Essay On Adam Smith Free Trade Theory

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The core of Adam Smith Free Trade International Trade Theory is all parties involved in trade have received trade benefits in the free trade transactions. Adam Smith thinks different countries produce the same product with different costs; the country should produce the definite low cost products instead of absolute high products. The products can be exchanged with other countries, so that the two countries will increase labor productivity and decrease the costs. Obviously, labor and capital can be properly distributed and utilized. Citizens could enjoy the variety goods and services at the lower costs, but the exchange needs international market free trade. Since Adam Smith Free Trade International Trade Theory was published, it as the core…show more content…
Previously idle resources can be utilized, and then the domestic resources will be increased. For an example, China with the low level of the economic development decades ago, most of idle resources were cheap. Through free trade liberalization, China transfers the idle resources to diversify export products, which brings economic growth to China. The early 1960s a few developing countries like China, Korea and Singapore adopted outer-oriented trade strategies. As a result, they have rapid economic growth. Surely, the growth of industrialization relies on exports. (2) Supplementary scarce resources developing the whole economy. Except for the intrinsic scarce resources, developing countries also need machinery and equipment, intermediate inputs, technology and management experience resources in the process of industrialization. Through free trade liberalization, developing countries can get these necessary scarce resources, which promote the development of national economy, improve labor productivity levels. As a result, free trade liberalization can promote the developing of economy. (3) Bring the development to related…show more content…
It is not doubtful that consumers in the developing countries could always get benefits from trade liberalization as they can buy the cheaper goods and enjoy the high quality products. In addition, exporters also get benefits from trade liberalization, because they have larger markets. However, producers face the opportunities and challenges in developing countries. Considering that the producers with more productive will get the benefits, but the less efficient ones will get the loss. Obviously, when international competition increases, producers will take more pressures to improve their productivity to meet the needs of the international market. Surely, the companies unable to improve productivity will be pushed out of the international market. The trade liberalization will stimulate the firms of developing countries to improve their productivity in order to get benefits from the
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