Why Free trade is more important than fair trade rodrigo | | December 18, 2012 rodrigo Table Table of Contents [show [ show]]
Introduction In a globalized world, er! few "eo"le wo#ld $#estion the benefits of international free trade% Different co#ntries can "rod#ce their own "rod#cts haing a com"aratie adantage, and then e&change with the "rod#cts "rod#ced b! other co#ntries% 'oweer, in the "rocess of international trade, there will alwa!s "rod#ce gainers and losers, and th#s will alwa!s be "eo"le com"laining abo#t #nfair trade% In the global global conte&t of the economic crisis, there is a call for f#rther "romoting trade liberalization( on other hand some "eo"le adocate "romotion of fair trade% )o, is the "#rs#it of fair trade more im"ortant* +r, is the "romotion of the free trade more im"ortant* This essa! will criticall! disc#ss the statement -ree trade is more im"ortant than fair trade%.
1.0 Definition 1.1 Free Trade Trade -ree trade is a form of international "olic!, which local goernment cannot tr! to interfere on the o"eration of foreign im"ort goods, or e&"ort goods% /'ill, 200 This form of international trade "olic! has been widel! s"read oer the free trade zones nowada!s% )ince o"ening the oer sea maret for the co#ntr!3s domestic absol#te adantages "rod#cts, it benefits both the trade "artners from the long4term economic ision%
1.2 Fair Trade 5isenberg states that -air trade refers to e&changes, the terms of which meet the demands of 6#stice%. /2007 In fact, fair trade has not been defined #niersall! eer% -I5 is a charit! association, which consists of fo#r diisions% The diisions are international fair trade networs, 5#ro"ean -air Trade 9ssociation, :orld :orld -air Trade +rganization, -air4 trade ;abeling +rganizations International and etwor of 5#ro"ean :orld :orld sho"s% -I5 indicates that fair trade "artnershi" is based on dialog#e, trans"arenc! and res"ect( member in this networ loos for greater e$#it! in international trade% /5#ro"ean -air Trade 9ssociation, 200 It contrib#tes to hel" worers or "rod#cers in deelo"ing co#ntries, es"eciall! in the so#thern hemis"here, "roide a more e$#itable trading condition and "romote s#stainabilit!%
-air trade organizations are s#""orted b! cons#mers for s#""orting "rod#cers in #ndeelo"ed co#ntries, and maing the r#les of international trade cam"aign more e$#itable% -air Trade s!stem has man! t!"es of goods growing more, which are coffee, cocoa, dried fr#it, fr#it 6#ice, n#ts, egetable oil, $#inine, rice, s"ices, s#gar, tea and
2.0 The Importance of Free Trade The free trade is a do#ble sword% +ne side edge carries adantage( another edge carries disadantage% Therefore, there will be alwa!s gainers and losers%
2.1 Gainers The free trade has man! benefits, which "rod#ce man! different gainers in the global maret% It "reents interference efficientl! of local goernment on im"ort and e&"ort trade( cancel ario#s "riileges of the domestic trade% )o the im"orters can gain man! benefits from the free trade% ;et3s tae a loo at other gainers%
2.2 Absolute advantae 9ccording to 9dam )mith3s theor!, co#ntries can s"ecialize in the "rod#ction of goods for which the! hae an absol#te adantage that incl#ding highl! silled labo#r, s#fficient raw materials and then trade these for goods the! "rod#ced less4efficientl! from other co#ntries% /'ill, 200 This is a win4win sit#ation, two co#ntries e&changing goods from each other are both gainers%
2.! "ffective use of ra# materials -ree trade also brings great o""ort#nities for effectiel! #sing raw materials% )ome co#ntries in the =iddle 5ast hae rich reso#rces of oil, b#t there will not be m#ch benefit witho#t trade% -or instance, >atar can gain m#ch benefit from e&changing man! goods and technologies with oil% +n other hand, some deelo"ed co#ntries, s#ch as ?a"an hae er! few raw materials% The! can gain m#ch oil the! need with e&changing technologies( otherwise the! wo#ld be er! "oor%
