liberty”. Oll.libertyfund.org. N.p., 2016. Web. 25 Apr. 2016.
“Fairy Trade Faqs | Global Exchange”. Globalexchange.org. N.p., 2016. Web. 25 Apr. 2016.
What Is Fair Type of Trade?”. Traidcraft. N.p., 2016. Web. 25 Apr. 2016.
