Coffee, Clothes, and a Conundrum:Poverty and Free and Fair Trade

ByOlivia Natan, Amanda Lordemann,

Leslie Hamachi, Sarah Rempel, Daniel Khalessi, and Benjie Smith

What is the best way to

address

International Poverty?

• Poverty: The inability to provide for one’s basic needs and comforts

• Trade: Exchange of goods or services

• Tariff: A tax instated by a country on imports

• [Economic] Globalization: The integration of national economies into the international economy

Free Trade

• Free Trade, aka Trade Liberalization, aka Lassiez-Faire Capitalism, is a macroeconomic policy that promotes multilateral tariff reduction and the removal of limits on foreign investments.

Free TradePro Con

•Allows countries to specialize, which can tap into a niche market.

•Specialization doesn’t allow for diversification, and this can lead to instability.

•In the long run, a “level playing field” can prepare a developing nation for global competition.

•Developing nations cannot compete with developed nations on a “level playing field” because they lack the resources, human capital, and leverage.

•Job creation in the long term

•Job loss in the short term

Fair Trade• Fair Trade is where

consumers pay a premium on products to support the welfare of the producers.

• The goal is to create a just and sustainable economic system by setting price floors on certain products from developing nations.

• Fair Trade Organizations designate and certify producers to receive Fair Trade status.

Fair TradePro Con

•Promotes specialization, which can tap into a small but lucrative market.

•Discourages diversification, which can lead to instability when a specific market shrinks.

•Has sway with its relation to activism; its label as “trendy” allows the cause to gain sympathy with consumers.

•Its status as a fad indicates that the popularity of fair trade products may not be lasting.

•Empowers individual producers •Price floors and/or subsidies provide false stability in the market

Protectionism

• Protectionism describes economic policy enacted by a nation to protect domestic industry.

• Includes tariff escalation and the implementation of restrictive quotas on imports.

ProtectionismPro Con

•Preserves weak domestic businesses.

•Reduces competition faced by domestic industry.

•Temporarily stabilizes a nation’s economy.

•Can lead to trade wars as trade barriers are implemented in retaliation.

•Regional integration schemes create economic opportunities for poor countries.

•Regional integration can cause poor countries to subsidize richer nations.

•The formation of a conglomerate of poor nations can isolate them in a swamp of economic destitution.

If a = b, and b = c, then a = c.

•We have just talked about how free and fair trade can affect the economy as a whole.•It is a generally accepted truth that the economy affects poverty.•Consequently free and fair trade policies affect poverty.

How can these policies, which shape macroeconomic trends,

affect poverty?• An unhealthy national economy can increase

unemployment and thereby decrease average income and standard of living.

• A healthy national economy can increase job creation and increase standard of living, but it can also increase the gap between the rich and the poor.

Group Discussion

• What is the best way to reduce poverty around the globe?

• Are the pitfalls of free trade avoidable? • Is fair trade idealistic in that it relies on the

goodwill of the consumer?• Are protectionist policies an efficient and

reasonable method of revitalizing domestic industry?

• Which of these policies, free or fair trade, creates a healthy national economy?

The Economic Spectrum

What is the best way to address global poverty?