The global trade system is composed of two components: free trade and fair trade. Free trade and fair trade, though benefitting the economy at times, are often criticized. Free trade, similarly to an unregulated trade system, is where the overall price of goods is lowered, thus, creating competition and profit which allows the flow of capital and technology not only in developed countries, but also in developing countries. As an economic liberalist might say, free trade is a positive sum gains procedure where everyone gets richer. On the other hand, fair trade aims to create more equitable trading conditions in order to help disadvantaged producers in LEDCs to receive greater profit for the goods they produce.
Fair trade and free trade is often criticized as well. Free trade leads to outsourcing, where domestic industries in MEDCs move to states with lower labor costs. Not only is LEDCs hurt by this, the environment and endangers the economic and military security. The major critiqued problem is the problem of sovereignty. Some critiques believe that free trade agreements weaken sovereignty since states are subject to adjudication and liberalizing markets. Meanwhile, fair trade has its own downside as well. In free trade, the location of the money is harder to observe. According to left-wing politics, fair trade hurts farmers while the right-wing believes that free trade benefits rich states and corporations.
To maximize the positive effects of trade while minimizing the negative effects, several methods can be taken. First of all, the World Trade Organization needs to be changed. The number of representatives in the WTO is based on the nations with the cash, thus, the LEDCs will never have a say in situations. In the United States, representatives and senates are giving out subsidies to agricultural sectors in order to receive votes. By doing so, the agricultural products such as corn is sold for a much lower price than the corns grown in LEDCs, thus, hurting their economies causing them to remain buried in sweat and labor. This needs to be improved. One of the major problems is where do the money go, in fair trade. To solve this problem, an organization can be established to simply watch over the flow of the currency.
Fair trade and free trade is often criticized as well. Free trade leads to outsourcing, where domestic industries in MEDCs move to states with lower labor costs. Not only is LEDCs hurt by this, the environment and endangers the economic and military security. The major critiqued problem is the problem of sovereignty. Some critiques believe that free trade agreements weaken sovereignty since states are subject to adjudication and liberalizing markets. Meanwhile, fair trade has its own downside as well. In free trade, the location of the money is harder to observe. According to left-wing politics, fair trade hurts farmers while the right-wing believes that free trade benefits rich states and corporations.
To maximize the positive effects of trade while minimizing the negative effects, several methods can be taken. First of all, the World Trade Organization needs to be changed. The number of representatives in the WTO is based on the nations with the cash, thus, the LEDCs will never have a say in situations. In the United States, representatives and senates are giving out subsidies to agricultural sectors in order to receive votes. By doing so, the agricultural products such as corn is sold for a much lower price than the corns grown in LEDCs, thus, hurting their economies causing them to remain buried in sweat and labor. This needs to be improved. One of the major problems is where do the money go, in fair trade. To solve this problem, an organization can be established to simply watch over the flow of the currency.