HUDU MUBARIK BAWAH

GROUPE 1

FREE TRADE

DEFINITION:

Free trade can be defined as the unrestricted purchase

and sale of goods and services between countries without
the imposition of constraints such as tariffs, duties and
quotas. In this regard, a government of a country does
not discriminate against imports or interfere with exports.
Free trade empowers markets to make the final
decisions on international economic life. Protected
trade, or international trade dominated by the
state, empowers political actors to be the final
arbiters of international economic life.

FEATURES OF FREE TRADE

Trade of goods without taxes (including tariffs) or other trade

barriers (e.g., quotas on imports or subsidies for producers)

Inability of firms to distort markets through government-

imposed monopoly or oligopoly power

Globalism - In an economic sense, the states of the

globe are irrelevant, only the demands of the global
market has any economic relevance ,under free
trade, the globe becomes progressively smaller as
corporations and bankers serve a global, rather than
a national, market.

Trade agreements, which encourages free trade -

Markets are based on contracts between buyers and
sellers. Free contracts are an important characteristic
of free trade. Protected trade, on the other hand, is
international economic activity controlled, at least in
part, by the state
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Unregulated access to market information.

ADVANTAGES OF FREE TRADE

Higher Levels of Investment Capital. With new capital

entering a developing country, it begins an upward
productivity cycle that stimulates the entire economy.

Free trade drives competitiveness. Free trade

does require businesses and workers to adapt to
the shifting demands of the worldwide
marketplace. Thus leading to critical competitions.

Cheaper goods and materials can be bought easily

from foreign suppliers

Less child labour. Free trade allows companies to

invest in equipment and pay higher wages to adult
workers through foreign investment. With higher
family incomes, children are able to attend school
rather than work.

Easy and quick access to New Markets.

DISADVANTAGES OF FREE TRADE

Harmful Products: Under free trade, injurious and

harmful products may be produced and traded. Trade
restrictions are necessary to check the import of such
products.

Dumping: Free trade may lead to cutthroat

competition and dumping. Under dumping, goods are
sold at very cheap rates and even below their cost of
production in order to capture the foreign markets.

Prevents infant industries in a country from

developing as it won't have economies of scale like
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GROUPE 1

larger firms abroad making it harder for them to

compete on price

Loss of jobs in countries