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The Liberal Trade Theory: Liberalism And Free Trade

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Liberalism and Free Trade
The Liberal trade theory is considered one of the most influential international trade theories to date and is implemented by most key states and international economic organizations. The liberal theory is based on the premise of a free market approach where there is to be minimal or no political interference from governments to ensure maximum growth and efficiency, this premise is said to be market-centric. This believe advocates that “what markets work best as mechanisms for allocating resources (both domestically and internationally) if state intervention in market processes is kept to a minimum” (Broome, 2014, s. 22) (Khorto, 2014:2)
The result of this belief is that states will only intervene through the provision of improved infrastructure and policy, with regards to legal framework to ensure the optimizing and efficacy of market operations. Furthermore liberal trade theory is characterised by its belief in co-dependency, liberals believe interdependence is key as it strengthens relations between state actors in the international sphere. Furthermore with the manifestation of the concept of free trade, defined as the “absence
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Furthermore, concerning the liberal premise of free trade which is grounded upon comparative advantage (CA) theory, liberals believe that the use of CA by countries will assist in an increase in stability and efficiency. This because “if a country specializes in the production of goods and services in which it is relatively efficient compared to its competitors it will be better off. (O'Brien & Williams, 2010, s. 151) (Khorto, 2014:3). This means that even the economically weak countries can obtain benefit from the free trade system, due to more efficient use of their resources. (Khorto,