Free trade is a largely theoretical policy in which government imposes no traffic, taxes, or duties on imports or export quotas. In this sense, free trade is the polar opposite of protectionism. Which is a defensive trade policy aimed at eliminating the possibility of foreign competition. So here this article gives the pros ad cons of free trade to better understand this topic.
Advantages or Pros of free trade:
- Local industries are subsidized by many governments. After the trade agreement eliminates subsidies, those funds can be used more effectively.
- Investors are expected to flock to the country. This provides capital for the expansion of local industries and the growth of domestic businesses. It also brings the US dollar to many previously isolated countries.
- Even when only minor restriction, such as traffic is imposed all countries involved experience higher economic growth. For example, the office of the US trade representative estimates that being a signatory to NAFTA by 5%.
- Domestic businesses gain access to the latest technologies developed by their multinational partners, in addition to human expertise.
- Local businesses also benefit from multinational partners’ access to cutting-edge technology. Job opportunities expand in tandem with the growth of local economies multinational corporations train local employees on the job.
- Traffic and quotas are used in trade to protect domestic businesses and industries. When trade barriers are lifted, consumers typically see lower prices because more products imported from countries with lower labour costs become available on a local level.
Related article: Bilateral trade agreements’ advantages and disadvantages
Disadvantages or Cons of free trade:
- Many smaller counties find it difficult to replace revenue lost due to import traffic and fees.
- Businesses suffer revenue loss as a result of the high level of competition created by unrestricted free trade. Smaller businesses in developing countries are particularly vulnerable to this effect.
- Indigenous cultures may be destroyed as development moves into isolated areas. The local is being uprooted. When their resources are polluted, many people suffer from disease and death.
- There are few if any environmental laws in developing countries. because many free trade opportunities entail the export of resources such as lumber or iron ore, clear-cutting of forests and underclaimed strip mining frequently devastate the local environment.
- Without adequate labour protection, multinational corporations may outsource jobs to emerging market countries. As a result women and children are frequently subjected to arduous factory jobs in deplorable conditions.
Related article: NAFTA pros and cons
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