Key Issues in the Article
Discuss about the Essence Of Fair Trade And Its Importance.
“Fair Trade” was an article published in the National Interest Journal in the May 2008 issue. E. Stiglit, writer of this article focuses on the concept that producers in developing countries must achieve better trading conditions and he mentioned various concepts or policies like waxing policies and double standards. Various arguments also made whether this policy should be supported or not, flaws and benefits. Here the work of a reviewer is of an analyzer and evaluator and the objective is to be critically analyzed the article and check whether the presented arguments in the article are accurate, finding out any deviations or gap and to develop new understanding relevant to the topic.
In this article, the author wants to state that it was often said that with the help of trade liberalization, the markets are diversifying and growing which was profitable for all companies and countries but why it was stated that everyone got benefited with trade as there was so much obstruction between both developed and developing countries.
There are some key issues discussed in the article like waxing politic, Double Standards, trade contracts and America’s National Interest. The author has presented his views on these elements.
Inequalities are spreading continuously over the world as globalization has significantly reduced inequalities in both knowledge and technology as lower-paid workers are now getting more education and equipment so that they can do the same task, which was done by their counter countries in developed countries. This enables the workers of developing country to get higher wages but also leads to hurt the feelings of more skilled. Free trade is wider and includes many countries together and even continents whereas liberalization is more likely policy inside the country.
Trade liberalization does not provide any benefits to everyone but here a portion of the company profits was given to losers so that there can be a win-win situation. Also, trade liberalization can make the situation worse as in absence of adequate insurance markets, the firm will try to shift to lower return areas and this will affect the national income of the country. There are various hurdles to increasing the level of the trade like the absence of infrastructure and the capital. Trade liberalization was going wrong as the situation was getting worse due to the force upon countries to open up their markets to the foreign banks that are more in favor of lending money to the multinational companies rather than giving to small or medium enterprises (which are a source of job creation) due to high rate of returns.
Flaws and Benefits of Fair and Free Trade Systems
Actually, various political arguments also state that protectionism was a bad thing instead of trade liberalization. It means most of the new industries of the country are protected in the initial stages of their development by supporting with financial assistance or technical assistance. According to the politicians, trade was just about job creation but the author says that maintaining the economy at full potential should be the main focused areas. In general, trade promotes a standard of living but it was not known that who’s standard living exactly?
Also, it was not a free trade agreement as the government was giving subsidies as there are traffic, subsidies and non-tariff barriers which are needed to be abolished. Globalization has increased the employment but unskilled or semi-skilled people are not getting employment. In liberalization, any company can do trade anywhere but for some countries, now also the protection was given and so the fact of liberalization got proved wrong.
America was the first country who find out this gap between fair and free trade and later on they help many developed and developing countries in reducing inequalities and promotes democracy. The aim was also to build good relations with the others countries so that there are more winners and fewer losers. For defence the losers, there was a need for social protection, not protectionism. So, the US has already moved towards fairer trade policies that will ensure that it will help all the industries in both developed and developing countries.
The article “Fair Trade” gives an in-depth discussion of the issues of the free and fair trade system relating to trade liberalization and what are the various healing ways to prevent instability and secureness to the both developed and developing countries. In this article, various arguments are discussed like double standards, waxing politic, trade agreements and national interests.
The idea of the fair trade was beneficial from the human perspective but it requires support from various sides (Global Groove Life, 2014). It was agreeable to give fair remunerations to all the producers of the third countries who are facing various difficulties in the market economy and global trade conditions (Whittle, 2018). The double?standard theory also criticizes the argument like if the importer charges a low price at the national level and high prices at the international market level, it was fair but when he charges a high price at the national level but low prices at the international level, it was unfair. This case was a common business practice as every business set different prices in different markets. U.S. government was the first who started to stop unfair imports by introducing antidumping law and imposes the antidumping duty. It was designed to protect the native industry from the foreign companies but it destroyed more jobs than it creates. This law was also adopted by many countries (USA, Canada, Australia are the main users of such law), whereas less developed countries are usually defendants), and anti-dumping actions are continuously increasing from the last few years. The antidumping law cannot be supported by any theory of liberal democracy and that’s why many political parties of different countries protest against it. The idea of Doha Round has also been introduced which an attempt by the developed countries and it can really could boost the global economy and can strengthen the nation economy through promoting business competitiveness, promoting employment, and benefiting consumers. However, later on it was found that it was beneficial only for the developing nations.
