Does Free Trade Raise Or Lower Incomes?

From an economic point of view, we cannot support this hypothesis. Free trade allows nations and companies to specialize themselves in producing goods in which they have a comparative advantage over others. Other goods, in which a nation lacks in efficiency, should better be imported than domestically produced. This specialization helps to further improve productivity, reduce the prices for products and hence, increases the overall live quality of the citizens.

Voluntary trade between individuals and countries has existed ever since the creation of civilization. The trade between nations, specifically individuals in nations, is primarily composed of both importing and exporting products for the purposes of this paper. In our current time, there is a trend towards an interdependent global market known as globalization. This trend is partially a result of increases in the technology of communication and transportation, as well as the relaxing of national tariffs on foreign made products since the 1940’s. There remains much debate between those opposing this trend and trade-liberalist that advocate for even more free trade than already exists. The liberalists argue that free trade presents the most efficient form of a global economy, forcing companies to compete with each other on the world market and thus passing the benefits onto consumers. On the opposing side, dissenters argue that free trade eliminates jobs, lowers domestic employment levels and takes advantage of less developed countries and their citizenship. This paper will examine each side’s arguments and work to examine the topic as a whole. According to existing microeconomic theory, free trade will offer far more positives to the world than negatives.

The concept of free trade has been debated throughout the ages and continues to stir emotion, as the title of Douglas Irwin’s book: Free Trade Under Fire. Douglas A. Irwin (born in 1962) is not only a businessman, but also is an American economist. But compared to other economists, he is exception stood out with clear and jargon-free English writing style. And in this book, Irwin has provided an informative, comprehensive and easy-to-read explanation of the benefits of a liberal international trading, help people who are deceived of the accusations against open markets have more information and knowledge to evaluate the issue more precise.

Trade Policy is a crucial part of our society in the United States, along with many others across the globe, that greatly depend on the profits and materials accessible due to the transfer of goods, ideas, and other materials between countries. Currently the trade policy that seems to dominate the trade market is ‘Free Trade’ which tends to leave the larger, wealthier counties with the most benefits while the developing countries are struggling to compete due to the lack of materials and workspace. Gradually withdrawing from Free Trade and expanding the Fair Trade movement that has sparked up would ultimately provide all people with equal advantages. This policy would put workers and the environment first and would be focused on dealing

Allowing free trade to happen will allow many benefits like having larger varieties of goods and services for a lower price, growth for the economy and as well as increased exports for producers. Free trade will especially help the Trans-Pacific Partnership, a free trade agreement among 12 countries that border the Pacific Ocean. The countries included in the are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Vietnam, and the United States.The benefits of free for this agreement include:the increase in exports, money going back to the workers while creating more jobs and prosperity, prevention of environmental abuse, and also the removal of tariffs placed on exports. According to the Coalition of Service Industries, the objective of this agreement is, “incorporate all negotiating participants under one free trade agreement which eliminates tariffs and non-tariff barriers to goods, services, and agriculture.” This countries involved with this agreement “account for 40% of the world’s trade”. When these countries make up 40% of the world’s trade, it also means that they make up 40% of the world’s GDP which equals to $107.5 trillion dollars. Consumers make up 793 million and 26% of the rest comes from the trade that they do. Where the countries are placed and the area of trade is larger than the North American Free Trade Agreement(NAFTA). The agreement doesn’t include China because the agreement wants to be able to balance the trade

The effects of free trade can be determined by comparing the domestic price without trade to the world price. A low domestic price indicates that the country has a comparative advantage in producing that good and that the country will become an exporter. A high domestic price indicates that the world has a comparative advantage and that the country will become an importer. When a country becomes an exporter, producers are better off than consumers. When a country becomes an importer, consumers are stronger than producers. In both situations, the gains from the trade exceed the losses.

