Monday 16 September 2013

Why do economists favour free trade

Free trade is trade taking place without restrictions and free flow of goods from one country to another removing all barriers to enable mutual benefit to both countries engaged in free trade.
The great advantage of free trade is that consumers can buy the products that are most competitive, whether they are produced at home or abroad. It helps to improve the standard of living of the people and economic well being. Many economists argue that free trade rather than protectionism is the way to create jobs and prosperity. Their view is that protectionism encourages protected industries to be inefficient. They have no incentive to become efficient and produce goods that consumers want to buy at the keenest prices. Such industries are unlikely to develop into strong industries capable of conquering export markets. Free trade on the other hand forces firms to be efficient or else they go bankrupt. If a firm can beat off imports at home, then it stands a good chance of being a successful exporter. Competition brought about by free trade produces efficient industries and thus leads to jobs and prosperity. What is more if countries  follow free trade policies, each country will specialize in those products in which it has a comparative advantage  and this produces gains to consumers in all countries.


No comments:

Post a Comment

Featured post

Commercial Bank & Central Bank

Followers