The Benefits Of Free Trade

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Introduction 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. Free Trade Benefits Based on Different Country Types Heckscher-Ohlin theory…show more content…
In generally, compared to less developed countries, developed countries are more abundantly endowed with at least two factors of production, hence they are more likely to be the supporters of free trade (Rogowski 2010). By creating free trade agreements with less developed countries, developed countries are able to specialize on the production of those goods which they have comparative advantages. Specialization in the production generates larger economic return to the entities (Shikher 2005). By specialized in the production and free trade, developed countries are able to ‘sourcing industry-specific skilled labour in the global arena’ (Bahn and Cameron 2013). On the other hand, free trade agreements enable developed countries to avoid environmental disruption during the production while this would be the cost of trade liberalization for less developed country which will be discussed in next section (Cate 2009). Moreover, in most situations, developed countries have greater trade surplus compared to the trade deficit of less developed countries, for example, the free trade agreement between America and Mexico (Weintraub 1993). This situation also happened between America and Australia. Tiffen (2010) claimed that although the free trade agreement existed between Australia and America, but since from 2004, the proportion of Australian exports to the imports between the two countries has been continually
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