Fair Trade or Free Trade? :
Establishing a Position

by Robert J. Cummings, Ph.D.

The Issue - A Statement of the Problem

Where free trade is introduced between partners of unequal levels of development, the benefits tend to be gained more by the developed partner, while the costs tend to be carried more by the less developed partner. In light of this, waysways need to need to be found of introducing "freer trade," and thus fairer trade, between developed and developing countries which maximize the benefits gained by developing countries, while minimizing the adjustment costs.

     For many years, the accepted orthodoxy was that the extension of non-reciprocal preferences of developing countries was an important means of compensating for structural disadvantages which economic operators face in developing countries. Increasingly, however, a new orthodoxy is asserting itself into the mix, namely that the best prospects for the sustainable economic and social development of developing countries lie in their closer integration into the world economy. An intermediate step in this process of integration into the world economy is seen to be the conclusion of free trade area agreements between developed and developing countries. Free trade area agreements progressively open up developing countries’ markets to duty free exports from the developed country partner.

     The significance of this lies in the fact that, for most developing country producers, local, national and regional markets are of greater importance than the distant, largely unknown and relatively high-risk European and North American markets.

November 1999