Free Trade Fairness - Essay Example

?Is Free Trade Fair? Introduction Trade is something that people participate into everyday. It is simply the buying and selling of goods and services(Anon. “What,” n.d.). It is used to determine a country’s economic status. It has the capacity to lift a country out of poverty. Nonetheless, as observed, the ways of trade has been harsh for some countries. These countries pertain to developing and underdeveloped countries. Both of them have limited avenues with regard to international trade. The reason of which is that the developed and industrialized countries of the world have imposed restrictions that weaken their capacity to trade. As a result, these countries choose to trade domestically or locally. To note, international trade brings in more income to a country than local trade (Organisation for Economic Co-operation and Development, 2009). When a country engages in international trade, it could have the greatest number of customers as well as investors. A substantial amount of income could be expected. In such case, it is proper to review the current international trade policy of the world towards an equal opportunity for countries to grow and develop. The freedom to trade or free trade shall be thoroughly discussed and analyzed. Free Trade Free trade is defined as an economic system wherein labor, goods and capital flow freely between countries without barriers that could hamper the trade process (Smith, n.d.). This means that a country could trade whatever goods and services to other nations. There is equal opportunity to trade for the participating countries. There is no barrier such as tariffs, import quotas and taxes (Smith, n.d.). In other words, there is no intervention from the government (Anon. “What’s,” n.d.). The area in trade is open to everyone who is interested. There is no restriction of some sort. This economic policy allows foreign individuals and companies to trade smoothly and efficiently as the domestic producers (Smith, n.d.). Stated otherwise, in this system, both the foreign and domestic producers have the same autonomy with regard to trade. They both have the same rights in trading. For nations to apply this system, they make free trade agreements (FTAs). Countries actually adopt this economic policy for economic and political reasons. According to Arnold Miller (2004), there is easy “access to one another’s markets” if free trade agreement is formed. This is logical since in FTAs, members are prioritized. This is to say that a free trade agreement creates a reciprocal obligation between the members (Organisation for Economic Co-operation and Development, 2005). A member is obliged to observe the free trade rules all throughout the life of the agreement. If a member grants free trade rights to another member, the other member is also obligated to accord the same right. In another aspect, there are countries which decide to form an FTA to encourage investment liberalization and trade (Miller, 2004). Developed and developing countries usually create FTAs under this reason. Politically, FTAs are used to reaffirm and strengthen relations between countries (Miller, 2004). For instance, the United States of America created an FTA with Israel in 1985 as a sign of economic cooperation and strong relation (Hassanien, 2010; Bard, n.d.). Basically, to make trade completely free would create an economic system wherein all types of government protection and intervention would be absent and borders would be open to “unlimited amounts of imported goods” (Anon. “What’s,” n.d.). It is contended that the result of such trade policy would be very beneficial to developed and industrialized countries. It would be easy for such countries to introduce and market their products to the domestic producers. On the other side, as to the developing countries, allowing a trade which is completely free would cost them inequality and poverty (Anon. “What’s,” n.d.). Take for instance, countries such as Nepal, Haiti, Zambia, Peru and Mali have adopted free trade in their markets but they have poor records on economic growth and poverty reduction (Anon. “What’s,” n.d.). The reason of which is that states having a strong economy like the developed countries could lower down the price of their products just to compete with the domestic traders. As a result, the consumers of the developing countries buy imported products, the products of the developed and industrialized countries. Is Free Trade Fair? It is a contention that at the moment, free trade is not fair. Instead of being a system which could help the developing and underdeveloped countries strengthen their economies, this economic policy has weaken their economic status and causes even more poverty. Free trade just like any other international policies is just a theory. In reality, trade rules are not being fair due to the hegemonic powers of the rich countries. Rich countries pertain to developed and industrialized countries. The hegemons have utilized their power and influence to compete with the markets of the developing and underdeveloped countries. In a sense, they have employed means which to an extent control the market system of the poor countries. They have used their power to successfully impose restrictions upon these states. This goes to say that the developing and underdeveloped countries are being subjected to manipulation by the rich countries in a free trade system. Most likely, the developed and industrialized countries group together and offer certain market benefits to the poor countries just to entice them to enter into a free trade agreement. These benefits could actually be economically or politically motivated. In most cases, the poor countries are often ignorant of the fact that the rich countries