Is free trade ever fair trade?

Economics essay: Is free trade ever fair trade

Every one of us has probably seen reports or heard something about demonstrations against globalization when international organizations like the WTO meet. One example was the G8 meeting in July 2001.

So we have to ask us the question why there are some people who protest against globalization and also against the free trade the WTO stands for.

The main complain and concern of these groups is unfairness. They say free trade is unfair, the low wages are unfair, the poor working conditions of foreign workers, the environmental standards in less developed countries, the high profits of multinational corporations, the inequality in incomes around the world, everything is unfair. If these reproofs are true it would mean that also free trade and globalization is unfair.

However the people of international institutions and multinational corporations who are in favour of free trade and globalisation also use the term fairness in their arguments.

If a multinational company pays low wages in less developed countries, they can claim that the wages are still fair set because they are above the legal minimum wage standards and that the workers would not get a better opportunity in a company of their country or their government.

The WTO and other international organisations consider free trade even as a help because it will promote economic growth, which in turn will raise the living standards throughout the whole world and reduce also the income inequality in the future.

They suggest that globalisation can promote better outcomes for many people what makes the free trade fair.

Both sides, either supporting or depreciating free trade predicate that what they think and support is fair. Of course everyone is in favour of fair trade, nobody could ever proclaim the opposite. But how can supporters of two opposed policies both be in favour of fairness. The truth has to be somewhere in the middle.

In my opinion there are certainly some or even many aspects of free trade which are unfair. Those who support the free trade are certainly the international corporations and the rich.

Due to free trade the wealthy companies can force some small companies down. If they sell their products at a price that is less than it´s cost of production and this way undercuts the competition for a sufficient length of time, the competition will be forced out of the business, because everybody would demand the product with the same quality but lower price. When there is no competition anymore they can raise their prices again and be able to recoup their losses. That's of course unfair for the smaller companies, which are not able to use this strategy and go to bankrupt because of it. So developing countries have to allow big business access to their markets.

Another point which is true and doesn´t support the free trade policy is that in cases of deciding whether to protect the environment or to encourage trade, the WTO tends to decide in favour of trade. There have been many examples for that issue. Yet the WTO allows trade to continue however there is no proof if a product is safe until it is proved unsafe. That issue should be handled the converse way, because environment and health is definitely more important than economic profit. So in this case the free trade policy of the WTO is unfair and not correct towards the environment and the population.

A dramatic aspect showing the unfairness of free trade is the unequal income and wealth. The rich are getting richer and the poor are getting poorer, at least relatively poorer. Fairness in trade and globalization would mean that the rich would need to redistribute some of their wealth and income to the poor, or that the poor would need a higher percentage of the income of their nation.

But free trade doesn´t only has unfair and negative aspects.

For example one point that is considered as unfair of many opponents of free trade is that workers around the world are not treated equal and do not gain wages in developing countries. But why should a man in Africa who has the same profession as a man in the US gain the same amount of many? His living cost are not as high as the living costs you have to pay in the USA. So in relation he actually gains about the same wage and is not treated unfair.

Also the increasing number of developing countries is a proof for the efficiency of free trade and there are many countries which has already benefited of the WTO.

To come to a conclusion I think that free trade can´t be always fair to every country, every economy or every individual and certainly there should be some attempts made of the WTO to become more fairly in some aspects. But it´s important to have in mind how difficult the job of the WTO is. They have to show consideration for developed countries and for developing countries, which of course have different interests. Although the developing countries and economies have some disadvantages and not the same influence, power and treatment like the developed ones, they would be worse off without the WTO and if not now, in the future they will profit of free trade. The aim is to develop a good working free trade economy on the whole world without such inequality between some countries, but to achieve this every country has to make some sacrifices.