What are the possible advantages of free trade?

Answer 1

Free trade makes each side better off. This is achieved through a concept called "comparitive advantage", where both sides take from each other what each have an advantage in producing. So, if country A is good at producing widgets (i.e. better at it than country B for various reasons), then country B will stop making widgets and use those resources to something that country A has an advantage in making. In this way, all parties are better off.

In practice, it actually works pretty much that way. The problem with it is that the workers displaced usually complain to their governments, and ask for protection from free trade, as they (the widget makers) don't want to be displaced, even though it's better for the economy as a whole. Who can blame them... it's an issue that needs to be balanced.

In the US, we have many tariffs to protect various groups from free trade. Once such tariff is the tax on ethanol imports. It would be better if we had no tax, then we can import ethanol from Brazil, which has a comparitive advantage in that they can make ethanol from sugar easier. However, this would hurt our corn farmers who want to make the ethanol, even though they are less efficient at it.

If we dropped the tarriff, there would be free trade, and the price of ethanol would likely drop and the US consumer would be better off. However, the farmer in the US might suffer. So, our government chose to side with the farmers. Clearly, a sub-optimal choice for the economy.

So, in summary, free trade is usually good for all parties in the long run by bringing prices down, but not so good for an industry that is not competitive in the short run (since they have to effectively find another line of work). In the long run, this competition brings about innovation (as the displaced workers find something with a comparitive advantage). Innovation or compeition is another advantage of free trade.

Answer 2

Free trade (capitalism) promotes competition. Unlike communism or fascism which promote cooperation.

On paper communism has a lot of appeal. However history has shown the application of "free trade" to be a more successful model.

One good example here would be China, which proclaim themselves as communist. However when it comes to their economy they operate by more of a "free trade" model.

Also "free trade" between countries helps to create political stability. China and the USA are major trade partners so both countries realize that any conflict would result in an unhealthy stale mate for both countries.

Hope that helps.

Answer 3

Consumer choice. We don't have to rely on our home land companies for the goods and services we desire. We have a range of choices and they all compete for our money. I like having options and competition keeping quality high and prices low. P. S. China doesn't have "free trade", they market their stuff freely but don't let us sell them stuff freely. It is a bit of a one way street with them. They like global marketing when it is good for them!

Answer 4

Equalibrium of trade?

Competitive forces.

Answer 5

Lower prices due to increased efficiency.