Free Trade And Its Effects On The Prosperity Of Countries

1744 Words7 Pages
The dispute over whether free trade has positive effects on the prosperity of countries or hinders the development of nations has been a major topic in international relations for centuries. Free trade is defined as a system in which goods, capital, and labor flow freely between nations without any trade barriers (What Is Free Trade?). Many nations therefore engage in this policy in order to ensure their citizens have enough economic resources or consumer goods for meeting various wants or needs. At the global level, free trade became a major U.S. foreign policy priority for the post-World War II international system and played a central role in establishing the Bretton Woods system. One of its core institutions was the General Agreement…show more content…
The sequence of this paper will be simply organized into the pros then cons of free trade, followed by my regard to its effectiveness in international relations. Several economists promote the idea of free trade through the concept of comparative advantage in which one nation can produce goods better than another. Nations can then export their specialized goods to other countries that have a limited supply of these products, thus increasing their economic welfare by boosting jobs and economic growth. If countries specialize in certain goods, they could also benefit from economies of scale and lower average costs, especially in industries with high fixed costs or that require high levels of investment. The benefits of economies of scale will ultimately lead to lower prices for consumers. Natural resources within a country could also be exported elsewhere so that it can be transformed into a more valuable consumer good. For example, Middle Eastern countries such as Qatar are very rich in oil reserves but without trade, there wouldn’t be much benefit in having so much oil. In other cases, a country may have very few raw materials, such as Japan, and would become poor without trade (Benefits of Free Trade). With free trade, nations can develop the best economic policies for their citizens and companies willing to meet
Open Document