Advantages and disadvantages of free trade

1. ENGLISH HOMEWORK
NAME: Richard Andréss Robalino Quito
CAREER: Electronics and Telecommunications
Advantages and disadvantages of free trade
In international trade theory, globalization and free trade results over the long term
in "commodity price equalization" across countries; or if capital, labor and technology are
highly mobile, free trade and globalization is only for rich countries. “Free trade” means
freedom to trade. Freedom is a concept and principle that everyone holds dearly, except
dictators and bullies [1]. We are going to analyze the advantages and disadvantages of free
trade in both cases: the poor and rich countries.
Free trade occurs when there are no artificial barriers put in place by governments to
restrict the flow of goods and services between trading nations. When trade barriers, such
as tariffs and subsidies are put in place, they protect domestic producers from international
competition and redirect, rather than create trade flows. [2] It is in the case of poor countries
due 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 consumption
needs and production inputs to be liberalized and to be available at bargains, but want their
own products and services to be protected from competition. It doesn't work that way. Still,
governments the world over so often give in to protectionist aspirations. Such is done often
in 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 various
goods and services to fill their needs. In this sense most people advocate free trade whether
they know it or not. [1]
Free trade in theory increased production of a country. Free trade enables countries
to specialize in the production of those commodities in which they have a comparative
advantage. With specialization countries are able to take advantage of efficiencies
generated from economies of scale and increased output. International trade increases the
size 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. Trade
liberalization creates losers and winners as resources move to more productive areas of the
economy. Employment will increase in exporting industries and workers will be displaced
as 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 service
industries, which can absorb the unemployment, created through restructuring as firms
close down or downsize their workforce. When tariffs were increased substantially in the
period 1974–1984 for textiles and footwear - employment in the sector actually fell by 50
000, 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 third
world countries. The countries involved in free trade experience rising living standards,
increased real incomes and higher rates of economic growth. This is created by more
competitive 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 to
compete.
International trade does not always amount to blessings. It has certain drawbacks
also such as the import of harmful goods foreign trade may lead to import of harmful goods
like cigarettes, drugs etc. This may run the health of the residents of the country. E.g. the
people of China suffered greatly through opium imports. [3]
This type of trade may exhaust resources. International trade leads to intensive
cultivation of land. Thus it has the operations of law of diminishing returns in agricultural
countries. 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 creates
danger of Starvation. A country might depend for her food mainly on foreign countries. In
times of war there is a serious danger of starvation for such countries. One country may
gain at the expensive of another. One of the serious drawbacks of foreign trade is that one
country 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 with
each other in finding out new markets and sources of raw material for their industries and
frequently 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:
http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html. [Accessed:
09-jul-2012].
[3] «Advantages and Disadvantages of International Trade | guesspapers.net». [Online].
Available: http://www.guesspapers.net/1593/advantages-and-disadvantages-of-
international-trade/. [Accessed: 09-jul-2012].