Free Trade And The International Economy Essay

Free Trade And The International Economy Essay

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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 there remains some confusion about the impact of trade and free trade agreement and whether expanded trade helps or hinders a countries economy.
Comparative Advantage
Free trade enables countries to specialise in producing goods and services where they have a comparative advantage. 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 ...


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...iency within an economy. However, many obstacles can also be incurred such as: potential structural unemployment and negative impacts to the natural environment. Protectionism of countries industries through the use of tariffs, quotas, the use of the infant industry argument etc. are also met with caution.
I believe it is more detrimental to an economy that focuses entirely on free trade, the benefits weigh heavily; however, to what end? There are too many assumptions, that is free trade ‘has’ the potential to spark competitiveness within industries, but also invoke trade creation and increase economies of scale. Protectionism, at least, for a select time, is more focussed on the growth within an economy; nurturing industries until an appropriate period of time as allowed them to gain experience and knowledge, made useful in regards to eventual international trade.

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