The Need for New Trade Policies
The statement of the author can be supported that the politicians and the economists have missed up the main concept that the trade was not about job creation as it was the maintaining of the economy at the full employment level with the supporting and the help of various policies.
In the last argument, the focus was on the economic insecurity. Regardless of the social and economic progress of the nation, people in both developing and developed have less economic security than they did earlier. The risks and uncertainties are all inter-related, the crises can be evolving anytime, and it was inevitable sometimes to give protection. However, sometimes trade protectionism was implemented when the industries are being negatively affected by unfair competition majorly from the developed countries (Marcovitz, 2011). It was a type of government action that restricts or restrains international trade as this was a strategy for protecting the trade. The major disadvantages of trade protectionism are that it’s weakened the industry, decisions, innovation and leads to a decrease in the quality.
The author has given a great solution to the problem which states that protectionism can be replaced by social security which can be beneficial for the future economic growth. It will boost the morale of producers in both developed and developing countries and the living standards can also be raised. There was just a need for the cooperation and the appropriate policy which can be implemented over all the nations.
Trade liberalization has faced a high level of fluctuations and instability due to the change in policies and the disagreements between various developed and developing countries. There are numerous factors which affect the decisions regarding various policies like globalization, monetary and fiscal policies, foreign banks policies etc. and if there was any instability to be found, the effective measures are needed to be implemented on time to save the nations from severe crises whether economic or financial.
It was also found that that the free trade countries are usually conservative but the fair trade policy help countries to distribute wealth and income equally and so to made balance between the trade (Warrier, 2011). According to economists, fair trade policies will help to increase more consumers to an economy.
Therefore, it can be seen various prevailing misjudgments and flaws in trade policy theory that creates a need for framing new policy for trade as to maintain stability in emerging nations and international trade guidelines can also be revised.
Conclusion
these prevailing misjudgments and flaws in trade policy theory and practice and examining the various results of trade policy in the recent decades, one is led to conclude that it was must frame new trade policy for emerging nations and revise international trade guidelines. In this respect, in preparing themselves for trade negotiations, emerging nations have to need to frame up a strong plan and in essentials of such plan the developing economies need to be clear as to whether they prefer to play a “passive”, a “defensive” or a “proactive” role in the negotiations.
If the notion of fairness was not more precisely defined in trade, then the conflicts will continuously arise between the industry, developed and developing countries. The United States needs to make a suitable policy for the better management of trade liberalization. Free trade can be fair, but contracts that helps few markets to dominant manufacturers where they can able to influence others by using their market influence while keeping others locked and uncompetitive, are neither free nor fair (Wielechowski, Roman, 2012). The condition where there was equal opportunity for all and the level of the field was the same, that time free and fair trade will be treated equally. The rivalry will be always being there on the playing field but the political power influences it and tilts it further. Free trade is fair trade when it is truly free from all bias nesses and political factors. Fair trade ensures that companies can be benefited by creating a positive impact for the people at the end of the chain. World Trade Organization (WTO) is also making efforts to promote international trade development and try to solve disputes between different countries regarding trade.
A perfect example of fair trade free of partisanship is the longstanding friction the United States has had on softwood lumber imports from Canada. In this, Canada’s regime are ruling upon the rules by giving large subsidies to Canadian lumber mills which enables them to sell their lumber at distorted prices for the purpose of monopolizing the market.
An important point is needed to kept in the mind, fair trade is not just about the industry, it is about giving chance to other and compete on equal basis, so everywhere can grow and the customer needs are met. This will also benefit the local communities. Free trade only works when fair trade is enforced.
References
Global Groove Life. (2014). FREE TRADE VS FAIR TRADE [ONLINE] Available from: https://www.globalgroovelife.com/blogs/global-groovin/14909329-free-trade-vs-fair-trade [Accessed 09/07/2018].
Marcovitz, H. (2011) Fair Trade. Minnesota: ABDO.
Warrier, M. (2011) The Politics of Fair Trade: A Survey. New York: Taylor & Francis.
Whittle, A. (2018) What Are Free Trade and Fair Trade? [ONLINE] Available from: https://greenliving.lovetoknow.com/What_is_Free_Trade_and_Fair_Trade [Accessed 09/07/2018].
Wielechowski, M and Roman, M. (2012) THE ESSENCE OF FAIR TRADE AND ITS IMPORTANCE IN THE WORLD ECONOMY. Acta Scientiarum Polonorum, 11(4), pp. 47-57.
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