Free trade is a powerful but often a contentious concept of trade. The paper attempts to make a clarification concerning the issue of free trade. The paper discusses that free trade is fair because it enables business parties such as multinational business organizations to trade without any barriers, increases competition, and ensures fairness in trading activities. This boosts the world economy and benefits the countries involved in several ways.
The main reason for carrying out trade us for the benefit of the buyer and the seller. The main benefit is the gain made from buying and selling of the goods and products. A society which is efficient makes use of the trade benefits to its maximum by employing human, capital, and natural resources. An efficient trading society makes gain from the trading activities it is involved in, and at the same time, the gains should be equally or fairly divided among the trading partners involved (Bhagwati, 2003).
Free trade implies that anyone can carry out trading activities with anyone else. The fairness of free trade depends on the amount of competition involved between the sellers and the buyers. Free trade creates a trading environment where buyers and sellers can freely compete without any barriers. In most cases, free trade involves competition among the sellers and also competition among the buyers who can be consumers (Shafaeddin, 2000).
Free trade is fair because when trade is free, there is an increase in competition which in turn makes the market power to fall, and also makes gains to be evenly distributed. Many buyers and sellers in the respective market reduce the bargaining power. The buyers gain because they can be able to hold the seller up when seller competition pushes the prices of commodities down. Therefore, free trade ensures market equilibrium is maintained (Bhagwati, 2003).
Free trade is fair because it removes restrictions between countries that are trading. Countries gain a lot by adopting free trade. Multinational companies are able to extend their business opportunities to other countries without any barriers or restrictions. At the same time, free trade is fair because the cost of importing and exporting goods is minimized which in turn is extended to consumers since they can now be affordable (Shafaeddin, 2000). Consumers benefit by getting cheaper, and better goods from other countries. Producers that are inefficient are eliminated from the business segment since consumers can acquire quality goods from other countries.
Even though free trade is fair, some agreements open up some markets to more powerful producers who use their power and influence in the market to shift prices and even sometimes bully consumers. As a result, they keep other market players in that business segment to remain closed and less competitive. This eventually hurts the consumers especially in developing countries. Free trade is fair when the parties involved have the same level of treatment and the market is in the same level. Competition may be challenging but that is one of the main features of a healthy and free business environment. In the case of countries, legal leverage and power tilt it further (Shafaeddin, 2000). Free trade is fair when the correct business practices are employed.
In a nutshell, the paper has discussed that free trade is fair because it promotes and increases trading activities across the borders of countries. This is because it removes barriers and restrictions between the countries enabling companies to extend the business activities to other countries. At the same time free trade is fair because it promotes healthy competition among the sellers and the buyers. However free trade market should be free from the influence of some powerful producers.
- Bhagwati, J. (2003). Fair Trade and Harmonization: Prerequisites for Free Trade? MIT Press.
- Shafaeddin, M. (2000). Free Trade or Fair Trade? An Enquiry into the Causes of Failure in Recent Trade Negotiations. UNCTAD