Free Trade, A Necessary Evil?: How Far Do You Agree?
“Free trade is a necessary evil”. How far do you agree?
Free trade is a branch of economics that proclaims freedom of trade and non-intervention of government in private entrepreneurship. Its main feature is absence of “trade-distorting policies” which reduce imports. The effectiveness of free trade and should countries adopt it to boost economic growth has been a debate since 18th century, after Adam Smith wrote his book “The Wealth of Nations”. There he outlined the main benefits of free trade and showed economic growth possible when adopting free trade policy. This question is still unsolved and some people see free trade as a bad policy. I partially disagree with the opinion that “Free trade is a necessary evil”. To prove my point I would …show more content…
If country can produce only a limited range of goods and services efficiently, they will have to buy it from other countries in their own interests. This means, that in case of war declaration, countries will most importantly damage their own interests. As a result, countries would want to prevent any wars.
On the other hand, we have effects that make some people think that free trade is worse for countries, such as:
1) Job loss. By the reason of having a very weak production of a certain good, that can be outmatched by better producers in other countries, government may decide to close this production in order to reallocate resources to industries where they are better at. This leads to involuntary structural unemployment. Consequently, other problems, for instance hysteresis and slower economic growth may be faced in the future. According to assessments of NAFTA after 20 years in Mexico, statistics reveal that despite average annual growth per capita was 0.9% almost two million small-scale Mexican farmers were …show more content…
This is true of course, but only to some extent. Developing countries are the only countries that should adopt protectionist policies for their own good. This is because, these countries must create industrial capacity and train their citizens, however this is quite difficult to do so. The reason for that is money and time. To improve, investment must be made, however the problem is – how can a country with outdated technology create goods that can match in quality and price with the goods produced developed countries, which have better machinery and labour that is more skilled? There is also the fact that developed countries will not share better technology with “capital-poor countries”. So, in order to enhance industries, developing countries can adopt protectionist policies and therefore buy some time along with keeping foreign-made goods from flooding their markets. The same was done by many rich countries in the 1800s, when they protected their markets and industries with high tariffs until they could produce better goods and compete with European manufacturers. Nonetheless, this is the only way that protectionist policies can help a country more than
Free trade is a branch of economics that proclaims freedom of trade and non-intervention of government in private entrepreneurship. Its main feature is absence of “trade-distorting policies” which reduce imports. The effectiveness of free trade and should countries adopt it to boost economic growth has been a debate since 18th century, after Adam Smith wrote his book “The Wealth of Nations”. There he outlined the main benefits of free trade and showed economic growth possible when adopting free trade policy. This question is still unsolved and some people see free trade as a bad policy. I partially disagree with the opinion that “Free trade is a necessary evil”. To prove my point I would …show more content…
If country can produce only a limited range of goods and services efficiently, they will have to buy it from other countries in their own interests. This means, that in case of war declaration, countries will most importantly damage their own interests. As a result, countries would want to prevent any wars.
On the other hand, we have effects that make some people think that free trade is worse for countries, such as:
1) Job loss. By the reason of having a very weak production of a certain good, that can be outmatched by better producers in other countries, government may decide to close this production in order to reallocate resources to industries where they are better at. This leads to involuntary structural unemployment. Consequently, other problems, for instance hysteresis and slower economic growth may be faced in the future. According to assessments of NAFTA after 20 years in Mexico, statistics reveal that despite average annual growth per capita was 0.9% almost two million small-scale Mexican farmers were …show more content…
This is true of course, but only to some extent. Developing countries are the only countries that should adopt protectionist policies for their own good. This is because, these countries must create industrial capacity and train their citizens, however this is quite difficult to do so. The reason for that is money and time. To improve, investment must be made, however the problem is – how can a country with outdated technology create goods that can match in quality and price with the goods produced developed countries, which have better machinery and labour that is more skilled? There is also the fact that developed countries will not share better technology with “capital-poor countries”. So, in order to enhance industries, developing countries can adopt protectionist policies and therefore buy some time along with keeping foreign-made goods from flooding their markets. The same was done by many rich countries in the 1800s, when they protected their markets and industries with high tariffs until they could produce better goods and compete with European manufacturers. Nonetheless, this is the only way that protectionist policies can help a country more than