Free trade is a policy in international markets in which governments do not restrict imports or exports. Free trade is exemplified by the European Union / European Economic Area and the North

Free Trade

Free trade is a policy in international markets in which governments do not restrict imports or exports. Free trade is exemplified by the European Union / European Economic Area and the North American Free Trade Agreement, which have established open markets.

Free trade exists when goods can be traded easily without restrictions. Prices of goods appear only from supply and demand and that means that government and customs don’t intervene in trade. There some advantages of the free trade:

· Trade of goods without taxes or other trade restrictions

· Trade agreements which encourage free trade

· Unregulated access to markets and market information

· Inability of firms to distort markets through government-imposed monopoly or oligopoly power

Protectionism is justified for developing countries when they want to start manufacturing their own goods. This helps them become less dependent on import and this is good for the country’s balance of trade. Protectionism is even justified for developed countries when they have problem with unfair, for example, when aggressive competitors dump their goods in importing countries. The competitor does not make profit but it kills the local competition.

Free trade is an opportunity for people to make their own choice, according to their own preferences and creates economic opportunities and market. It is also a big part of the world economy at all: the comparative advantage in one sphere help this or that country to become a leader in this sphere of economy and encourage other countries to establish economic relations.

But free trade faces some disadvantages. Free trade agreements may often lead to cutthroat competition and dumping, under which, goods are sold at very cheap rates in order to capture the markets. Governments may also restrict free trade to limit exports of natural resources.

To sum up, despite many advantages, free trade policy has never been completely adopted by all the countries in the world. Globalization has made the world a much smaller place. And global trade refers to the act of buying and selling goods and services between countries.

Shekhmametieva T. 10B

Дата добавления: 2015-11-04