How can the positive effects of trade be maximized while minimizing the negative effects?
Trade had been booming after globalization and is seen as one of the most significant way to boost economic growth in a country. This blog post, would discuss the positive and negative effect of free trade and fair trade, how free trade and fair trade should operate, domestic policies with international effects, the global trade regimes, and how each of them should be interpreted to maximize the positive effects and minimize the negative effects.
Free trade is one of the most common ways to avoid trade barriers. It comes with several advantages, first to lower the costs of goods; it then consequently leads to a lower price for consumers. A lower price for consumers means the flow of capital and technology, mostly benefiting the developing countries. But most importantly, it stimulates greater profits, reinvestment, and higher employment rate.
Free trade is also followed by disadvantage where outsourcing, or the domestic industries in MEDCs move to LEDCs for lower labor costs, occurs and lowers the labor and environmental standards. It results in the endangering of infant industries, for they are more unlikely to survive from the lack of protection, and the also endangers the economic and military security, for state would entirely depend on other states for goods. After all, even if free trade is in effect, MEDCs could always subsidize their own companies to make them competitive, therefore reducing some of the positive effects of free trade.
Fair trade is a social movement that aims to help the disadvantaged producers, mostly in LEDCs, to receive greater profit and promotes sustainable environmental practices. In fair trade, producers receive fairer prices for the MEDCs are paying more and the middlemen in the supply chains are being reduced. The states could monitor more forced labor and child labor, for they would decrease them, also to create gender equity.
Fair trade, however, also brings negative effects. Fair trade could hurt the other farmers not in the fair trade framework. Other criticisms say that the “fairer” prices the producers receive are not sustainable, and that the middlemen still exist to absorb most of the money.
In order to maximize the positive effect and lower the negative effect of free trade and fair trade, it is necessary to incorporate both methods into the system. One of the most effective ways would be to base the system on fair trade, where we would get all the advantage from receiving greater profit and promotes sustainable environmental practices. We could monitor the fair trade closely to see where the capital goes to. Free trade would be then build on free trade, where free trade agreements of perhaps certain products should be encouraged in the global trade regime, and the more free trade area should be established. Then, the global trade regimes, especially WTO should enter and monitor subsidization of a state on its product to ensure that the effect of free trade is in progress, and WTO should have the rights to ask the state to minimize subsidization even if the treaty does not involve WTO. These would maximize the positive effect and minimize the negative effect of free trade.
Free trade is one of the most common ways to avoid trade barriers. It comes with several advantages, first to lower the costs of goods; it then consequently leads to a lower price for consumers. A lower price for consumers means the flow of capital and technology, mostly benefiting the developing countries. But most importantly, it stimulates greater profits, reinvestment, and higher employment rate.
Free trade is also followed by disadvantage where outsourcing, or the domestic industries in MEDCs move to LEDCs for lower labor costs, occurs and lowers the labor and environmental standards. It results in the endangering of infant industries, for they are more unlikely to survive from the lack of protection, and the also endangers the economic and military security, for state would entirely depend on other states for goods. After all, even if free trade is in effect, MEDCs could always subsidize their own companies to make them competitive, therefore reducing some of the positive effects of free trade.
Fair trade is a social movement that aims to help the disadvantaged producers, mostly in LEDCs, to receive greater profit and promotes sustainable environmental practices. In fair trade, producers receive fairer prices for the MEDCs are paying more and the middlemen in the supply chains are being reduced. The states could monitor more forced labor and child labor, for they would decrease them, also to create gender equity.
Fair trade, however, also brings negative effects. Fair trade could hurt the other farmers not in the fair trade framework. Other criticisms say that the “fairer” prices the producers receive are not sustainable, and that the middlemen still exist to absorb most of the money.
In order to maximize the positive effect and lower the negative effect of free trade and fair trade, it is necessary to incorporate both methods into the system. One of the most effective ways would be to base the system on fair trade, where we would get all the advantage from receiving greater profit and promotes sustainable environmental practices. We could monitor the fair trade closely to see where the capital goes to. Free trade would be then build on free trade, where free trade agreements of perhaps certain products should be encouraged in the global trade regime, and the more free trade area should be established. Then, the global trade regimes, especially WTO should enter and monitor subsidization of a state on its product to ensure that the effect of free trade is in progress, and WTO should have the rights to ask the state to minimize subsidization even if the treaty does not involve WTO. These would maximize the positive effect and minimize the negative effect of free trade.