The mercantilist idea was already represented by the rulers of the 18th century and is still gaining more and more popularity in our times. With the signing of the first free-trade treaty in 1860 between the UK and France (Mègrelis, 1978, p.15) these two countries set the starting point for tendencies towards barriers surrounding the industrialized nations. The broad hypothesis underpinning this article is “ Most of the problems concerning free trade only exist due to the fact, that protectionist barriers set up by Northern countries still disturb an actual free trade system.”
Basically free trade has to lead to international division of labour and therefore to interdependence between countries. According Kohlehammer (1993), a defender of the free trade concept, “national customers can gain from it by choosing the cheapest products from all over the world” (p.45). According to this view the foreign supplier can increase in turnover and is able to expand the production. Due to the fact that foreign producers use a part of their proceeds on imports from their customers' countries, they also promote the domestic economy. Exports should be supported as they mean more jobs to the exporting country.
What happens is that all countries try to follow the same idea of reducing their imports and maximising their exports. Blanchard (1997) describes that a too high number of imports from foreign countries endangers domestic jobs and is therefore controlled through customs duties and other trade barriers. (pp.243-245) If customers could decide between domestic and imported products, some domestic suppliers would not be competitive anymore and would not be able to sell their products, because they either are too expensive or of low-quality. They would only be able to survive, if they lowered their costs of production with no consideration for social and economical losses.
Table of Contents
Abstract
1. Global Free Trade and its obstacles
2. Trade not Aid
3. Fair Trade: Only a PR Initiative of the First World
Conclusion
Objectives and Topics
The primary objective of this article is to critically examine the viability of global Free Trade compared to protectionist approaches such as Fair Trade. The author investigates whether the systemic problems attributed to free trade are inherent or actually a result of existing protectionist barriers imposed by industrialized nations, aiming to sensitize readers to the economic impact these systems have on developing countries.
- The historical and economic justification for global Free Trade and its associated obstacles.
- A critical evaluation of Fair Trade practices, specifically focusing on product diversification and profit margin allocation.
- The role of international organizations like the WTO and GATT in shaping global trade dynamics.
- The impact of protectionist standards on the economic growth and liberalization of developing nations.
Excerpt from the Book
1. Global Free Trade and its obstacles
The mercantilist idea was already represented by the rulers of the 18th century and is still gaining more and more popularity in our times. With the signing of the first free-trade treaty in 1860 between the UK and France (Mègrelis, 1978, p.15) these two countries set the starting point for tendencies towards barriers surrounding the industrialized nations. The broad hypothesis underpinning this article is “ Most of the problems concerning free trade only exist due to the fact, that protectionist barriers set up by Northern countries still disturb an actual free trade system.”
Basically free trade has to lead to international division of labour and therefore to interdependence between countries. According Kohlehammer (1993), a defender of the free trade concept, “national customers can gain from it by choosing the cheapest products from all over the world” (p.45). According to this view the foreign supplier can increase in turnover and is able to expand the production. Due to the fact that foreign producers use a part of their proceeds on imports from their customers' countries, they also promote the domestic economy. Exports should be supported as they mean more jobs to the exporting country.
Summary of Chapters
Abstract: The abstract outlines the core debate between Free Trade and Fair Trade, suggesting that Free Trade is fundamentally more conducive to development despite its perceived negative side effects.
1. Global Free Trade and its obstacles: This chapter analyzes the historical origins of trade barriers and discusses how protectionism hinders the efficiency of a truly global free trade system.
2. Trade not Aid: This section investigates the limitations of Fair Trade initiatives, highlighting issues such as the lack of product diversification and the inequitable distribution of profit margins.
3. Fair Trade: Only a PR Initiative of the First World: This chapter argues that many Fair Trade policies serve as performative measures that prioritize Northern standards over the actual liberalization needs of Southern countries.
Conclusion: The conclusion synthesizes the arguments, suggesting that Fair Trade organizations often lack the scale to create systemic change and that true economic development requires moving beyond investor-focused trade agreements.
Keywords
Free Trade, Fair Trade, Protectionism, Economic Development, Globalization, Market Share, Trade Barriers, Liberalization, Developing Countries, Profit Margin, WTO, GATT, International Division of Labour, Sustainability, Trade Policy
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines whether global Free Trade should be further expanded or if protectionist policies, often framed as Fair Trade, offer a more effective pathway to economic and social development.
What are the central themes discussed in the article?
The article explores the history of trade barriers, the economic efficiency of free markets, the structural limitations of current Fair Trade models, and the impact of international trade organizations on developing nations.
What is the primary goal of the author?
The author aims to demonstrate that many of the criticisms leveled against Free Trade are actually consequences of remaining protectionist barriers, and intends to make readers more aware of how these systems affect emerging economies.
Which scientific methods or approaches are utilized?
The author utilizes a qualitative economic analysis, referencing historical trade treaties, academic literature (e.g., Kohlehammer, Bhagwhati, Blanchard), and comparative data regarding market shares and export-to-GDP ratios.
What content is covered in the main body of the text?
The main body evaluates the mercantilist origins of trade obstacles, the mechanisms of free trade, the failures of the Fair Trade movement regarding product variety and profit allocation, and a critique of Fair Trade as a public relations construct.
Which keywords characterize this work?
The work is characterized by terms such as Free Trade, Fair Trade, Protectionism, Economic Development, and Market Liberalization.
Does the author believe that Fair Trade succeeds in its primary goals?
No, the author argues that Fair Trade organizations struggle to have a major impact because they only support a very limited spectrum of products and often fail to pass the bulk of the profit margin to the actual producers in developing countries.
How does the author view the role of organizations like the WTO and GATT?
The author views them as entities that reinforce current internal trade structures within the "First World" and suggests that, while often criticized, they play a part in a global system that necessitates deeper reflection on how trade agreements are negotiated.
- Quote paper
- Elisabeth Luger (Author), 2003, Free Trade versus Fair Trade, Munich, GRIN Verlag, https://www.grin.com/document/14032
