Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth. With so much focus on the positive elements of free trade, the negative aspects of an open system are often overlooked. However, they do exist, and protectionism is needed. Consequently, safeguards are built into the system. States look out for their own good, whether that is through the use of escape clauses or the choice of the optimal forum for dispute settlement based on the precedent they do or do not want set. This paper argues that protectionism is valuable and inherent in the current system; however, not enough. Powerful states exploit weaker states, and “free trade” exacerbates the problem. I will first discuss why free trade does not work. Then, I will explain how the current system enables the inherent protectionist attitude of states. Finally, I will analyze the fairness of the system. Free Trade Doesn’t Work As Ian Fletcher pointed out in Free Trade Doesn’t Work: What Should Replace it And Why, nations need a well-chosen balance between openness and closure toward the larger world economy (Fletc... ... middle of paper ... ...his sense, exploited by stronger nations. Conclusion Even in a world focused on the benefits free trade and aimed at achieving the goal of free trade, states are protectionist by nature. Unfortunately, the design of the international system allows for stronger nations to be more protectionist, leaving the weaker states even more vulnerable. A study that is more intensive than a critical commentary should be devoted to analyzing the impact of free trade on developing nations. I was limited to the readings and prior knowledge, and thus couldn’t provide a sufficient analysis on the fair treatment of developing nations. I was skeptical of the one reading that focused on fairness of international institutions because of the statistics that indicate these nations have not done well in recent decades. I would like to look into this more given more time and resources.
In 1776, even as Adam Smith was championing the ideals of a free market economy, he recognized that the interests of national security far outweighed the principles of free trade. More then two centuries later, that sentiment proves to still be accurate and in use. Since the early 1900s, the United States has used this precept to defend its position on trade barriers to hostile nations, and through the majority of the century, that predominantly referred to the Soviet Union and its allies.
Trading internationally, along with foreign trading policies has always been a controversial issue in America. Free trade is just as taboo if not more so. Today, the United States has made an attempt to maintain an open market of trading. Free trading greatly benefits a nation’s economy. The history of trade in The United States dates back over half a century ago. Through a substantial part of history, the United States had implemented rather extensive barriers and restrictions regarding importation, in order to better protect domestic suppliers from any serious foreign rivalry. Regardless, of Government restrictions and barriers set in place to avoid foreign competition it is healthy for our nation to have motivation and have the desire to
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
In 1993, the North American Free Trade Agreement (NAFTA) was signed by President Bill Clinton. It was said that Clinton hoped the agreement would encourage other nations to work toward a boarder world-trade pact. In 1994, the agreement came into effect, creating one of the world’s largest trade zones between United States, Canada, and Mexico.
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
All nations can get the benefits of free trade by being specialized in producing goods they have a comparative advantage and then trade them with goods produced by other nations in the world. This is evidenced by comparative advantage theory. Trade depends on many factors, country's history, institution, size and. geographical position and many more. Also, the countries put trade barriers for the exchange of their goods and services with other nations in order to protect their own company from foreign competition, or to protect consumers from undesirable products, or sometimes it may be inadvertent.
Free trade in today’s economy allows so much more than just jobs and goods at lower prices for Americans. Compared to the foreign competition, the free trade benefits outweigh any risks the foreign competition might impose on the US. As said by Denise Froning in her article, free trade benefits in four ways. “Free trade promotes innovation and competition, Free trade generates economic growth, Free trade disseminates democratic values, and Free trade fosters economic freedom.” Societies that enact free trade policies create their own economic enthusiasm, nurturing freedom, job opportunities, and success that benefit every citizen. Free trade is the only type of fair trade because it offers consumers the most choices and best standards to improving their type of living. Also by fostering opportunitie...
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
We begin our study of free trade by understanding the four principles of individual decision making.... ... middle of paper ... ... Edge, Ken, “Free trade and Protection: advantages and disadvantages of free trade” NSW HSC online http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html#more Accessed November 29, 2011. Net Aparijita, Sinha, “What are the disadvantages of free trade?
...liberalisations have had adverse consequences for some – including the poorest people – but should we automatically condemn trade initiatives because it means that one person loses or is pushed into poverty? The identification of hardship arising from a generally desirable policy reform should stimulate the search for complementary policies to minimise the adverse consequences and reduce the hurt that they unintentionally cause (Winters, 2002). ‘No country has successfully developed its economy by turning its back on international trade and long-term foreign investment’; although trade alone may not offer a solution for poverty reduction, the OECD and DFID have recently published reports identifying that combining aid and trade initiatives and encouraging the integration of trade and aid could progressively and sustainably alleviate poverty (OEDC, 2009; DFID, 2005).
Haddad, M., Shepherd, B., & World Bank. (2011). Managing openness: Trade and outward-oriented growth after the crisis. Washington, D.C: World Bank.
Globalisation has been one of the most significant developments of the last half century, and issues such as trade and international commerce have become increasingly important. In consequence, problems such as poverty, unfair wages and poor working conditions in third world countries have been drawn to the attention of consumers (Hayes and Moore, 2007). This is a growing global issue which cannot be ignored by anyone concerned about the problems in developing countries. Free trade and Fair Trade have both been offered as solutions to these issues.
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.
Globalization’s history is extremely diversified and began during the beginning of civilization. Now we live in a world that is constantly evolving, demanding people to use resources in locations that are very difficult to obtain certain resources. This could make it completely impossible to operate in these specific parts of the world. However, globalization allows people across the world to acquire much needed resources. Globalization creates the opportunity for businesses to take advantage and exploit the ability to take part of their business to a different country. Nevertheless, globalization is part of today’s society and will be involved in virtually all situations.