Free trade is the process of liberalization of market from governments’ interventions. Under free trade policy, all economic resources from all countries involved are subject to price as a reflection of supply and demand, thus making price as the sole determinant for resource allocations.

The characteristic of free trade are:

1. Trade of goods without taxes or any kind of barriers

2. The free movement of labor between countries involved in the agreement

3. The free movement of capital between and within countries involved in the agreement

4. Free access to markets

Free trade ensures the same playing rules for a competition, although does not necessarily ensures a fair competition for all the parties involved.

FREE TRADE IS NOT FAIR TRADE

Free trade creates an equal business environment. By signing the agreement, countries will put their private sectors to compete with other countries’ private sectors in equal terms. For poorer countries, it means their private sectors – whom are relatively weaker – will compete against much stronger companies. The regulation may be equal, but the players capabilities are certainly not. It would be like a football match between Manchester United and Malaysia National Football Team – there might be a level playing fields, but Manchester United will still win every time.

Without the government intervention, the private sectors, commonly farmers or small companies, will fail to protect their production. It happened in Senegal, when it open its market, and should lower the tariff of tomatoes during 1994 to 2001. The country was producing about 73,000 tonnes of tomato concentrate by 1990. In 1996/7, hitted by the imports from EU, the production decreased to 20,000. The EU’s exports of tomato concentrate to Senegal increased from 62 tonnes in 1994 to 5,348 tonnes in 1996 due to the increased access to Senegal’s market (an 8625,81% increase). Since then, there has been stagnation in Senegal’s tomato processing industry with declining prices of tomato concentrate and a lack of credit and investment resources available to processors.

The EU farmers, on the ther hand, have easy access to credit and qualified labour compared to the Senegalese counterparts, and they are able to produce tomatoes more cheaply for the European processing industry. Moreover, in 1997 alone, the

EU paid out US$300 million in export subsidies to tomato processors. This example of Free Trade comes to show how countries that does not have an equal competitive advantage are expected to play against a more stronger player and, in the process, failled miserably.

However promising the benefit of Free Trade the richer country claims, the reality shows that inherently. Free Trade is never a fair ground to compete and therefore should be abandoned.