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Free Trade and Globalization in The Wealth of Nations by Adam Smith

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In the modern world of contemporary economics trade liberilisation and globalization are constantly debated topics. One side of the arguing that free trade and globalization will lead ultimately lead to developing countries being alleviated of poverty and developed nation’s GDP will reflect an increase that would otherwise be unattainable. The other side of the argument however claims that there is already contrary evidence that the introduction of free trade unfairly favors developed nations and that it cripples infant industries. Below will be elaborated on globalisation and trade liberilisation, also relations to international trade theories from David Ricardo, David Ricardo and the Heckscher-Ohlin theorem.
Globalisation is a worldwide movement towards economic, trade, financial and communications integration (“Business Dictionary,” 2013). This would allow firms to operate on a multinational level, previously being restricted to local communities as their target market. Taking advantage of different factors of production abundances in multiple countries. An important aspect to globilisation is trade liberilisation, which is the removal or reduction of trade barriers on the free exchange of goods between nations (“Investopedia,” n.d). These barriers can include tariffs and quotas as well as non tariff obstacles such as licensing rules (“Investopedia,” n.d). Removing such barriers allows international trade occur easier and countries are able to put to practice the comparative advantage aspect in relation to other economies.

In Adam Smiths paper “The Wealth Of Nations” paper by Adam Smiths projects the view on international trade as not a zero sum equation resulting in being beneficial to all parties involved eventually. By e...

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One of the main arguments against globalization is that large corporations take advantage of poorer nations. Opponents argue that corporations take advantage of the labor force by giving them unfair working conditions as well as having a disregard for the environment (“Economist” 2001). While this may have been the case in the past most multinational corporations are working to clean up their practices in developing countries.

Regardless of the way that the standard of living is measured, there is clear evidence that economies that adopt free trade policies outperform their counterparts that maintain protective trade barriers. This economic performance has lead to clear increases in the standard of living in these countries, providing clear examples that free trade can be used to help underdeveloped economies catch up to more developed nations.