have ulterior motives in making such agreement. In case of underdeveloped countries, they have no choice but to accept the benefits and agree to the free trade policy. Once the free trade agreement is in order, the poor countries would later on realize that the system does not bring them any good. It actually makes their economic situation worse. The rich countries actually desire to keep protecting some of its sectors (ex. farmers) while making use of international trade talks to prise open the markets of the poor countries (Anon. “What’s,” n.d). In a sense, the rich countries are just being practical. Obviously, it would be very beneficial for them to trade freely in one of the poor countries while they continue to introduce their agricultural products to other countries. Analytically, it is just a matter of economic strategy. Nevertheless, such technique is driven by a selfish motive. It is a motive that brings inequality and injustice. Upon the acceptance of the free trade system, the poor countries would also like to protect few of its vulnerable sectors and introduce new industries, however, they are prevented from doing such (Anon. “What’s,” n.d.). The reason of which is that the rich countries are employing mechanisms which allow them to effectively penetrate the marketing sector of the poor countries. The unfairness of free trade could actually be explained through the dependency theory. It says that even if countries are to trade freely, small and poor states become increasingly dependent on rich nations (Eisenberg, 2005). These rich countries actually deplete the natural resources of the poor states (Eisenberg, 2005). The small and poor countries therefore rely to the rich countries’ capacity to utilize and harness the natural resources. They have not considered the fact that such activity could bring them harm and would not elevate their economic status. In truth, the small and poor nations experience a slow or even zero economic growth. To understand more the situation, the basic foundation of the dependency theory shall be tackled. The rich nations are actually collectively called as the “core” while the poor states are called collectively as the “periphery” (Eisenberg, 2005). The dependency theory entertains the notion that the periphery nations rely “for their well-being on the core” (Eisenberg, 2005). The periphery produces industrial goods while the core specializes in luxury goods (Eisenberg, 2005). In this set up, time will come that the periphery would depend on the luxury goods of the core. It would not happen that the core would depend on the industrial goods of the periphery since the periphery also produces such kind of good although to a minimal extent. If this relationship continues, then it would ruin the periphery (Eisenberg, 2005). They would find themselves sacrificing some of their fundamental trade rights just to keep their relationship with the core. Actually, applying the dependency theory, the fair trade proponents believe that the prevailing trade rules between the poor and rich countries are unfair because the market prices of the goods offered by the developing and underdeveloped states are too low for the laborers to obtain a salary reflecting their dignity (Eisenberg, 2005). According to Peter Sutherland (2000, p.8), free trade is unfair due to the uneven playing field in the international arena. He said that the differences in political and economic power imply that some nations are more powerful and advantaged than the others (Sutherland, 2000). The rich states have many skilled financial and human resources to commit to negotiations in trade than the developing and underdeveloped countries (Sutherland, 2000). Conclusion It is concluded that the unfair rules of trade would not be changed unless the rich countries would be willing to sacrifice their personal interests for the good of all market players. This would entail true economic cooperation and integration between and among the nations of the world. Countries should be one in the goal of making the economic policy of free trade as fair and just as possible. References Anon., n.d. What is trade? [pdf]. [Online] Available at: http://www.oxfam.org.uk/coolplanet/kidsweb/oxfam/campaigns /downloads /what_is_trade.pdf [Accessed 17 March 2011]. Anon., n.d. What’s wrong with free trade? [Online] Available at: http://www.actionaid.org.uk/101015/whats_wrong_with_free_trade.html [Accessed 16 March 2011]. Bard, M., n.d. Free trade agreement (FTA). [Online]. Available at: http://www.jewishvirtuallibrary.org/jsource/US-Israel/FTA.html [Accessed 16 March 2011]. Eisenberg, J., 2005. Free trade vs. fair trade. [Online]. Available at: http://www.globalenvision.org/library/15/834 [Accessed 16 March 2011]. Hassanien, 2010. United states bilateral free trade agreements: consistencies or conflicts with norms in the middle east? The Netherlands: Kluwer Law International. Miller, A., 2004. Free trade: current issues and prospects. New York: Nova Publishers. Organisation for Economic Co-operation and Development, 2009. International trade: free, fair and open? [pdf]. [Online] Available at: http://www.oecd.org/dataoecd/33/53/42732710.pdf [Accessed 17 March 2011]. Organisation for Economic Co-operation and Development, 2005. Preferential trading arrangements in agricultural and food markets: the case of the european union and united states. OECD Publishing. Smith, S. E., n.d. What is free trade? [Online] Available at: http://www.wisegeek.com/what-is-free-trade.htm [Accessed 16 March 2011]. Sutherland, P., 2000. Is free trade fair? Has it gone to far? [pdf]. Available at: http://www.wcfia.harvard.edu/fellows/papers/1999-00/sutherland.pdf [Accessed 17 March 2011]. Read More

 

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