The literature analysing the economics of free trade is extremely rich with extensive work having been done on the theoretical and empirical effects. Though it creates winners and losers, the broad consensus among economists is that free trade is a large and unambiguous net gain for society.[6][7] In a 2006 survey of American economists (83 responders), "87.5% agree that the U.S. should eliminate remaining tariffs and other barriers to trade" and "90.1% disagree with the suggestion that the U.S. should restrict employers from outsourcing work to foreign countries."[8]

Free trade is beneficial and grows economies due to the theory of Comparative advantage. This theory states that countries should specialize and produce the goods and services in which they are most efficient. This converts a theory in which people see free trade as zero sum game into a positive sum game in which all gain. David Ricardo was the first most to come out with the theory of comparative advantage and he did so almost 200 years ago. His theory was the basis for latter theories to come and it was based on the fact that countries should specialize in goods, which they are the best in producing and his model only accounted for labor as a factor of production (Feenstra, 2011). The Ricardian models basis is that instead of factor endowments trade is affected by the growth in technology and it says a country has a comparative advantage in producing a good when the country’s opportunity cost of producing the good is lower than the opportunity cost of producing the good in another county. This pattern of trade between countries is determined by comparative advantage. This means that even countries with poor technologies can export the goods in which they have a comparative advantage (Feenstra, 2011). This is good in the sense because countries that are less developed have a chance to export products that they are good at and boost the economy and GDP. They do not have to compete and make products in which they have poor technologies; these countries can simply import those

As we know trading blocks are breaking down into several different union, and different countries gather up in order to make trade intensely with each other. But that is just a brief definition, because the intense trades could as reflect no more than variable in comparative advantage. According to, “ What mainly matters is that each of these agreements allows trade between the participating countries to take place more easily and at lower cost.”(Economic theory and policy for trading blocks, 1994).

The argument has been made that free trade is the path that should and will be taken to improve the world economy for all. Through it States will be able to better allocate resources, labor, and goods. This sentiment, however, is not shared my all. A major opponent of free trade is Ian Fletcher. His argument against free trade is sound, however through other readings, especially Moonhawk Kim’s on the GATT/WTO, it can be seen that the theory of free trade is still evolving at the international level and that by sticking with it and having States being willing to work with each other it will end up being able to accomplish all that it is theorized to do.

Despite the clamor of the classical economists about the advantages of the free trade, the policy has either not been adopted by many countries or abandoned by those who had already adopted it. Economic history indicates that for the last two centuries, international trade has developed with

Yes, I think America should allow free trade. Free trade can form a mutually beneficial international division of labor. Under free trade, countries can compare interests and factors in terms of natural conditions. It specializes in the production of products which are more advantageous or less unfavorable. This international division of labor can bring many benefits, such as the benefits of specialization, and the optimal allocation of elements. The conservation of social resources and technological innovation.

Many policymakers today acknowledge the benefits of free trade than when Congress passed the Tariff Act of 1930 (the Smoot-Hawley Act). The destruction created by these protectionist tariffs led succeeding U.S. administrations to support free trade after World War II. Americans today do not sew their own clothes, grow their own food, build their own houses, or buy only products made in their own states. It would simply cost too much, since Americans can acquire such items on the open market with comparative comfort and usually for cheaper prices. It makes economic sense to buy a product from another who specializes in such production or who can make it more easily or for less cost. This does mean that your local producers will have to compete with international competition and job protection is not granted. Free trade encourages competition, spurring companies to innovate and develop better products and to bring more of their goods and services to market, keeping prices low and quality high in order to retain or increase their market share. Since companies must compete with their overseas counterparts, American firms can take note of all the successes as well as the failures that take place in the global marketplace. Free trade also spurs innovation. The U.S. market has demonstrated repeatedly, particularly over the last decade, that competition leads to increasing innovation. This is unmistakable, for example, in the intense competition to create the latest

Although free trade has theoretically never been in full practice, it has become, by definition, to provide for unrestricted trade between countries with the presence of tariffs to solely bring about revenue to the government (Eaton 1913, 78). With the installment of free trade, a country is pushed to maximize production (Eaton 1913, 78). Its industries can center their resources and efforts on those products with the least expense, or opportunity cost, and resultantly sell or barter the goods to another country (Eaton 1913, 78)

Nowadays, ‘Free trade’ has became one of the most popular words appears in public media. Like what Goldstein and Moss (2011) defined in their book, free trade is the policy that acts on diminishing government intervention on exports or imports business, while those intervention tools could be subsidies, tariffs or quotas. The debates also arisen as there are growing number of mainstream media focusing on the inequality of trade parties in the negotiations, and people want to know ‘who is the biggest winner in free trade’. This article will discuss the benefits of free trade for countries at different stages of their development, and within them.