Free Trade 's Defence : The Ricardian Theory Of Trade

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In Free Trade’s defence.
The Ricardian theory of trade states that “Trade is a positive-sum game and therefore there are no losers across or within countries” (dowling). On the contrary, Paul Krugman questions the necessity of free trade and the notion presented by this theory. Asserting that even though free trade agreements seem to provide a win-win outcome for countries, one country is guaranteed to benefit much more; establishing a winner and loser (Krugman free trade passe). These different ideologies are one of the various arguments for and against free trade – dating back to as early as the seventeenth century. Therefore, this essay seeks to analyse those arguments presented, provide the advantages and disadvantages of free trade, the history of free trade and examples from a current free trade agreement (FTA) between Australia and China (appendix 1), to prove free trade is beneficial and not passé.
There is no unique definition for free trade. In theoretical terms, it articulates the non-existence of artificial impediments pertaining the exchange of goods across national markets. Plus, the similar prices met by domestic and international producers and consumers regarding transportation and other transaction costs (Irwin). Conversely, in practical terminology, free trade is the nation-state policy towards international commerce; promoting the absence of barriers and eradicating the restrictions imposed on the importing and exporting of goods between countries and

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