Fair trade and free trade sound like they’re interchangeable in passing. But free trade and fair trade for farmers and producers in the Global South are completely different. It’s important to understand them both.
Free trade emphasizes the need for less borders, restrictions, and tariffs on goods and services passing through countries and continents. Meanwhile, fair trade involves ensuring that the workers behind these goods and services are treated fairly and that human rights are maintained throughout the supply chain.
Maybe you’ve heard a certain President tweet about having a fairer trading system for his country. But he never mentions fostering a fairer system for the people making these goods. When you understand the difference between free trade and fair trade, you can start making good buying decisions.
What is Free Trade?
To put it simply, free trade emphasizes the reduction in barriers between countries. It aims to eliminate trade policies that favour certain countries or specific industries (such as agriculture or technology).
Free trade is all about the free market. It assumes that a business should succeed or fail based on its ability to respond to a free and open market. Free trade goes hand-in-hand with the theory that businesses don’t need governmental protections to protect the industry or its workers. So by eliminating these trade barriers, such as taxes, subsidies, and regulations in the global trading system, it will create an even playing field for businesses to thrive wherever they are.
Supporters of free trade believe that the elimination of trade barriers and tariffs will eventually lead to an even playing field for all companies around the globe. They say these lowered costs will be passed down to the customer and that competition among companies will ensure that only the best products succeed.
Free trade is fair to businesses seeking to expand but it does not favor the rights of workers or seek to improve working conditions. Instead, free trade seeks to eliminate pay discrepancies (imbalances) from country to country.
10 Principles of Fair Trade courtesy of the World Fair Trade Organization
Meanwhile, fair trade promotes fair wages and working conditions for labourers. Advocates for fair trade want multinational, big companies and governments to further regulate trade. Besides ensuring workers earn livable wages, fair trade also works to prevent exploitation of these workers’ rights and lands by the global trading system. Advocates believe that fair trade will help stop big corporations from swallowing their competition and creating monopolies.