In terms of efficiency, free trade thus means that every state should play to maximise their specialisation of production and to minimise doing less efficient tasks (Kindleberger, 1995). Liberals believe that specialisation will improve the welfare of an individual country and that of the world as a whole if countries specialise in one task according to their comparative advantage (O’Brien and Williams, 2013). Moreover, nation states can expand their businesses with foreign direct investments, and this leads to more dynamic business style. Free trade opens up a door to the world for every single state, and domestic companies can export and import their commodities without paying extra tariffs or tax. Eliminating trade barriers creates a field which people can play a role internationally to compete one another in order to improve national as well as international economy (Balaam, and Dillman, 2011b).
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.
The occurrence of free trade import and export can be done without the barriers to pay the duties from the businessmen. The growing of the economy will increases the demand of the goods and services. As the result, when the demand increases, the opportunity for businesses will increases and with the boost up of these matter, it will create more job opportunities to the people in the white collar and blue collar sectors. Besides that free trade encourages strengthen the development of a country’s institutions, in order to protect the country’s eco... ... middle of paper ... ...ate by others. The country should create more competition to bring more opponents into certain industry such as in technology industry, agriculture industry and automotive industry.
1) Discuss the advantage and disadvantages of free international trade ADVANTAGES Increased Production The reason for exchange is to give access to a more amazing variety of products and services. As stated by the Heritage Foundation, free trade fosters rivalry, impelling organizations to enhance and create better products keeping the costs low and high quality. Free trade permits organizations to concentrate on the merchandise or services that they do best. International trade builds a companies market share. As a result of which cost is decreased and the productivity is increased, prompting higher rates of production.
These agreements create a more accountable and fair trading relationship between two or more countries. They promote fairness for all countries involved by reducing trade barriers, cutting tariffs (taxes on imported goods) and establishing a fair set of rules. Free Trade also helps prevent countries from using unfair trade practices to hurt the countries involved. These agreements rebalance the rules governing one countries trading relationship with others; they also make other countries more accountable for their actions. The importance enacting free trade has increased as the whole has grown more competitive in recent years, yet
The idea of collecti... ... middle of paper ... ...unity to trade in order to reach their full potential to flourish economically (List 49). Consequently, state regulations for promoting public prosperity are unnecessary (List 49). In conclusion, I contend that economic integration reduces conflict, and in turn creates peace and prosperity due to interdependence, and free trade. In an era of globalized economy, countries see the resources they lack and thus, look to establish interdependent business networks that will be advantageous to both of them in the long run. Furthermore, free trade permits the greater interests of all to be discerned, and thus a more prosperous nation.
In addition, globalization uplifts those in poverty and creates more technologically advanced societies. Moreover, many of the problems associated with the process of economic globalization can be solve through adjustments in how trade liberalization occurs. Ultimately, the gains of economic globalization far outweigh the costs. The integration of economies benefits all those involved as larger markets ultimately create greater growth and efficiency – an assertion that is grounded in both theory and practical experience. Economic theory states that larger markets are more efficient by nature because they allow for the realization of greater economies of scale.
They would say that competition is healthy and necessary for economic growth. However, there are many reasons why trade barriers are beneficial and play an important role in international trade. Some of these reasons include being self-sufficient in producing military goods, trying to avoid becoming too specialized in our industries, keeping new industries alive domestically, protecting against foreign competition, and increasing domestic employment while reducing the number of jobs outsourced to other countries because of their cheaper labor
Consumer can benefit in cheaper goods, when presented with two products that offer similar benefits, customers vote with their purchases and decide which product will survive. Customers also determine the ultimate price point for a product, which requires producers to set product prices high enough to make a profit, but not so high that customers will hesitate to make a purchase. Except consumer can benefit in cheaper goods, corporate access to larger markets means that firms may experience higher demand for their products, as well as benefit from economies of scale, which leads to a reduction in average production costs. Providing an incentive for countries to specialize and benefit from the application of the principle of comparative advantage. Globalization enables worldwide access to sources of cheap raw materials, and this enables firms to be cost competitive in their own markets and in overseas markets.
Thus, increased investment and productivity would lead to increased output in the economy. With this increased output the economy grows and unemployment goes down. Yet, this would not be the only policy to bring the economy out of a recession. A monetary policy must be implemented in order to compliment the supply-side policies that stimulate the economy to bring it out of recession. The monetary policy that would best work with the supply-side policies would the easy money policy.