Free Trade versus Fair Trade

The mercantilist idea was already represented by the rulers of the 18th century and is still gaining more and more popularity in our times. With the signing of the first free-trade treaty in 1860 between the UK and France (Mègrelis, 1978, p.15) these two countries set the starting point for tendencies towards barriers surrounding the industrialized nations. The broad hypothesis underpinning this article is “ Most of the problems concerning free trade only exist due to the fact, that protectionist barriers set up by Northern countries still disturb an actual free trade system.”

Basically free trade has to lead to international division of labour and therefore to interdependence between countries. According Kohlehammer (1993), a defender of the free trade concept, “national customers can gain from it by choosing the cheapest products from all over the world” (p.45). According to this view the foreign supplier can increase in turnover and is able to expand the production. Due to the fact that foreign producers use a part of their proceeds on imports from their customers' countries, they also promote the domestic economy. Exports should be supported as they mean more jobs to the exporting country.

What happens is that all countries try to follow the same idea of reducing their imports and maximising their exports. Blanchard (1997) describes that a too high number of imports from foreign countries endangers domestic jobs and is therefore controlled through customs duties and other trade barriers. (pp.243-245) If customers could decide between domestic and imported products, some domestic suppliers would not be competitive anymore and would not be able to sell their products, because they either are too expensive or of low-quality. They would only be able to survive, if they lowered their costs of production with no consideration for social and economical losses.