Free trade is not fair trade

The idea of free trade is built on two or more nations reaching an agreement to create a boundary-less economy in which any of the agreeing nations can trade freely within its own sphere or that of other member nations. Numerous free trade zones exist across the world, such as the EU, ASEAN, ECOWAS, WTO, etc. While a number of arguments have evolved in relation to how these free trade zones are disadvantageous due to the belief that they create the perfect setting for nations to exploit others, there is no doubting the fact that they actually have numerous advantages associated with them. The first of these advantages is that free trade "enhances the standard of living" for citizens and residents of member nations (Bernard 2001; Caifa 2004; Cass 2003; Catrinus and Andre 2002; Franklin 2000a; Franklin 2000b; Jiagui and Chang 2002; Peter 1998; Tamer and Michael 2001; Saren 2001; Steven 1999; Thompson 2000; Ting 2003; Yao 1999; Yonghai 2003). Considering that human needs are vast and virtually insatiable, while the resources needed to provide for them are scarce, one can easily see why free trade will actually enhance the standard of living. 

A number of theories have been developed in relation to this argument. According to David Ricardo's Comparative Advantage Theory, if one nation can produce the needs of another nation at a relatively lower price than the nation in need, the best option for the nation in need would be to buy-off such production and improve their own lives (Bernard 2001).This is relatively true because resources are dispersed throughout the world.There is no single nation that can achieve full economic independence, as we all depend on each other for economic sustainability. The advanced nations produce sophisticated machines and gadgets that are shipped to developing nations to enhance their lives, while these developing nations provide them with both the raw materials needed for such production and cheap labor to ensure profit maximization. As such, one would agree with Adam Smith that free trade will definitely enhance the livelihood of people across the trade regions. This is because these nations will be able to exchange their resources and form a more productive force that will eventually meet the needs of trading nations. In the theory of comparative advantage, everybody is a winner for the common good, and this fosters an argument in relation to how free trade enhances the livelihoods of people across the globe. The factor proportion model (also known as the Heckscher-Ohlim theorem) provides another supporting argument for why free trade is fair trade, just as the comparative advantage theory does.In the theorem, the factors of production (land, labor, and capital) are sparsely distributed across the globe, with no country capable of boosting the self-independence of these factors of production (Yonghai 2003). Therefore, the right solution would be a free trade that will eventually enhance livelihood as the needs of people will be effectively and efficiently provided. Some nations have labor in abundance (e.g., China), others have capital in abundance (e.g., Germany), while others boost resource abundance (e.g., Nigeria and Russia). Thus, it is obvious that the best way to ensure enhanced livelihoods would be to create a free trade zone where these nations can bring all these factors of production and utilize them to develop a more profitable global economy. The "Increasing Returns to Scale" theory by Paul Krugman is another theory that shows how enhanced livelihoods can be achieved through free trade. A nation or company is said to experience increasing returns to scale if the return from an increase in factors of production is greater than the increase experienced in these factors of production. Mathematically, if there is a 10% increase in factors of production, one would say that there is an increasing return to scale if the increase in return actually exceeds 10%. Through free trade, nations will be able to enhance their livelihoods by increasing returns to scale (Franklin 2000b; Jiagui and Chang 2002; Peter 1998). This is because advanced nations will bring needed machinery, while developing nations will provide cheap labor and resources. For instance, numerous American companies are now moving to China in search of this cheap labor, and the outcome has been a subsequent increase in the return of scale with these corporations (e.g., Dell and HP) now serving the globe through their massive Chinese production networks. In essence, it can be seen that livelihoods will increase with free trade because nations will be able to combine their production resources and advance the production process. The resulting outcome will be an enhancement of the standards of living across the globe as needs and wants will be more effectively and efficiently provided.

