A popular debate that has been building momentum in the realm of academics and pop stars alike is the discussion of free trade versus fair trade. In general terms, this has been an issue that people most likely know exists but do not know the facts or are not interested. However, in the international realm it impacts entrepreneurs, small business owners, and individuals, especially the poor, in real ways.
In the era of globalization, the world has become a much smaller place than it was 50 years ago. The market place has expanded which has allowed businesses of all shapes and sizes to increase their customer base. This interdependence and the free flow of goods and services across state lines and even borders is referred to as the free market. Free trade is tightly associated with the free market because without the physical act of those goods and services being transferred from the producer to the consumer, the free market cannot exist.
The development of the free market and free trade are good things because they allow consumers to dictate what the prices are and what is produced. If free trade is such a positive thing, then fair trade must therefore be negative right? This is the opinion I have come across in several circles, which is formulated before any knowledge about what fair trade is can be communicated or researched. According to the Fairtrade Foundation, 'fair trade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world.' They go on to say, 'by requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers.' Simply put, fair trade seeks to better the lives of the poor and other weak producers by providing them with a market so that those individuals' or businesses' products can be purchased.
To some this may sound like a manipulation of the free market. Before jumping to conclusions though, lets look at why small businesses or individuals that do not produce large quantities need assistance in order to sell their products and therefore earn a profit. In an ideal free market situation, consumers would be able to choose want they want to purchase and producers would constantly be battling each other and the prices within that free market to earn the profit from that consumer. However, government interference can influence the events that take place within the free market that can allow weak producers to have just as much of a chance to earn a profit as strong producers. An example of this interference that impacts the poor are subsidies. A subsidy is a form of financial assistance given to a business or economic sector. Subsidies are used to help a business that may normally fail in a free market environment, or to encourage economic excitement in a sector that may not have seen any. In America, our agriculture industry is heavily subsidized. The principle of subsidies was first developed and put into action during the Great Depression in the 1930s. Their role in sustaining the agriculture industry presently however is minimal. American agriculture subsidies currently cost taxpayers $35 billion annually, while the average American farm household brings in $79,000 annually. It is easy to see how even without subsidies, American farmers would be just fine. Subsidies are not necessary in our day and age, and most importantly these subsidies allow farmers that are receiving them to artificially lower prices below what they would be in a true free market environment which does not give smaller farmers and producers in developing nations an opportunity to compete. Now tell me, which is manipulation?
I am in favor of the free market and free trade because pragmatically, it is efficient. I am also in favor of alleviating poverty by allowing small producers an opportunity to fairly establish a market and earn a profit. If subsidies did not exist, the market could operate how it should which would provide the poor with an avenue to sell their products and ultimately earn a profit. Therefore the debate of free trade versus fair trade is quite unnecessary because what proponents of 'fair trade' want is simply for smaller producers to have just as much opportunity to sell their products as large farmers and corporations do which in fact is free trade. Until the manipulation of the market through subsidies for example is abolished, we as consumers must continue to voice our opinion with our money and purchase fair trade products. Give the poor an opportunity...
Where to buy fair trade certified products
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