Free trade is a policy in international markets in which government do not restrict imports or exports. Free trade is exemplified by the European Union and the North American Free Trade Agreement,

Free Trade

Free trade is a policy in international markets in which government do not restrict imports or exports. Free trade is exemplified by the European Union and the North American Free Trade Agreement, which have established open markets. Most nations are today members of the World Trade Organization (WTO) multinational trade agreements. Member states agree to reduce the trade barriers between them in a series of trade negotiations (rounds) and the WTO, in its turn, has to settle trade disputes.

Free trade policy has a lot of advantages. It increases export opportunities and creates wealth. Manufactures in countries with small populations can find new markets, which allows them to expand. It provides unregulated access to markets and to market information. Free trade promotes inability of firms to distort markets through government-imposed monopoly or oligopoly power. It allows all companies to grow and stimulates competition. This feature is most valuable for consumers, because competition between producers keeps prices down, gives people wider choices and can be a guarantee of the quality of goods. However, free trade also has several serious disadvantages. Firstly, in certain cases it does not support world peace and stability. Most wars are caused for economic reasons; over trading routes to markets, or access to natural resources, because each country wants to expand its territory or influence to have more export and import partners and, as a consequence, monetary benefit. Secondly, free trade gives an opportunity to aggressive companies to dump their goods in importing countries. They do not make a profit, but this kills the local competition. So domestic manufactures often complain that foreign companies destroy them and their country’s inner trade system. That is why most governments still impose some protectionist policies. One way they do this is by using tariffs which are kind of tax on imported goods. Another way is by using quotas which limit the number or quantity of goods that can be imported. But exporters may complain about complicated bureaucracy and complex customs regulations.

I think that policies of free trade and protectionism are both the extremes and the countries should base their trade on their competitive advantages. It is when countries have one thing they do better than anyone else. They may have specific natural resource or a climate which is perfect for growing certain fruits. By concentrating on one activity they can import the things they produce less well. Countries that do not have these advantages can be successful too. They just need, for example, to turn their people into advantage: to develop highly educated workforce and know-how in manufacturing high-tech goods.

Дата добавления: 2015-11-04