The second argument in support of free trade as being fair trade is that it allows nations to specialize in certain industries, and specialization brings about quality and efficient delivery (Peter 1998). If not for free trade, a number of nations wouldn’t be experiencing their present economic boom; China and India represent some of these nations that are presently profiting from free trade. Since China joined the World Trade Organization, it has seen its economic shift from a national phenomenon into a global demand, with "made in China" products now easily accessible across every corner of the globe. Financial indications show that China has experienced GDP growth of an average of 7% for the last two decades, which has further pushed the country into becoming a global economic power (Ting 2003; Yao 1999; Yonghai 2003). Its success is easily linked to its manufacturing power. China is a production-driven economy, with virtually all products used across the globe being manufactured by Chinese firms. A further boost is that it also boosts cheap labor, which now forms the major reason why China is the global workplace for multinationals. This significant increase in economic power has also boosted China's global standards, with more advanced nations now welcoming China as a trading partner. The most recent of such deals is the signing of a nuclear plant deal worth £13 billion between the Chinese and UK governments, in which a nuclear power plant is to be built in the UK (for the purpose of generating electricity). Figures also indicate that the Chinese-UK trade has grown from £4 billion in 2002 to over £40 billion in 2015, further showcasing that free trade is essential for economic ties and the growth of trading nations. Besides China’s manufacturing will, India also boosts a different level of specialization as influenced by free trade in the area of "call centers." India is the global quick response space that stays awake while the world is sleeping to address global emergency needs. It strengthens some of the most sophisticated and advanced customer service units available on the planet, providing quick responses to customers' needs and assisting industries in retaining customer loyalty (Steven 1999; Thompson 2000; Ting 2003).There are numerous global corporations that presently have their call centers located in India (such as Dell, Shell, and so on). The demand for India as a global call center response network is also influenced by the availability of skilled labor in that area. The streets of India are littered with computer network centers, which range from providing simple computer services (such as internet and printing) to sophisticated self-defense networks (against cybercrime). This further boosts the overall demand for "call centers" From the above discussion, it is evident that free trade allows countries to specialize, and this brings about the effective and efficient delivery of services, with a resulting positive influence on economic development, enhancement of livelihoods, and the interdependence of global economies. However, outsourcing as a result of free trade does have its negative influence in terms of the overall economic value of any given state. For instance, in the case of China, where multinational corporations are now moving in to cash in on the cheap labor available in China, these corporations are forced to lay off staff in their country of origin, thus increasing the unemployment level in these countries and reducing the overall standard of living as these staff who are dropped from their work won’t have a means of surviving. Therefore, one cannot guarantee that free trade will effectively bring about comparative advantage to the trading countries, as it sometimes allows some countries to take advantage of others.

The third argument in relation to free trade is the "globalization of economies." Another area in which free trade has advanced economic growth is that it has enhanced economic globalization (Bernard 2001; Caifa 2004; Cass 2003; Catrinus and André 2002; Franklin 2000a; Franklin 2000b; Jiagui and Chang 2002; Peter 1998; Tamer and Michael 2001; Saren 2001; Steven 1999; Thompson 2000; Ting 2003; Yao 1999; Yonghai 2003). As a result of free trade, small local businesses can now compete effectively in foreign markets with multinational corporations.The global market has been opened up for all to benefit equitably. People are no longer committed to specific products; instead, they can now make choices based on what they want. The case of Malaysia is a good example, with the presence of multinational corporations now on the rise. Since Malaysia joined the WTO, foreign firms have rushed into the country to establish a long-standing legacy (Yonghai 2003). Such firms include McDonald's, KFC, Toyota, and Coca-Cola. Because of free trade, Malaysians are no longer limited to only local products, but sophisticated individuals can now enjoy foreign products at their leisure.For instance, the resulting increase in ownership of foreign cars is one of the benefits that Malaysian consumers now enjoy. However, a number of issues abound with the presence of these global firms. For instance, inexperienced local firms are easily pushed out of business as a result of these more capital-endowed global corporations. The Malaysian tradition of "coffee houses" (Kopitian) has now been transformed into western values by multinationals such as Starbucks, Burger King, KFC, McDonalds, and so on. This is pushing local firms to the brink of extinction. The WTO can be described as purely undemocratic (Jiagui and Chang 2002; Peter 1998; Tamer and Michael 2001; Saren 2001) in the sense that it is based on a capitalistic view of "letting capitalism reap" without considering the associated dangers as being experienced by these local Malaysian firms. Therefore, while the government can boost its internally generated revenue due to the huge capital these multinationals are pumping into the Malaysian economy, poverty is actually increasing as the standard of living decreases with these foreign firms pushing local firms to extinction—and leaving the owners of these local firms without the necessary means of supporting their livelihoods. Furthermore, this structural adjustment has a negative impact on trade because not everyone can afford the products and services of these foreign firms (which are relatively more expensive than those of local firms).On the same hand, the economic sovereignty of Malaysia is also threatened as these foreign firms can utilize their immense power to influence political decisions and the outcomes of the Malaysian economy. While the Malaysian government has adopted a number of policies (such as higher taxes) for these foreign firms and their Malaysian customers, there seems to be a subsequent increase in their penetration and assimilation within Malaysian society. On that basis, one could argue that while free trade leads to the globalization of economies and provides consumers with a plethora of options, it also leads to the decline of local businesses and a decrease in the standard of living.Thus, free trade is not fair trade in reality.

Andre Gunder Frank's "Development of Underdevelopment" is the final argument in relation to free trade in this essay. Andre argued that free trade makes developing nations highly (and possibly endlessly) dependent on developed nations as these developed nations fight to sell to developing nations (Bernard 2001; Caifa 2004; Cass 2003). Additionally, developing nations can also push low-quality products to these developing nations (such as what China has been accused of doing in Africa), offering them low value for the price. Even as these developing nations grow to meet the present standards of the developed nations, the developed nations will be further enhancing their development, making it virtually impossible for the developing nations to actually develop (Yonghai 2003). Thus, free trade, as argued by André, is not fair trade.

In conclusion, a number of arguments have been raised in favor of free trade as being fair trade. However, further analysis shows that the disadvantages overshadow any advantage associated with free trade. In essence, the free trade process does not allow for the effective and equitable development of all, as some simply take advantage of others and allow "capitalism to reap." Thus, it is concluded that free trade is not fair trade.

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