Free Trade and Fair Trade
Free Trade and Fair Trade
All over work places and school campuses around the world you can be sure to find cocoa, coffee and certain other products that are labeled “free trade,” but is fair trade the same as free trade? “Free” and “fair” are powerful, often abused words when applied to the concept of trade. I will attempt to clarify the differences between free and fair trade, show how they may overlap, and the beneficial in each system.
Deliberate trade benefits both the buyer and the seller. The benefits in excess of costs are the gains from trade. An efficient society maximizes the gains from trade by wisely using human, natural and capital resources. Political processes redistribute these gains to promote or reduce equity.
Free trade means that anyone can trade with anyone else. Property rights are typically maintained, but government intervention in markets are minimal at best, (Wetzel). The fairness of this trade depends on the amount of competition between buyers and sellers. For example, products price rises when there are few sellers and many buyers. In this case, sellers gained because they have “market power”. With few buyers and many sellers, the price falls; buyers use their market power to gain. Fair Trade is about more than just paying a fair wage. It means that trading partnerships are based on equal benefits and mutual respect; that prices paid to producers reflect the work they do; that workers have the right to organize; that national health, safety, and wage laws are enforced; and that products are environmentally sustainable and conserve natural resources, (Codey).
When trade is freed, competition increases, market power falls and gains distributed more evenly. Numerous buyers and sellers in the farmer’s market reduce bargaining power. Seller competition pushes price down; buyer competition holds them up. Free trade can be fair trade, but agreements that open some markets to powerful producer where they can use their market power,
All over work places and school campuses around the world you can be sure to find cocoa, coffee and certain other products that are labeled “free trade,” but is fair trade the same as free trade? “Free” and “fair” are powerful, often abused words when applied to the concept of trade. I will attempt to clarify the differences between free and fair trade, show how they may overlap, and the beneficial in each system.
Deliberate trade benefits both the buyer and the seller. The benefits in excess of costs are the gains from trade. An efficient society maximizes the gains from trade by wisely using human, natural and capital resources. Political processes redistribute these gains to promote or reduce equity.
Free trade means that anyone can trade with anyone else. Property rights are typically maintained, but government intervention in markets are minimal at best, (Wetzel). The fairness of this trade depends on the amount of competition between buyers and sellers. For example, products price rises when there are few sellers and many buyers. In this case, sellers gained because they have “market power”. With few buyers and many sellers, the price falls; buyers use their market power to gain. Fair Trade is about more than just paying a fair wage. It means that trading partnerships are based on equal benefits and mutual respect; that prices paid to producers reflect the work they do; that workers have the right to organize; that national health, safety, and wage laws are enforced; and that products are environmentally sustainable and conserve natural resources, (Codey).
When trade is freed, competition increases, market power falls and gains distributed more evenly. Numerous buyers and sellers in the farmer’s market reduce bargaining power. Seller competition pushes price down; buyer competition holds them up. Free trade can be fair trade, but agreements that open some markets to powerful producer where they can use their market power,