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The Argument of 'Which Protection or Free-Trade'

Discuss about the Real Impact On The Working Poor.

Fair trade in National interest is an article published in April 5, 2008. Joseph E. Stiglitz wrote this article. The writer of the article focuses on how fair trade can promote development. Fair Trade has been on the rise in the last few decades to solve the problem of inequality in international trade. It is a business between companies of developed and developing nations in which fair prices are paid to the producers. It has now become common parlance for politicians to lead effectively. The objective is that both rich and poor in developing and developed countries will achieve benefits.  In the following, an effort has been made to point out main arguments of the article stated as “Which protection or free trade”? In addition, give critical analysis on the same, gap analysis between trade agreements and America’s national interest and evaluate article based on your own understanding.

Fair trade is a common platform of both politicians and political parties to expand market through trade liberalization, which offers a situation in which there is no loss to anyone in the market. The unskilled people are not getting employment because competition is day-by-day increasing. Globalization and Liberalization are increasing at a fast pace. Globalization also increases the employment but somehow unskilled and semi-skilled people are not getting employment.  As there is cutthroat, competition and due to that government are also taking initiative to run projects on international level to provide employment to poor people.  The article mainly focuses on key elements such as-

It is stating about the argument of the fact that “Which protection or free-trade” can be elaborated as most successful industries give protection to new companies at their critical stages and at the same time enabling them free trade, which proves the concept of liberalization has not been achieved

It has also been argued that the step at which poor countries open their marketplace to business should correspond with the development of new institutions. Since many poor countries cannot manage, the contribution required to build these institutions. (Reich, 2006)

In this point, it is clearly stated, as the agreements are not free- trade agreements as it includes all the tariffs, subsidies, non-tariff barriers that should be abolished .They are managed –trade agreements specially arranged the advanced industrial countries. It is supporting free trade as long as it is fair and reciprocal. There is all over liberalization around as anyone can trade as trade liberalization is stated as the biggest argument we have today.

The Role of Institutions in Fair Trade

 The developing countries should focus on providing lifesaving medicines to poor, as they cannot afford to buy brand-name generic products, which are a necessity for them. On the other hand, companies mandate huge prices for them, this can create trouble for poor. This is quite surprising that these companies give importance to profits only rather than problem of affordability of poor people to buy generic products. (Block, Krasnozhon and Simpson, 2006).

It is also focusing on Foreign direct investment is in agriculture but now a days it is coming on the retail sector itself. It is thereby expanding the global trade.

The gap analysis between unfair managed and free trade is been utilized by the markets of U.S. It has helped many countries to reduce inequality and promote the democracy among the citizens, which moreover can build relations with other countries, but the people of America are not satisfied with this agreement and protest against the U.S. It is stated, “We need social protections not protectionism.” To give commitment of complete free-market access to all developing nations and richer nations should allow unskilled people to relocate on a temporary basis so that earned sufficient money could be transferred to their native place and by this; we give social protections to them

 To take an example U.S is one of the leading countries in the world and the workers are always have fear about losing their jobs either due to foreign competition or technological change as recession can occur suddenly. Therefore, we need to manage trade liberalization better so that it will provide benefits to both rich and poor in developed and developing countries.

Fair trade is a common parlance predetermined for contribute for assisting poor people in developed nations. It is based on faith, which helps to solve the critical social problems.

The author argued that Protectionism is not a bad thing and on one side it is been stated that everyone is liberal. On the other side trade can be done  at any time but we give protection to new industries which are now establishing and need economic benefit so if the policy of safeguard of poor industries is embraced, question arises whether protection ought to be accomplished through imposing tariffs on imports or through licensing. Besides this, the famous economist David Ricardo secured free –trade to stimulate productivity and competency in the economy (Mukher, 2018).

Thomson Henry examines the conclusion by protectionism from distinctive shareholders such as consumers, government, employees, and firms. It reorganizes income. It creates gains for some industries and losses for others. Those individuals who have the benefit of profits can be expected to favor protection. It consistently advocated economic policy, which led to economies of scale. It prohibits the ultimate benefit of misusing comparative edge, lowering federal income, trade barriers etc. Economists induce government to give protectionism. Those individual who was benefited from this policy are willing to contribute wealth and effect legislative decisions. From LeaAnn Stagg’s perspective, from any one state’s point of view, exporting to a remote nation or to another state represents methods of creating wealth. However, one state’s meets profit at the cost of another.