2.$ %esser livin cost and more products choice The citizens are also big gainers from free trade% -ree trade s!stem can effectiel! sto" selling "rod#cts at high "rices from local "rotectionism, which lead lower liing cost% -ree trade also leads to more "rod#cts being aailable in the maret% Cons#mers hae more choices on the "rod#cts in maret for different "rices and t!"es% Charles :%;% 'ill mentioned in the boo International b#siness that if a national maret is small, there ma! not be eno#gh demand to enable "rod#cers to realize economics of scale for certain "rod#cts% 9ccordingl!, those "rod#cts ma! not be "rod#ced, thereb! limiting the ariet! of "rod#cts aailable to cons#mers% /200
!.2 %osers
-ree trade brings great o""ort#nities, also brings great com"etitions, es"eciall! for the deelo"ing co#ntries% In the initial stage, man! new ind#stries in deelo"ing co#ntries are not strong eno#gh to s#rie from the com"etition of established ind#stries in deelo"ed co#ntries% The local goernment will introd#ce some meas#res in order to "rotecting local ind#str!% 9le&ander 'amilton "ro"osed it in 1@2% 9ccording to the arg#ment, there is a "otential com"aratie adantage in man#fact#ring in man! deelo"ing co#ntries%for instance, China owns chea"er labo#r and raw material costs, and India has big "o"#lation of highl! silled and nowledgeable em"lo!ees who can comm#nicate with fre$#ent 5nglish% 'oweer, at the initial stage, most of their small to medi#m sized firms in ind#stries are too wea to s#rie from br#tal com"etitions of established ind#stries m#ch earlier in international maret% The reason is that the! do not hae strong bacgro#nd for financial s#bsidies and so#rce which assist them get toehold in the start "oint% =oreoer, it is common "henomenon that firms in those deelo"ing co#ntries hardl! reach the international standard for high4end "rod#cts% The arg#ment is if the new ind#stries sho#ld necessaril! be "rotected tem"oraril! b! incenties #ntil the! hae become strong eno#gh to com"etition in free international trade maret%（'ill， 200）-or e&am"le, if China lets the a#tomobile ind#stries from Aerman!, ?a"an and other co#ntries enter the domestic maret witho#t trade "rotection, and then China3s own a#to ind#stries wo#ld colla"se% )o China ado"ts the im"ort tariffs on im"orted cars in order to "rotecting its a#tomobile ind#str!% :hen the local new ind#stries become strong eno#gh to global maret com"etitieness, the goernment sho#ld abolish the "rotectie meas#res established before, otherwise the meas#res of "rotection wo#ld adersel! affect global trade% In fact, canceling the original "rotection is not an eas!( the negatie im"act of s#ch meas#res is to "rod#ce local mono"ol!%
!.0 The Importance of Fair Trade -air trade is a strateg! for s#stainable deelo"ment of economic and "oert! red#ction in the world% Its goal is to create o""ort#nities for "rod#cers from economicall! disadantaged co#ntries% It does not onl! "roide fair "a!ments to the "rod#cers, b#t also consider the e$#al "a! according to the "rinci"le of e$#alit! between the se&es% If the "artners of fair traders need "a!ment in adanced in order to s#riing in the s"ecial sit#ation, fair traders hae to ens#re matching their demands% -air traders also need to tae res"onsibilities for aoiding "otential health and safet! "roblems for "rod#cers% If children are inoled in the woring enironment, fair trader will ens#re matching safet! and ed#cation re$#irements for them% In the 1B0, the largest distrib#tion of the fair trade is to hel" the co#ntries banned from main global trade maret b! "olitical iss#es, to find marets for their "rod#cts% /-air Trade ;abeling +rganizations International, 200 icolas 5berhart in 2007 had the oliian case st#d! concerning fair trade coffee as a member of the -rench non4goernmental organizations 9gronomes 5T EtErinaires sans frontiFres% It "roed that the fair trade did not onl! hae a "ositie im"act on the local "rice of coffee in G#ngas, b#t also hae the economic benefit to all coffee "rod#cers% =eanwhile, fair trade organization co#ld enhance their "rod#ction and their "olitical infl#ence% /5brehart, 2007 The econometric anal!sis led b! ecchetti and Costantion erificated effects of fair trade on farmers of Hen!a% The researchers obsered a gro#" of farmers with fair trade certification, and another gro#" of farmers witho#t fair trade certification for Com"arison% 9fter a "eriod of time, ecchetti and Costantion fo#nd that fair trade co#ld im"roe the liing $#alit! of famers, red#ce child mortalit!, im"roe ho#sehold food intae, and increase the "rice of their
