Marginalized
The Difference Between Free Trade & Fair Trade
Free Trade Vs. Fair Trade – Not The Same!
Many people confuse the terms “Free Trade”, which has played a major role in countries’ trade policies in the past few decades, with “Fair Trade“. The table below will help clarify the key differences between the two terms.
| Free Trade | Fair Trade | |
| Main goal: | To increase nations’ economic growth | To empower marginalized people and improve the quality of their lives |
| Strategy: | Profit is the overriding concern | Balances concerns for people, the planet, and profit |
| Primarily benefits: | Multinational corporations, powerful business interests | Vulnerable farmers, artisans and workers in less industrialized countries |
| Critics say: | Punishing to marginalized people & the environment, sacrifices long-term relationships | Interferes with free market, inefficient, too small-scale for impact |
| Financing: | Payment is received at time of shipment; credit is sometimes extended by informal lenders at exorbitant rates. | Businesses offer producers advance credit with low- or zero-interest for income during lean seasons between harvest/production cycles |
| Producer compensation determined by: | Market & government policies | Living wage & community improvement costs. Technical assistance and training build broader skill set, and social premiums invest in social projects that benefit all residents. |
| Supply chain: | Includes many parties between producer and consumer; seeks out lowest-cost labor and raw materials, often through exploitive middlemen. | Includes fewer parties, more direct trade. Disadvantaged groups are made partners in the fair trade supply chain. |
| Marketing: | Marketing is directed at increasing profitability | Marketing is driven by consumer education and advocacy that leads to socially responsible business innovations. |
Here at Fair Trade World, we do not side with one model over the other indicating that one is superior. These are two distinctly different models that accomplish different tasks and both are important to the growth and transformation of a developing country. 🙂
Fair Trade World 