Managed-Trade Agreements vs. Free Trade Agreements

The contribution of international trade is so enormous that some countries could become competent even with the greatest effort. Franklin argued that the survival of these countries depends primarily on the exports of manufacturers that need limited area. However, countries that are capable to fulfill the necessity of life would be faced an unbearable downturn in living standards if they were cut-off from international trade. Infant industries are getting huge initiative and support from various government bodies to achieve sustainable industrial growth and development. Accordingly, over a period their cost per unit will go down and therefore, for quite a while they should be protected else they would be destroyed by foreign competition (Ma and Lu, 2011).


Protectionism preserves domestic employment at any given time in an economy. Major businesses are in downfall, as they cannot contend with overseas competition. For example, mid-80s was the sunset time for the steel business as they were not competitive anymore so it is better to re-employ these resources in the economy. It is often stated that the reason for declining domestic enterprises is the reducing cost of labor in exporting nations and that is the reason economy should be protected from imports, where cost of labor is very low. Many governments contend that a sunrise enterprise that is simply growing may not have the economies of scale so that the heavy industries may enjoy. It avoids limit of over-specialization, and country is highly dependent on the exports. It can create major consequences for the country’s economy.

It is often contended that specific enterprises need to be secured as a result in strategic reasons so that the country has these resources available in the time of crises that they are required in war or electricity, agriculture, and steel. In major developing nations, it is hard to muster taxes and government levied tariffs to raise revenue. Foreign producers emulate unjustifiably by dumping the merchandise in another nation. Dumping is a type of price discrimination when producers of a nation offer merchandise in another nation at lower price. Once competitive spirit enables, protection abandoned fair trade.

The World Trade Organization has taken a great step towards Doha development round, bilateral agreements, and multilateral trade negotiations. It has governed that American cotton subsidies are illegal, and then United States continues giving them –twenty five thousand rich American agriculturists getting benefit at cost of many dejected people in the emerging world. It is America and Europe’s refusal to deal with their agricultural subsidies that are so called Doha development round. It would reduce the non-tariff barriers and eliminate agricultural subsidies.

Access to Lifesaving Medicines for the Poor

Currently, the DDA is in a conclusive stage and there is a great opportunity to redirect and be prepared for the future of the Doha round. At last, all WTO members benefit from a stable and anticipated multilateral trading system that offers for expansion of new business. Many members criticized that the export products of their nations have to compete with the subsidized products of developed countries. In addition, it increases the burden on agricultural undertaking in developing nation, which would probably confront negative outcomes and high alteration expenses for the time being.

Fair Trade is a financial tool intended for offering help to poor people in developing nations and based on the faith to market mechanism, which would illuminate the social and environment issues. It tries to associate low-income producers and consumers in extensive markets in more sustainable, conservative, and equitable way. It originates in an emerging interest among consumers in huge markets in the advancement of socially responsible dealers. 

It is commonly acknowledged as the main tendency of international trade development in the majority of aspects, trade protections are still sustained by few stakeholders because of the necessity of specifically areas or periods. WTO is also making effort to encourage international trade and settle trade disputes for multi decade as subsequence of GATT. But a wide range of trade agreements understandings amongst nations have played important role in international trade development. The affluent are developing considerably wealthier while the white collar is being squeezed. It surely generates profits, but in any case, those gains are more generally shared -within richer and poorer as well as richer countries (Stiglitz, Charlton, 2005).

World Trade Organisation should influence a guarantee to providing complete free- market access to all developing countries. Finally, rich countries ought to enable unskilled workers from poorer countries to relocate for time being, thereby earning money they can send home.

In other words, many people need access to credit or protection of insurance in light of the fact that they are not able to begin their own particular organisation or take benefit of new opportunities that exchange may bring. Many poor countries are now tormented by high unemployment and job losses in the recently trade segment. It empowers marginalized and small producers in their nations to live and work in respect and dignity. Fair trade is progressively on the agenda of policy creators throughout the world.

References

Block,W.,Krasnozhon,L.,Simpson,D. (2015) Fair trade : It’s Real Impact on the Working poor. The Review of Social and Economic Issues,1(2).

Ma,J.,Lu,Y. (2011) Free Trade or Protection: A Literature Review on Trade Barriers.Research in World Economy,2(1).

Mukher,S. (2018 ) Foreign Trade Policy: Free Trade Versus Protection.[online] Available from: https://www.economicsdiscussion.net/international-trade/policy/foreign-trade-policy-free-trade-versus-protection/10779 [Accessed 10/07/2018]

Reich,R. (2006) The Poor Get Poorer.[online] Available from: https://www.nytimes.com/2006/04/02/books/review/the-poor-get-poorer.html  [Accessed 29/06/2018]

Stiglitz,J.,Charlton,A. (2005) Fair Trade for All : How Trade Can Promote Development. World Trade Review,5(3),pp.489-500.

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