Introduction
Trade takes place in different parts of the world. Products differ from country to country, and Japan also exports many products and imports them from various countries.
Through trade, we can build international relations and stabilize our economy. For this article, let’s find the answer to the question: Will trade continue to be an integral part of our lives?
Why do we trade?
Trade is the process by which people exchange products from their own country for those from other countries. So why are we trading?
First of all, maintaining our economic competitiveness by importing resources from other countries is impossible. In addition, it aims to promote the evolution of technology and the improvement of product quality and to encourage the market to specialize more than ever before.
Through trade, we can introduce technology and products that are better or cheaper than the home-country alternatives we have been using and that are not available in our own country.
Different countries with which they trade have comparative advantages over their goods, which also leads to economic development. Therefore, increasing profits is also one of the reasons why we continue to trade.
(Qurban, 2021)
What is the difference between free trade and fair trade?
Per Pete (2015), free trade pertains to the free trade of various products without being bound by tariffs and regulations. It concentrates on trade agreements with other nations and strives to expand the economy. There are no price limits because it is freely tradeable. The product is made at a low cost, so the pricing is also inexpensive. Government engagement rises as a result of free trade since transactions necessitate international exchanges. This kind of trade is practiced in numerous nations, where market and governmental policies benefit and influence the trading enterprises in different ways.
Fair trade refers to trade in which a country in the process of growth assists the development of the country through fair trade. Here, we must treat everyone involved in the production of fair-trade products fairly and protect their rights. Fair trade seeks to better the lives of those living in developing nations as well as assist and empower the weak. Contrary to free commerce, fair trade is subject to rules and transactions take place within those rules. Prices for fair trade goods are higher than usual since they also account for the labor costs of those who work in challenging conditions. Business traders and various associations are included, and the emphasis is on trade between businesses and individuals. Small business owners operating in regions with few resources and facilities get significant benefits from fair trade, which also strengthens the nation’s institutions and economy-
Characteristics of free trade
Free trade has different pros and cons, according to Nanda (2022). Here they are:
Advantages
- Cheap price
Trade makes international competition more active. Therefore, we can purchase goods at a lower price.
- Better efficiency
When the quality of imported goods is high and the price is low, the quality is high, and companies will try to make more professional and high-quality products. As a result, the production volume is also increased, so efficiency is improved.
- Faster economic growth
As countries look more toward their own high-volume commodities and areas of strength, the demand for those commodities will increase even further. As a result, exports will increase, the number of workers will increase, and the economy will develop further.
Disadvantages
- Employment opportunities may decrease.
When trade goes wrong, those industries suffer great damage. It’s hard because it takes time for lost jobs to move to other, more efficient industries.
- Vulnerability and pressure
Because a country may bring in items that it is lacking, importing is highly practical. However, because when it relies too heavily on imports, it becomes susceptible to political pressure. By refusing to trade in essential items and assuming control over another nation’s politics, it might pose a threat to other nations.
- Tax havens
Tax rates vary from country to country, and some countries set them higher. By starting a business in a tax-friendly location, those countries can reap significant benefits. However, if taxes are reduced, there will be less money for social services such as health care and education, so some people’s livelihoods will be affected.
Characteristics of fair trade
Advantages
- Wages increases
Fair trade-certified producers can stabilize market prices if they get the lowest prices for their products (Nanda, 2022).
- Children not having to work
People who support fair trade reject products made in unsafe environments or by children. So, when fair trade allows people to do fair trade and get fair wages, children don’t have to work so hard (Nanda, 2022).
- Invest in the community.
With fair trade, producers get a plus fee called a trade premium in addition to their regular wages. So, producers can choose the communities they want to support, such as healthcare or education, and donate that money (Nanda, 2022).
Disadvantages
- Authentication fee charges
Fair trade certification requires money, such as admission fees and annual membership fees. In other words, this certification is not easy to obtain and often requires help from others (Nanda, 2022).
- High prices and limited customers
When comparing fair trade and free trade prices, the former is more expensive. As a result, consumers may refuse to purchase in search of cheaper products and may be limited to those with financial means (Nanda, 2022).
- Small number of products
Fair trade is a niche market, so product types are limited (Nanda, 2022).
Conclusion
Through trade, we can make up for what we lack and stabilize and further develop our economy. There are two types of trade, both of which play an important role but also have their drawbacks. In order to continue trade and promote economic growth, we should promote the advantages of our products while thinking of ways to make up for the shortcomings of trade.
References
Nanda, V. (2022). Difference between Free Trade and Fair Trade. [online] www.tutorialspoint.com. Available at: <https://www.tutorialspoint.com/difference-between-free-trade-and-fair-trade> [Accessed 31 May 2023].
Pete (2015). Fair Trade vs Free Trade. [online] GlobeIn Blog. Available at: <https://globein.com/blog/fair-trade-vs-free-trade/> [Accessed 31 May 2023].
Qurban, M. (2021). Why is trade important and how does it work? [online] Trade Finance Global. Available at: <https://www.tradefinanceglobal.com/posts/why-is-trade-important-how-does-it-work/> [Accessed 1 June. 2023].
