Free trade details and Advantage & Disadvantage

2. What is Free Trade?
 Occurs when there are no artificial
barriers put in place by governments to
restrict the flow of goods and services
between trading nations.

3. Advantages and Disadvantages of
Free Trade.
Advantages of free trade.
• Increased production
• Production efficiencies
• Benefits to consumers
• Foreign exchange gains
• Employment
• Economic growth

4. Disadvantages of free trade.
• With the removal of trade barriers, structural
unemployment may occur in the short term.
• Increased domestic economic instability from
international trade cycles, as economies become
dependent on global markets.
• International markets are not a level playing
field .
• Developing or new industries may find it difficult
to become established in a competitive
environment .
• Free trade can lead to pollution and other
environmental problems.
• Pressure to increase protection during the GFC.

5. Why shouldn’t countries protect their own producers
from Free Trade?
 You could say that it's OK for countries to protect
their own producers. However, in that case, all
countries should be allowed to do this. At the
moment, the trade rules are unfair. Some countries
are forced to accept goods from abroad, while others
protect their markets with
 Import tariffs: also known as custom duties, which
are taxes imposed on goods when they enter a
country or one of a group countries such as EU.
 Quotas: which are quantitative restrictions on the
import of goods.
 and subsidies: are sums of money given by the
government to producers.

6. Advantage and Disadvantage of Free Trade with
regarding to developed and developing
countries.
Advantages
 Higher Employment Rates
 Less Child Labor
 Access to New Markets
 Higher Levels of Investment Capital
 Increased Life Expectancy

7. Disadvantages
 Unrealistic Policy
 Non-Cooperation of Countries
 Economic Dependence
 Political Slavery
 Unbalanced Development
 Dumping
 Harmful Products
 International Monopolies
 Reduction in Welfare of Certain Groups

8.  Harmful to Less Developed Countries:
Free trade is harmful for the less developed countries for the following
reasons:
i. Competition under free trade is unfair and unhealthy. The less
developed countries find it difficult to compete with the economically
advanced countries.
ii. Under free trade, gains of trade are unequally distributed depending
upon the level of development of different countries. The terms of
trade are favourable for the developed countries, and unfavourable for
the poor countries.
iii. Less developed countries generally experience unfavourable balance of
payments. The problem of un-favourable balance of payments cannot
be solved under free trade policy.
iv. Free trade policy adopted by the British government in India led to the
destruction of Indian cottage and small scale industries.
v. The less developed countries cannot protect their infant industries
under the policy of free trade.
vi. Free trade may endanger economic and political independence of the
backward nations.