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Advantages and disadvantages of free trade
Advantages and disadvantages of free trade
Advantages and disadvantages of free trade
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Advantages and disadvantages of free trade


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Advantages and disadvantages of free trade

Advantages and disadvantages of free trade

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  • 1. ENGLISH HOMEWORKNAME: Richard Andréss Robalino QuitoCAREER: Electronics and Telecommunications Advantages and disadvantages of free trade In international trade theory, globalization and free trade results over the long termin "commodity price equalization" across countries; or if capital, labor and technology arehighly mobile, free trade and globalization is only for rich countries. “Free trade” meansfreedom to trade. Freedom is a concept and principle that everyone holds dearly, exceptdictators and bullies [1]. We are going to analyze the advantages and disadvantages of freetrade in both cases: the poor and rich countries. Free trade occurs when there are no artificial barriers put in place by governments torestrict the flow of goods and services between trading nations. When trade barriers, suchas tariffs and subsidies are put in place, they protect domestic producers from internationalcompetition and redirect, rather than create trade flows. [2] It is in the case of poor countriesdue to we can’t be competitive with development countries such as EE.UU, Germany,Europe. Some groups, however, have a double standard. They want all their consumptionneeds and production inputs to be liberalized and to be available at bargains, but want theirown products and services to be protected from competition. It doesnt work that way. Still,governments the world over so often give in to protectionist aspirations. Such is done oftenin the name of "nationalism" and "helping the poor", but this view is myopic. [1] The main advantage of free trade is the variety of products and the price of them.People are happy when they find bargains -- cheap clothes, shoes, computers, food, drinks,cell phones, -- whether or not those are available in their traditional, often local, shops.People are happy when they have plenty of choices of products, and sources to find variousgoods and services to fill their needs. In this sense most people advocate free trade whetherthey know it or not. [1] Free trade in theory increased production of a country. Free trade enables countriesto specialize in the production of those commodities in which they have a comparativeadvantage. With specialization countries are able to take advantage of efficienciesgenerated from economies of scale and increased output. International trade increases thesize of a firm’s market, resulting in lower average costs and increased productivity,ultimately leading to increased production. Free trade creates employment for industries and unemployment for people. Tradeliberalization creates losers and winners as resources move to more productive areas of theeconomy. Employment will increase in exporting industries and workers will be displacedas import competing industries fold in the competitive environment. For example with free
  • 2. trade many jobs have been created in Australia, especially in manufacturing and serviceindustries, which can absorb the unemployment, created through restructuring as firmsclose down or downsize their workforce. When tariffs were increased substantially in theperiod 1974–1984 for textiles and footwear - employment in the sector actually fell by 50000, adding to overall unemployment. [2] You have to be a person with a lot of resources(rich person) to survive in a free trade. The Economic growth is increase in development countries and decrease in the thirdworld countries. The countries involved in free trade experience rising living standards,increased real incomes and higher rates of economic growth. This is created by morecompetitive industries, increased productivity, and efficiency and production levels. [2]However it’s not real because countries like ours can’t buy or create a huge industry tocompete. International trade does not always amount to blessings. It has certain drawbacksalso such as the import of harmful goods foreign trade may lead to import of harmful goodslike cigarettes, drugs etc. This may run the health of the residents of the country. E.g. thepeople of China suffered greatly through opium imports. [3] This type of trade may exhaust resources. International trade leads to intensivecultivation of land. Thus it has the operations of law of diminishing returns in agriculturalcountries. It also makes a nation poor by giving too much burden over the resources. [3] Not only create an economic dependence on development countries, also it createsdanger of Starvation. A country might depend for her food mainly on foreign countries. Intimes of war there is a serious danger of starvation for such countries. One country maygain at the expensive of another. One of the serious drawbacks of foreign trade is that onecountry may gain at the expense of other due to certain accidental advantages. [3] It may lead to war. Foreign trade may lead to war different countries compete witheach other in finding out new markets and sources of raw material for their industries andfrequently come into clash. This was one of the causes of first and Second World War. [3] REFERENCES[1] «mg_20080717.pdf». . Advantages and Disadvantages of free trade.[2] «HSC Online - Free trade and protection: advantages and disadvantages of free trade». [Online]. Available: [Accessed: 09-jul-2012].[3] «Advantages and Disadvantages of International Trade |». [Online]. Available: international-trade/. [Accessed: 09-jul-2012].