Fair Trade VS Free Trade—What’s the Difference?

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“Fair trade” and “free trade” sound like very similar terms, and it’s easy to confuse the two. However, they are two different ideas, and some supporters of fair trade believe that only one seeks to improve the dignity and circumstances of those living in third-world countries.

A movement dating back to the 1950s in the US that calls for fair treatment of all workers. Fair trade ensures the producers in the developing world benefit from their hard work by mandating that goods are bought from them directly at a previously agreed-upon price.

The international exchange of goods that is unrestricted by government interference, such as import quotas and protective tarrifs (which is a tax attached to an imported good). Free trade allows the exchange of goods across country borders without a government interference in prices.

While free trade aims to benefit the global economy as a whole, often those who see the most profit from it are the world’s wealthiest countries. Free trade allows goods and services from all over the world to become domestically available, often at a cheaper price than the domestic products and services. Some argue it drives an even bigger chasm between their mounting wealth and the mounting poverty of the third-world countries struggling to compete.

Proponents of fair trade might suggest that the existing terms of trade between wealthy and poor countries are unjust, because current market prices for the products made in third world nations are too low for the workers to collect enough wages to keep their familes afloat and keep their dignity intact. The idea behind free trade—which is that people’s quality of life is improved through the ability to consume higher quality goods at cheaper prices—does not always hold true when the country’s economy is not at full employment.

But it’s important to note that without free trade, we wouldn’t be able to purchase goods from other countries at all, so the two don’t have to be opposing sides of an issue. What do you think? Can fair trade and free trade exist simultaneously and work together for the good of the global economy?



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