Tuesday, October 5, 2010

IWF Scholarship Winning Essay: The Fair Trade Trend

Fair trade is a growing concern among consumers.  The goals of the fair trade movement are to assist marginalized producers to become more economically stable and to promote sustainable production and development.  Fair trade also aims to protect the environment and improve women’s wages.  On the surface, the values of the movement are a step in a positive direction for developing countries.  The fair trade movement has expanded the growth of industries into these countries, thus helping the poor and disadvantaged by providing better jobs, eliminating slave labor and exploitative labor practices.  While these motives are noble, the fair trade movement may not be helping as much as its goals intend.
Although fair trade is an attempt to enable the disadvantaged producers to become more self-sufficient, international standards were established.  Fair trade “certified” farmers receive higher prices for their products, making it more difficult for non-certified farmers to compete.  This puts the non-certified farmer at the disadvantage, limiting competition from developing countries.  The standards established by the fair trade movement can also create an impurity due to the fact that the certified farmer could be purchasing his products from another non-fair trade producer at a lower cost.  This makes it hard to say if our “fair trade” products are truly produced in the manner that the movement is trying to achieve.
Fair trade has also helped farmers by providing credit avenues and more sustainable methods for their production.  The challenge begins when consumers are willing to pay more for a particular product, for example, coffee, simply because it is labeled as “fair trade.”  This creates an artificial swell of prices, which creates incentives that can have a negative effect on our economy.  These incentives give producers a good reason to join the movement and can create an oversupply of certain products, which results in a price crash.  If all farms become fair trade certified, competition among products will become obsolete.
Free trade is not fair trade.  Free trade is based on the theory that a country should produce what it makes most efficiently at the least cost and should trade its products with other countries for those it is less able to produce.  This way of economic thinking derives from Robert Torrens’ and David Ricardo’s theory of comparative advantage.  A free market allows the exchange of goods or commerce without restrictions such as import duties or licenses, domestic production subsidies, trade quotas or export bounties.  Free trade and market maintains economic balance.  Nations which can produce quality goods efficiently may succeed, while those who cannot must find a new product to produce.
Many people argue that the signing of NAFTA in the early ’90s was the beginning of the export of American jobs to Mexico and that it has caused unemployment rates in our own country to climb.  The opposite perspective is to look to the jobs that have been created in the United States as a result of the increase of imports from those countries.  While consumers want “fair trade” products, in most cases, the farmers may only grow or manufacture the products and sell them back to the United States for the remaining value-added production jobs – processing, packaging and distribution.  NAFTA was originally established in order to remove tariffs and to eliminate the barrier of cross-border investments and the transportation of goods between the endorsed countries.
Although, on the surface, fair trade appears to be a positive movement, it is merely a trend.  The intentions are notable; however, the free market is still the most reliable economic position.  Developing nations tend to gain more in terms of eliminating poverty and see a higher rate of social progress when they exchange goods freely.  Free trade is the most efficient way of satisfying global supply to demand, providing prosperity for all parties.  Although the fair trade trend has value, the market is more balanced without interference.  Once consumers have discovered a more interesting product, the fair trade fad will fade.

This essay was written by Kelly J. King in competition for the Independent Women's Forum Scholarship Essay.  The topic was "Is Fair Trade the same as Free Trade?" This essay won an honorable mention in the competition. Thank you IWF!  To make a donation, please visit www.iwf.org.

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