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free trade advantages and disadvantages
an essay on fair trade
free trade advantages and disadvantages
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Introduction
The idea of fair trade was founded in the 1950s, and it has become more prevalent in the 1980s. (Mohan, 2010) Fair trade is trade between developed and developing countries where suppliers in the developing countries are protected to ensure a fair trade. (Hayes and Moore, 2005) Suppliers usually benefit from guaranteed minimum price and the social premium. On the other hand, free trade does not have a fixed price, and it has low government intervention such as tariffs on imported goods. On free trade, the prices fluctuate depending on the demand and supply of the goods. Fair trade has its advantages, however there are drawbacks that must not be overlooked. Some critics argue that fair trade has little, if any, benefits to the producers, and it only affects a small number of suppliers. Fair trade only concentrates on a few individuals whereas free trade will have a positive impact in the whole economy. There are flaws in the fair trade system and unlike free trade, it does not encourage efficiency and competitiveness to sustain the suppliers. This essay aims to discuss the benefits and the flaws in the fair trade system and how free trade can be more beneficial to suppliers than fair trade.
Advantages of fair trade
Fair trade offers fixed price that can protect suppliers from fluctuations in prices. (Mohan, 2010) Most of the products traded under fair trade are agricultural. The prices of agricultural products are very volatile under the free market. This is because usually agricultural goods such as coffee and banana are necessities and their supplies are subject to random shocks such as natural disasters. Due to its volatile nature, any small changes in demand or supply will dramatically affect the price. For ex...
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...orks Cited
Booth, P. & Whetstone, L., 2007. Half a Cheer for Fair Trade [online]. London: Institute of Economic Affairs. Available at: [Accessed 11th December 2013].
Griffiths, P., 2010. Lack of rigour in defending Fairtrade: a reply to Alastair Smith. Economic Affairs , 45-49
Hayes, M. & Moore, G., 2005. The Economics of Fair Trade: a guide in plain English [online]. Newcastle Fairtrade Partnership. Available at: [Accessed 11th December 2013]
Mohan, S., 2010. Fair Trade Without the Froth: A Dispassionate Economic Analysis of ‘Fair Trade’ [online]. London: Institute of Economic Affairs.
Ronchi. L., 2002. The Impact of Fair Trade on Producers and Their Organisations: A Case Study with Coocafé in Costa Rica. University of Sussex.
Sidwell, M., 2008. Unfair Trade. London: Adam Smith Institute.
Wright, L. T., & Heaton, S. (2006). Fair Trade marketing: an exploration through qualitative research. Journal of Strategic Marketing, 14(4), 411-426. doi:10.1080/09652540600948019
...ystem primarily responsible for promoting global competition. Free trade also promotes shifts in production so as to fit the “comparative advantage” model. Though free trade is widely practiced concerns with how to regulate free trade, something supposedly unregulated, countries have to subject themselves to the controversial institutions of the IMF and WTO. Fair trade policies while potentially creating smaller markets support workers’ rights in both the U.S. and developing nations. Though the pros and cons of globalization continue to be debated the United States can no longer escape its role in the global economy nor can it impose policies that are detrimental to the United States founding ideals. However policies that play towards the advantages of both free and fair trade could stimulate a healthy domestic economy that is also competitive in the global market.
...sibility to compile with lies on everyone. Fair Trading Act was used in this guide to show how some situations which arise in business are applied to law. Headings were used to cover the most important sections of the act with details on how it relates to business. Having said all that, I can conclude that this was just a guide on how each and every one should compile with the law, there are many sections which I didn’t mention, not because they are not important but I wanted to emphasise on the ones which are usually encountered in everyday business. Everyone must follow the law, if you are found to be in breach of any act, there are penalties. Any company or person has the right to defend the charges laid upon them but evidence must be provided. There are also remedies which can be claimed, not only under this act but in other laws as well.
Fair Trade is an organization that helps certify farmers get the right amount of money for their products. It was founded in 1992, the headquarters is in London, England, UK. Fair trade is a non profitable organisation. Without Fair Trade; the shops and the investors will get profit but the farmer won't. Fair Trade helps the farmers have a safe vision of the amount of profits they will get.
...-operative handling distribution of coffee (Kolk 2013:327-28). Fair trade also allows consumers to consider the type of product being purchased by informing them of the fair and ethical practices behind the coffee beans (Kolk 2013:334). By supporting fair trade coffee the consumer can feel a sense of contribution in supporting the farmers’ livelihood.
Fair Trade can be defined as “a trading partnership, based on dialogue, transparency, and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional trade”. (Lyon and Moberg 2010) By encouraging more ethical consumer choice, Fair Trade challenges processes which devalue and exploit people in disadvantaged positions and the environment by aiming to re-embed commodity circuits within ecological and social relations. (Lyon and Moberg 2010) Established and enforced by Non-Governmental Organizations (NGOs), Fair Trade is a voluntary system with its success driven by the wi...
Fairtrade is something that you will now hear or read about on a regular basis while grocery shopping. We can see packages labelled as Fairtrade; we can see stores promote themselves as being fair trade. However, when you ask people what fair trade actually is, some know and others have a skewed idea of what it means. Fairtrade is a certified process where businesses promote fair prices, fair working conditions, and better trading methods. There are many regulations that are placed onto producers so they can acquire the prestigious title of being labelled “fair trade certified”, yet many of these requirements are not met fully, especially when it comes to workers. Workers are not being treated as fairly as they should be on some of the
Fair Trade will partner with corporations such as manufacturers, retailers and other companies who are associated with buying produce from producers in undeveloped c...
I drink coffee almost every morning, yet I have never thought about the coffee industry or the process involved with the coffee trade. What I am aware of is that the coffee production is usually revolved around Africa and North America, which are destinations that are not as economically developed as New Zealand. In terms of fair trade coffee, I have never considered using it, as I did not know that there was such a system. I only purchase coffee depending on the brand; the taste would be assured, as it is popular with the majority. I also look for cheap prices and products that are on special. Even if the coffee product I purchase is fair trade, I would have only bought it because it is on special or popular with the mass.
Though fair trade is being increasingly affiliated with empowerment of the local and marginalised communities and acclaimed for offering an alternative formulation of trade relations and globalisation, the model is not without pitfalls. In this section, various challenges posing threat to the fair trade model – in theory and practice have been analysed.
Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth.
In the long run, despite the apparent advantages of Fair Trade and the opportunities it appears to offer small suppliers, free trade provides a more sustainable development for suppliers than Fair Trade. It is also more effective in incr...
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.
Two common products that are Fair Trade Certified are Cocoa and Coffee, each of which contains problems that producers face but gain benefits from Fair Trade. Fairtrade International states that cocoa is grown in tropical regions of more than 30 developing countries, such as West Africa and Latin America, providing an estimate of 14 million people with livelihood. Fair Trade Standards for cocoa includes no forced labor of any kind - including child labor and environmental standards restricts the use of chemicals and encourage sustainability. A problem cocoa producers face is the lack of access to markets and financing. Since cocoa is a seasonal crop, producers need loans to meet the needs for planting and cultivating their crop. With this in mind,...