Free Trade vs Fair Trade

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Free Trade vs Fair Trade Winners and Losers Why trade?  Specialization and economies of scale in production lead to greater quantity of production in all trading countries and thus increased incomes and higher standard of living (economic welfare)  International trade and international economic interdependence may reduce tensions and promote peace among nations of the world NAFTA  Free trade  Elimination of tariff, gradual in some cases  Exceptions  Free capital movements/investment ==================== Rationales Stability Economic prosperities for all parties Will reduce illegal immigration Concerns  Economic Disparities  Environmental concerns  Labor concerns  Inequalities Why free trade may not be fair:  Limited potentials for trade in the developing world  Winners and losers in both developed and developing countries  The mismatches  Tastes  Regulations  Standards  Cultures  Economic and social institutions  Etc. Has NAFTA been successful?  Economic growth  Income inequality and poverty reduction  Economic stability  Immigration  Has NAFTA resulted in real “free trade?”  Some non-tariff barriers have survived – The corn and tomato story – The maquiladoras – The emergence of China Perils of Free Trade  Transitional job losses (unemployment)  Lower incomes for some  Loss of tariff income for some countries  Infant industries at risk: A need for protection  Imperfect capital markets (Note: Some criticize protection of infant industries.)  Level playing field?  From developed countries perspective  From developing countries perspective  Dumping laws  There may be more losers and winners despite economic growth in some countries Where are we now?  From GATT rounds (ending with the Uruguay Round) to WTO 1994  The rule of
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