cro"s and so on, in either monetar! or non4monetar! al#e% nfort#natel!, in the methodolog!, this research had errors for the sam"le of cro"s, the relatie contrib#tion of fair trade and the choice of the control gro#"% /ecchetti, Costantino, 200B
$.0 Free Trade vs. Fair Trade ?effre! 5isenberg states that free trade refers to an international trading "olic! that aims at o"enness% /2007 -ree trade is a form of international "olic!, which local goernment cannot tr! to interfere on the o"eration of foreign im"ort goods, or e&"ort goods% /'ill, 200 The +&fam charit! and some economists beliee that the foreign s#""liers in trade sho#ld be "aid a fair "rice, s#ch as the cocoa beans for maing chocolate sho#ld be bo#ght b! higher than maret "rice% This ma! be the most infl#ential demand for fair trade toda!% /'9A:9TI, 2010 'oweer, fair "rice /wage. has been $#estioned b! ?effre! 5isenberg% :o#ld the "rice be fair if it was higher* The "rice can get higher for few worers ca"t#ring the 6obs( or the "rice can get lower in order to "roiding more 6ob o""ort#nities for more worers get "aid% :hich wa! is fairer* /5isenberg, 2007 gaire :oods recommends #sing the "rotectionism as a "art of the "referential s!stem "ro"erl! in order to hel"ing bacward ind#stries in #ndeelo"ed co#ntries% In "ersonal o"inion, there is "ossibilit! that the "referential s!stem or "rotectionism can mae negatie im"acts on the trade, if the! cannot be im"lemented well% -air trade is the e&"ression of 6#stice with h#man emotion% -ree trade regard ol#ntariness as the chief com"onent of 6#stice% /5isenberg, 2007 9ltho#gh fair trade is "ositie actiit! on man! res"ects, solel! adocating fair trade and ignoring the benefit of free trade is reall! not necessar!% =ost beliee that both free trade and fair trade at least hae one thing in common% :orldwide the! are concerning 6#stice, "oert! alleiation and "ros"erit!% -ree trade and fair trade sho#ld sto""ing o""osing each other% -air trade can be an efficient meas#re of s#"erision in order to im"roing free trade s!stem% eca#se of there are still man! ga"s and loo"holes in free trade s!stem% -or instance, the international r#les are generated b! trade negotiations, "rimaril! for the rich co#ntries, while the maret is closed for the main e&"ort "rod#cts in "oorer co#ntries, s#ch as agric#lt#re% /:oods, 2007 )o, is the "#rs#it of fair trade more im"ortant* +r, is the "romotion of the free trade more im"ortant* 9nswer is free trade is more im"ortant than fair trade for global economic deelo"ment%
&onclusion -ree trade is a form of international "olic!, which local goernment cannot tr! to interfere on the o"eration of foreign im"ort goods, or e&"ort goods% /'ill, 200 The free trade has man! benefits, s#ch as "rod#cing lesser liing cost and more "rod#cts choice( bringing o""ort#nit! for e&changing with absol#te adantage and effectie #se of raw materials% -air trade is a strateg! for s#stainable deelo"ment of economic and "oert! red#ction in the world% Its goal is to create o""ort#nities for "rod#cers from economicall! disadantaged co#ntries%
-or global economic deelo"ment, free trade is more im"ortant% 'oweer, fair trade and free trade hae one thing in common, which concern with global 6#stice, "oert! alleiation and global "ros"erit!% =oreoer, fair trade can be an efficient meas#re of s#"erision in order to im"roing free trade s!stem%
'eferences Charles :%;% 'ill, /200, International #siness, @ th 5dition, Cha"ter 7, B, =cAraw4'ill Irwin Charles :%;% 'ill, /200, International #siness Com"eting in the Alobal =aret"lace, Bth 5dition, Cha"ter 7, B, =cAraw4'ill Irwin 5berhart, % /2007% htt"JKKen%wii"edia%orgKwiiK-airLtrade ;% ecchetti, =% Costantino /200B% htt"JKKen%wii"edia%orgKwiiK-airLtrade 5#ro"ean -air Trade 9ssociation% /200% -air Trade ;abelling +rganizations International /200% Alobal -airtrade sales increase !earl! b! 22M% htt"JKKwww%economist%comKdebateKda!sKiewK708 htt"JKKwww%globalenision%orgKlibrar!K17K8NO
