Free trade is a type of economic policy that allows member countries to import and export goods among each other with lower or no tariff imposed. While supporters say that it is a win-win situation for both consumers and traders with free access to the market and information and without trade barriers, not all people (including economists) agree, saying that this way of trading allows for foreign competition to cause certain economic issues. To build a well-informed opinion whether free trade is more beneficial than not, let us take a look at its key advantages and disadvantages.
List of Advantages of Free Trade
1. It provides consumers with more options and the benefit of lower prices.
Proponents argue that, with imported products from other countries with lesser or without tariff, consumers can choose from a plethora of products, unlike when there is monopoly in the market. Also, the high level of freedom in this trade will result to reduced prices.
2. It benefits trading countries through competitive advantage.
It is stated that countries that have enough resources to produce certain products will enjoy competitive advantage to specialize in such goods and be their only suppliers to other countries. In return, the purchasing countries can also benefit from the low prices of these imported products. Therefore, it is a win-win situation for both trading nations.
3. It is a key to economic growth.
Countries that are engaging in free trade are seen to have richer economies. By specializing in certain products with plenty of materials to make of, they maintain a high level of productivity. Also, there exists productive competition, where products are traded at lower prices. All these aspects are good for economic growth.
List of Disadvantages of Free Trade
1. It will have an unfavorable effect on local businesses and producers.
Opponents argue that free trade is not beneficial to local businesses and producers in terms of profits. They explain that, with the reduced or zero tariffs imposed making foreign suppliers easily lowering their prices, local companies have to compete with the prices, which they should do even if it is difficult for them, or consumers will go for imported goods over their locally produced products.
2. It would cause workers to live in desolate places for their jobs and be paid with low wages.
Free trade is believed to force laborers in poorer countries to work long hours and live in shanties without the basic facilities, just to be able to keep their work and send money to their families.
3. It would rob the citizens of jobs that are supposed to be theirs.
Some groups say that this form of trading has taken away job opportunities for the average American, as some manufacturers are encouraged to hire foreign workers for cheaper labor and even relocate their facilities overseas.
The debate on free trade has remained to be a divisive issue between proponents and opponents. But by weighing down its advantages and disadvantages, we will be able to come up with a well-informed decision ourselves.
Crystal Lombardo has been a staff writer for Future of Working for five years. She is a proud veteran and mother. If you have any questions about the content of this blog post, then please send our editor-in-chief a message here.