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.
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