What is Free Trade and Fair Trade by Crizlap


									Fair trade is an organized social movement and market-based approach to empowering
developing country producers and promoting sustainability. The movement advocates the payment of a
fair price as well as social and environmental standards in areas related to the production of a wide
variety of goods. It focuses in particular on exports from developing countries to developed
countries, most notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit
and flowers.
Fair trade's strategic intent is to deliberately work with marginalized producers and workers in order to
help them move from a position of vulnerability to one of security and economic self-sufficiency. It
also aims at empowering them to become stakeholders in their own organizations and actively play a
wider role in the global arena to achieve greater equity in international trade. Fair trade proponents
include a wide array of international development aid, social, religious and environmental
organizations such as Oxfam, Amnesty International, Catholic Relief Services, and Caritas
In 2007, Fair trade certified sales amounted to approximately €2.3 billion (US $3.62 billion)
worldwide, a 47% year-to-year increase. While this represents a tiny fraction of world trade in physical
merchandise, fair trade products generally account for 1-20% of all sales in their product categories in
Europe and North America.In June 2008, it was estimated that over 7.5 million disadvantaged
producers and their families were benefiting from fair trade funded infrastructure, technical assistance
and community development projects.

Free trade is a system in which the trade of goods and services between or within countries flows
unhindered by government-imposed restrictions. Such government interventions generally increase
costs of goods and services to both consumers and producers. Interventions include taxes and tariffs,
non-tariff barriers, such as regulatory legislation and quotas, and even inter-government managed trade
agreements such as the North American Free Trade Agreement (NAFTA) and Central America Free
Trade Agreement (CAFTA) (contrary to their formal titles.) Free trade opposes all such interventions.
Trade liberalization entails reductions to these trade barriers in an effort for relatively unimpeded
One of the strongest arguments for free trade was made by classical economist David Ricardo in his
analysis of comparative advantage. Comparative advantage explains how trade will benefit both parties
(countries, regions, or individuals) if they have different opportunity costs of production.
Free trade can be contrasted with protectionism, which is the economic policy of restricting trade
between nations. Trade may be restricted by high tariffs on imported or exported goods, restrictive
quotas, a variety of restrictive government regulations designed to discourage imports, and anti-
dumping laws designed to protect domestic industries from foreign take-over or competition.
Free trade is a term in economics and government that includes:
       trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or
        subsidies for producers)
       trade in services without taxes or other trade barriers
       The absence of trade-distorting policies (such as taxes, subsidies, regulations or laws) that give
        some firms, households or factors of production an advantage over others
       Free access to markets
       Free access to market information
       Inability of firms to distort markets through government-imposed monopoly or oligopoly power
       The free movement of labor between and within countries
   The free movement of capital between and within countries

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