What's the difference between Free Trade and Fair Trade? Free trade advocates and fair trade advocates have a lot of goals in common. Both seek to help farmers and other producers get access to the global market and to improve wages for producers. Their ideologies, however, differ in some important ways.
Say you’re looking to buy a cup of coffee....
Free trade means that the producer (farmers, small business owners, manufacturers, etc.) who harvested the coffee beans sold them without the interference of the government's tax or monetary gifts - tariffs, subsidies, price controls or pork-barrel politics. Sounds pretty good, right? For some, it is. Free trade proponents believe that leveling the playing field among producers from all nations is the best way of matching global supply to demand while making all people involved more prosperous.
Though by some accounts, free trade leaves producers in developing countries at a disadvantage. In those countries, producers lack social security and other safety nets that would help them hold out on selling their wares during times when prices are low. While producers in more prosperous nations can wait to sell at times like these, their counterparts in developing nations must sell immediately. As a result, they lose a lot of money.
Fair trade means you believe there are some rules in trade that must be placed in order to provide for producers who have disadvantages in a free market. If you buy a fair trade cup of coffee, it means that the farmer who harvested the beans in a developing nation had some help getting his specific product to you. Fair trade aims to help producers in developing countries obtain better trading conditions and gives an extra boost to those producers who promote sustainability (that is, eco-friendly agriculture). Rather than leaving environmental standards and wages up to the market, fair trade actively pushes for higher price for producers as well as social and environmental standards.
Opponents of fair trade say that any solution that favors one group over another harms growth overall. Producers in developed countries, for instance, resent having to compete with what they call cheaper, lower-quality imports. The agreement, they say, is unfair because developing nations often sell more of their product but end up buying less from other countries.
So when you are deciding on that cup of coffee, which should you buy – free or fair? We’ve provided the information, and now it’s up to you to decide. If you ask us, the only thing we could tell you for sure is that it’s super important that you don’t forget the whipped cream on our cappuccinos.