The terms free trade and fair trade are often confused, since they are used frequently when discussing international trade between developing countries (or “South”) and industrialized nations (or “North”).
In its simplest terms, the notion of free trade refers to how easily nations can exchange goods and services. It focuses mainly on government policies related to international trade. The end of the cold war provided an opportunity to open borders and stimulate global commerce. In an ideal free trade environment, there would be no protectionism or tariffs and free market competition would determine the best price, rewarding those who could produce most efficiently regardless of national origin.
In the “real world” of the early 21st century, fiscal realities are forcing countries to protect their national industries and in some cases take advantage of the vulnerabilities of other countries to maintain economic growth and standards of living. Furthermore, the disparity in resources, education levels, civil liberties, and standard of living between industrialized nations and the developing world place the free market on a very uneven playing field. While free trade purists insist that all countries will benefit in the long run, the workers and farmers in poorer countries rarely experience the benefits of free trade.
In contrast, the fair trade movement aims to ensure that producers in developing countries are able to share more of the benefits of the free market. While fair trade proponents may differ on the means to ensure that trade is fair, none would argue for a return to the closed borders and nationalism of the cold war. From the perspective of “the North”, it is important that “the South” benefit from trade through improved education and standard of living. Industrialized nations can no longer imagine themselves immune from the impact of crushing poverty in the developing world, as the resulting social and political upheaval can quickly become a global crisis.
One of the biggest questions facing the fair trade movement is whether consumers will make buying decisions, and in some cases pay a premium, in the belief a worker or farmer in another part of the world will benefit. Even during the recent global recession, evidence shows that they will and that they do. However, consumers must have a level of trust that all the parties involved in the production and distribution of fair trade products are indeed playing fair. As the world becomes ever more connected, we can now share a level of transparency and accountability that could not have been imagined a generation ago.