(p.68) However, digging deep in to the effects of free trade shows us that that it benefits few but not the masses. For example, the US will benefit from cheap labor and low tariff cost, paying less for more but the workers in the countries where the product is being manufactured will not benefit and neither will the country. (p. 71) By having cheap labor those people cannot afford to buy luxury items or even basic items, which in turn will affect that counties economy. By having youth workers not in sc... ... middle of paper ... ...or those who did have jobs. (p. 95) This is an example of how free trade can be harmful to developing countries.
However, when we read that the central argument is that, 'by liberalizing trade while protecting domestic economies -- a bargain consistent with US trade law, practice, and history ...', we might reasonably expect to be in for a roc ky ride. Politics is important and possibly even central in the process of trade protection, but will always be found to depend on economic forces. The politics... ... middle of paper ... ...sn’t have enough of its own trees to meet its demand for paper. The cheapest way for the Japanese to meet their paper needs has been to import raw logs from America, a trade which ended in the 1980s because there simply was not enough timber to supply Japan and satisfy domestic U.S. needs. Free trade, of course, demands that traders sell to the customer who offers the highest price; they cannot be required to fill the needs of one market at the expense of another.
Because larger scale plantations are able to sell a cheaper product it makes it almost impossible for small family farms to compete without cutting down net profits (Nelson & Galvez, 2000). In order for cocoa farmers in impoverished countries to increase national wealth they need to increase their productivity. Wealth in countries is directly correlated with the nations productivity, and in largely cocoa based nations efficiency in cocoa farms are very important. Wealth allows farmers a greater amount of leisure time to invest in education, health care, and capital equipment. While companies, like fair-trade, help provide farmers with health and fair crop prices to increase national wealth farmers have to increase productivity and increase capital investments (Nelson & Galvez, 2000).
And the big manufacturers of chocolate have to face the problem, as the beans become short it will be difficult for them to provide quality products at cheaper rates. But it beneficial for the supplier of the cocoa beans manufacturers that they can charge prices according to their own rules. As in supply, when price increase the supply of the product will increases. Labor shortage is another problem in areas where cocoa is growing. In the growing areas people prefer to work in cities rather than rural to earn better income.
(Wilson, 2013) This raises questions as to why peasant farmers participate in fair trade coffee networks despite these claims. The possible practicality of fair trade agreements with large corporations and third world countries has been proven to exist. If only a single kind of coffee was sold, the market would opt for the more expensive coffee, which would allow better control of the treatment of all workers. This would also remove the two classes of market wages from normal coffee and fair-trade coffee to allow more focus on ensuring the profits are evenly distributed between the farmer and the workers in third world countries. Singling out the coffee industry would even give the ability to lower the shelf prices to advantage to the consumer.
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,... ... middle of paper ... ...r demands for method of operating that are less efficient means resources are shifted away from more efficient methods. Also, the cost of the finished product is a little higher price for third party certification process but the actual production of the product cost less.
Nonetheless many American consumers are unaware of fair trade labeling unlike Europe and United Kingdom. Many people debate on perceived benefits of fair trade because it has a cost that can be seen as both beneficial and harmful. Selling fair trade products guarantees a min... ... middle of paper ... ...t to determine if all the beans are certified. Second, the prices are inflated for people to stay in the coffee making business instead of progressing into other industries that may be more profitable in the long run. Third, fair trade appears to be a good way to limit competition for wealthy counties such as Europe and US.
But when it comes to coffee, producers don’t want to exit the market because the costs of moving out of coffee production are quiet large and farmers don’t have the means for alternatives. The reason being that, farmers don’t have any outside funding to promote efficient diversification and development. Another reason is that there are protection policies from the United States and the European Union that have made it harder for framers to benefit from producing other crops. And yet, the opportunity cost for farmers to switch to another product is higher than the cost of coffee in a low profit market. So, this book discusses different strategies that are being used to help producers get a better advantage to provide a living for their families.
Why would this be important to Starbucks? For example, with Starbucks bean farms; it is much cheaper for foreign labor and coffee is not easily grown in the United States. It could be damaging if one of Starbucks largest coffee making countries went in to war or into a new style of government that was much stricter on foreign trade and business. Starbucks must also be aware of taxation and tariffs in international markets as well. Environmental The group choose this factor due to the importance of the growth of the coffee bean.
However, there is much debate surrounding the use of subsidies as many critics argue that relying on subsidies prevents suppliers from actually solving their production problems. Nevertheless, subsidies do ensure that prices can be kept low and is a much faster solution. To prevent such price fluctuations within the coffee bean market, government intervention in the form of price controls may be the only way to ensure that the coffee bean market remains stable. Price floors limit the minimum price that can be charged for a product, in this case coffee bean farmers will be protected as their product cannot be sold at a price that is too cheap, therefore they themselves can sell the coffee beans for a decent price. A price ceiling on the other hand, is the maximum price for which a product can be sold to a consumer.