What is the difference between Free Trade and Fair Trade?

Difference Between Free Trade and Fair Trade

Free Trade and Fair Trade may sound similar, but they are actually opposite to each other. With the increase in global commercial and trade activities, the jurisdiction in which products are purchased and used has changed significantly. This results in the regulation of commercial activities mainly through – Free Trade and Fair Trade.

Free trade provides more freedom within the global trade market and entails the bilateral agreement between countries. The countries involved in free trade allows unrestricted import and export of goods and focus on removing restrictions, tariffs, and regulations to promote trade. The primary purpose of allowing free trade is to enhance the efficiency of the global markets and improve the economic growth of involved countries.

Fair Trade is based on the dialogues, transparency, and respect between two trading nations to have greater international trade equity. Fair Trade reduces the exploitation in the trade market, reduces human rights and environmental violations.

The main purpose of fair trade is to secure marginalized groups’ rights, offer better wages, promote standard working conditions, and stop child labor. The fair trade tries to regulate the violations involved in trade between the involved nations. Let us now move to the Difference Between Free Trade and Fair Trade.

Difference Between Free Trade and Fair Trade

• The primary purpose of free trade is to improve the nation’s economy, while the main goal of fair trade is to empower marginalized groups and improve their life.
• Free trade offers minimum overheads in the production process; hence the prices are low and not regulated by the government, while fair trade includes additional price to have fair labor, and hence prices are higher.
• Free trade usually benefits businesses and traders, while fair trade benefits small scale business owners and marginalized communities.
• Free trade focuses on the trade policies between the country, while fair trade focuses on the trade among individuals and businesses.

Some economists support free trade as it provides the least overheads in the production process, which results in low-pricing goods and services and benefits for end-customers and improves the economy. But other groups of economists support fair trade, as they believe that fair trade policies add up more consumers, and additional price for fair labor is outweighed by net economic benefit.