Describe the concepts of free trade and fair trade, and then discuss the difference between the two. Identify a product or products that are fairly traded.
Free trade can be defined as an agreement between two or more trading partners to transact business without discriminating against any imports or export between them. They create a free entry and exit of goods from either countries or locality. The number of export or import is not restricted on any of the partners and thus there is a mutual gain from trade of either products may it be export or import. This type of trade may exist between two government that allow the movement of goods in and out of the country without any restriction of goods and services. The prices of goods and services are determined by forces of demand and supply. The stakeholders do not pay tariffs that may exist in a country and any quotas by the government are scrapped off to allow entry of any number of goods or services. Free trade differs from any other type of trade in that its price are controlled by forces of demand and supply where other types of trade are controlled by government agents and tariffs (Bhagwati, 2003).
Fair trade is an agreement between developed countries and developing countries to promote sustainability by helping producers in developing countries to grow and produce their goods or services in better trading condition. This is followed by the government of developing countries pitting up tariffs and quotas as to the number of and quantity of goods or service to be imported. This is an act to protect local industries from internationally recognized and well established company that may overflow the local market with cheap goods and in thus lead to a fall in sale of local products and finally closure of these industries. The government may also dictate the price of goods on the market and set standards that importers should arrive at before putting their goods and services on the market (Marcovitz, 2011).
Free trade differs from fair trade in that free trade seeks to maximize profits and sales when marketing their products. Only efficient international organizations or companies can compete well in this type of trade as they seek to maximize their sales and profits while fair trade seeks to educate the consumer on the offered on the market. Fair trade markets its products while seeking to educate consumers on the offered goods and service. Organizations that undertake free trade do not put enough care on the safety of its employee or their working condition. Fair trade organization care about the welfare of its employees and the consumer regarding working conditions and the price and quality of goods offered in the market. Free trade is not hindered by tariffs imposed by the government to the price and number of goods that are offered in the market and thus there is free trade of goods and services and the prices are dictated by demand and supply and not government forces as is evident in fair trade. In fair trade it is controlled by government forces through quotas and tariffs in terms of the quantity and the amount of import and export Free trade normally benefits multinational corporations that are able to produce under stringent conditions and thus are able to lower their price to compete favorably on the international market in regard to local markets, while fair trade is more likely to benefit the consumers more than the multinational companies as their prices are pocket friendly and government controlled (Bhagwati, 1997).
Beans are some of the products that can be fairly traded on the local and international market. Marketing of beans in the recent past has helped mitigate the adverse effect that a free trade would have on the price of beans and the long term effect it could have on small scale farmers mainly in developing countries. Offering fair trade beans on the market ensures that the welfare of the small scale farmers is put in line not to pull them out of the market as it would happen in a free trade. It ensures that the prices of this essential product on the market is fair to consumers and thrives the activities of small scale farmers in turn. The government checks the prices of beans by introducing quotas on the imports of beans fro other countries and this helps to stabilize the prices on the market and eradicates dumping by multinational companies on the local market and this may drive out local industries (Bhagwati, 1997). In fair trade there exists an organization like the alternative trading organization that checks on agreement between trading partners and ensures that fair trade is carried out and the agreement honored. The mission of this organization is to cross check the allocation of prices the products are fair to both the consumer and the farmer. It makes sure that small scale farmers of crops like beans are not exploited by multinational companies (Bhagwati, 1997).
Where and how are these products marketed?
The marketing of beans is mainly controlled by government agencies and other non governmental organization like alternative trading organization where they set and dictate the prices of certain goods on the market like beans. This is meant to protect the local industry more so the small scale farmers in developing countries and the consumers of such products against exploitation by industries mostly from developed countries. Such agreement are respected by the market players and thus viable in encouraging small scale farmers to thrive and a protection of local industries from dumping that may be experienced in free trade where demand of goods and services is dictated by forces of demand and supply in the market (Marcovitz, 2011).
Are milk and milk products generally considered fairly traded goods?
Milk and milk products are mostly considered fairly traded goods because their pricing is mostly determined and fixed by government, this is to ensure that farmers get the best returns from their produce and fetch a fair wage. The pricing also protect the consumers from sub standards goods offered in the market and also high prices that may be un-fair to them in the long run. In most countries the price of milk and other milk products is controlled by the government to help struggling dairy farmers while at the same time educating the consumers about the importance of the control and the benefit it will have on them. The agreement is to protect local dairy farmers and provide good returns for their produce and for them to manage how to meet their farm and labor costs. It brings a sense of pride for the country dairy farmers and a guard to national integrity. Most consumers who buy products labeled fair trade pay a bit higher than other products as the extra coin goes to the family operated and run dairy farms so as to provide a decent wage for the workers. Farmers are thus able to cater fro their farm cost s incurred during the milk production and thus create more jobs for the local farmers and the associated stakeholders (Marcovitz, 2011).