Fair trade or Free trade?

Fair trade or Free trade is a discussion which raises loud and passionate arguments every time it's brought up in any sosical context. Most people have valid arguments for both sides of the discussion. But whatever valid argument is put on the table concerning free trade, I find it hard to ignore that the producer whereever he/she is situated is the main responsible to make sure that the workers are treated fair, equal and are paid living wages.

Most "producing countries" are currently the poorer developing nations. Labour is cheaper, regulations are far from what a western worker and his/her trade union would ask for, and all this keeps again all labour cost lower.

A fair day’s work deserves a fair day’s pay and the price paid to a producer should be at least sufficient to provide for a reasonable standard of living. More than that, workers should have the right to join a trade union and bargain collectively and there other standards to do with such things as health and safety that everyone should enjoy. We like to have our employment protection laws so everyone else should, too.

The Free Trade lobby will argue against this. They say that Fairtrade is protectionist and that the market should be left to decide the price of a product. This promotes competition and efficiency. They would also refer to the theory of Comparative Advantage. Oversimplifying it, the theory says that any two trading countries should do what they are best at and we are all better off.

Besides, simply carrying on trade with a country will help it climb out of poverty. Surely, trade of any sort is a good thing and can only help people over the long term. Foreign trade brings in money and creates employment and that supports the local economy. Given time, such an economy will grow and the incomes, wealth and working conditions of its workers will improve.
Against this, Fairtrade supporters strongly argue that many of the products that are produced by third world countries, like coffee, are highly volatile in price. This makes business planning difficult to impossible and cash flow erratic.

Others criticise Fairtrade as creating inefficiencies in the market, that it lowers product quality because the best produce is kept back for sale on the open market. There are other ways of helping the world’s poor rather than just giving them a reasonable price. Most of the value in a product is added when the raw material is processed and the finished item is produced, but that part of the process normally takes place in wealthier countries. Roasting coffee beans before exporting them would create much higher income for producers but it rarely happens.

One of the problems that Fairtrade faces is that the arguments for it are complex. There are so many facets as to how world trade is organised, subsidies paid by rich countries to their own producers, the relative negotiating strength at international trade talks, the causes of inequality, the effect of globalisation and so on. It is an uphill battle to make these points quickly and succinctly when we live in a world dominated by sound bites.

The good news is that both sides agree that trade is key to helping alleviate poverty in poorer nations. It is just how things operate that separates them. The eventual answer will probably lie in consumers, and how they choose to make their purchases. It will not be easy for consumers, though, should they choose to buy Fairtrade for more expensive items.

Consumers have come to expect low and ever decreasing prices and these expectations need meeting. It is all very well supporting a good cause but the recent spate of well known stores going under illustrates just how real the possibility of failure a retailer can face.

The arguments will go on unabounded but this in itself brings the issues of world poverty and how international trade works out in to the open. Continued debate is crucial in order that everyone can gain a better understanding of the issues and act accordingly :).

From My Fair Trade