There is more competition therefore this pushes the prices that domestic producers charge down because a lot of the imported goods coming in are cheaper therefore the producer surplus decreases but the consumers surplus increases (Feenstra, 2011). The positive benefits of free trade can be looked at from an economic
Free trade has many advantages including first, lower prices for consumers by removing tariffs enabling us to buy cheaper imports. Second, free trade encourages greater competition. There are more incentives to cut costs as for example, a monopoly in the U.S. may face competition from foreign companies. Third, the law of comparative advantage says that free trade will enable an increase in economic welfare. This allows countries to specialize in producing goods and have a lower opportunity cost.
In an effort to compete fairly, production firms left in the developed countries try to reduce their production costs by reducing labor costs and deteriorating work environment conditions, hence resulting to a race to the bottom. Economics have tried to explain this phenomenon, proposing solutions to the controversy. To start with, economic growth differs from nation to nation and thus causing differences in development status. Accordingly, prices differ mostly due to production costs. United States as a nation portrays a clear image of this phenomenon, with the south being less developed as compared to the north.
Introduction The reason said consumers better off as a result of economic rationalism because consumers can enjoy more fairness in the market. For instance, consumers have more information about price, utility, quality and product materials that they can compare with substitution in the market and select the best fit product. Also, economy closer to free market can inspire product innovation. The concept of economic rationalism aim at market efficiency to reach entire society interest maximization, through deregulation, a free market economy, privatization of state-owned industries, lower direct taxation and higher indirect taxation, and a reduction of the size of the welfare state, for example, privatization of public utilities and free trade
Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer (Mankiw & Gregory, 2012). This provides a net gain in economic welfare for the producing country. There are many advantages to this aspect of free trade such as lower production costs. For example, inflicting stringent rules on the production of goods can give leave domestic manufacturers with an unfair disadvantage, leading to possible price increases as a result of the cost of production. New Zealand is an efficient producer of (has comparative advantage in) a range of products that are subject to some of the world 's highest barriers to trade (NZIBF, 2015).
PRO’s Competitive advantage Supporters of FTAs between countries believe that if a country has enough capacity and capability to produce a marketable product it gives them a competitive advantage to supply that product at a lower cost. Other countries that then have the capacity and capability to produce alternate products competitively can then trade with the other country for mutual benefit. Consumers benefit When imported products have reduced or no tariffs, they will be cheaper for consumers to buy. Employment
Using this concept of comparative advantage makes clear that international trade, both exporting and importing, is beneficial to countries. The United States in specializing production in goods that they have a comparative advantage in producing allows the United States to meet local demand of their goods and have extra to export to other countries where there is demand for their goods, which could be sold at a higher a price than in the local market. Also, if the United States needs more of a certain product, then it could import it from another country that has a comparative advantage in producing that good. When the United States imports goods from countries, which has a comparative advantage in producing that good it will be cheaper than producing it domestically. Based on this examination, trade is obviously making everyone better
Imports from countries like China and Mexico have eased inflation and caused lower prices in the U.S. Free trade promotes competitiveness and forces countries to lower costs. A direct result of this is lower prices for the buyer. This competition creates a dynamic business environment (Boudreaux & Ghei, 2017). An article by David Boaz reports: “The benefit of international trade to consumers is clear: We can buy goods produced in other countries if we find them better or cheaper” (Boaz,
The outsourcing of jobs from United States of America is becoming a major threat to the American economy. Despite the substantial benefits of outsourcing, the increase in unemployment and the economy decline causes a major concern to the US government. But economists have cited many points that support outsourcing of jobs based on certain facts. If US companies do not outsource their jobs then foreign firms will produce cheaper goods and sell it to the US market. The demand curve is negatively sloped, so as the price of the substitute goods (3) that are outsourced gets low, the demand for the costlier US goods will come down.
This results in a lower cost to employers and an influx of workers. Whether legal or illegal, additional workers result in economic growth. Finally, globalization has facilitated human development through cultural diversity, broadening ideologies, and creating beneficial competition between nations. However, because the U.S. protects its citizens with labor laws and livable wages millions of manufacturing jobs are lost to inexpensive, overseas counterparts. While there are many benefits to fusing the world, globalization comes at a cost, the elimination of America’s middle class.