The Importance Of Free Trade

1302 Words6 Pages
Businesses and workers have long thrived in the international economy. In recent years some countries have implemented national trade policies that unfairly favour their workers and companies; this is where fair trade agreements are introduced. Free trade helps create a more level playing field for national businesses and workers to succeed. Trade within the group is duty free but members set their own tariffs on imports from non-members (World Trade Organization, 2015). 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…show more content…
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). The removal of tariff barriers as a result of free trade can lead to lower prices for

More about The Importance Of Free Trade

Open Document