Should Global Economies Continue Moving Towards Free Trade or Rather Increase Trade Barriers?

Categories: Sustainability

In this paper, it will be argued global economies should place more emphasis on moving towards free trade and eliminate all barriers to free trade. The first section of arguments will explore the economic reasoning of notable economists and their support for free trade. The second segment will explore the merits of moving towards free trade as opposed to the implementation of trade restrictions.

Free trade meets notations’ benefits that cannot be met through any other system of trade, and thus the necessity to encourage global economies to continue shifting towards free trade.

Background Free trade entails the elimination of all barriers to trade and encouraging the exchange of goods and services between nations. Various economists shared critical insights on free trade.

For instance, Adam Smith offered his support to free trade in The Wealth of Nations. He supported free trade on the premise that nations should specialize in their area of expertise. Smith argued that it would not be economical to protect the Scottish wine industry if it costs 30 times the price of importing wine from warmer countries (Smith).

Besides, he argued that if competitors become better off, then they would buy more of their exports. He perceived free trade as an opportunity for all nations to improve their welfare.

David Ricardo also argued that the removal of trade tariffs would result in net welfare gain, where the gain of consumers would outweigh the loss of producers. Arguments by John Maynard Keynes focused on free trade as a vital tool for fostering specialization.

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The arguments proposed by that free trade should be encouraged among nations.

Benefits of Free Trade Free trade promotes efficiency in market operations. Encouragement of free trade leads to the realization among domestic firms they could be facing competition from abroad, and thus the need to increase efficiency. Such firms will have an incentive to cut costs and increase productivity. The ultimate effect would be the efficient utilization of scarce resources in a country. Such a scenario would not be attained in a regime that embraces a protectionist approach to free trade.

Free trade should be encouraged because it causes higher levels of specialization where countries engage in the production of goods and services that give them a competitive advantage. Nations that are actively involved in free trade produce goods and services that have lower opportunity costs (Krugman 4). Intense specialization results in higher levels of output. Besides, it results in minimal efforts being required in the production of goods of extremely high quality. Also, specialization facilitates the attainment of economies of scale in the production process, which results in below-average costs for producing particular goods and services. Economies of scale result in a lower price for consumers.

The options available to consumers increase whenever nations engage in free trade. Notably, nations gain access to a combination of high-quality goods and services outside their production possibility curves. Access to a wide range of goods enables consumers to meet their diverse needs. In the event where nations restrict free trade, they deny their citizens access to goods not produced within the boundaries of a country. Opening up nations to free trade help place a check on monopolies in local is known that monopolies are known for being insensitive to consumer needs and charging high prices despite the quality of goods not matching the expected standards (Milner, Helen and Keiko 108).

The effects of monopolies are checked by opening up nations to free trade, which decreases the market power of monopolies. Free trade facilitates the transfer of technology that enhances efficiency in production. Nations across the globe are equipped with varying levels of technological advancement. Advanced technologies result in a higher degree of efficiency in the production processes.

A conventional approach towards the transfer of technology leads to the promotion of free trade. The benefits of advanced technology will enhance the living conditions in developing nations. In addition, free trade enhances access to a wide range of expertise. Most foreign companies have more expertise required in the development of local resources.

For instance, most developing nations do not have access to local expertise to facilitate activities in mining, oil drilling, and manufacturing. Such industries would remain largely unexploited if nations do not engage in free trade. Free trade agreements make it possible for the global firms to access such business opportunities (Milner, Helen and Keiko 109).

The multinational firms partner with local firms to facilitate the exploitation of such resources, where they are trained on the best practices that enhance efficiency in the exploitation of natural resources. Nations that engage in free trade have an opportunity to sell off surplus raw materials. For instance, nations in Middle East Asia, such as Qatar, are rich in oil reserves.

The absence of free trade would deny such countries an opportunity to dispose of their surplus oil. The surplus oil would be a waste if not sold off. Transactions involving surplus raw materials increase the GDP of such nations. Free trade is a great catalyst for economic growth among nations. Free trade results in increased economic output coupled with an increase in demand for local goods. A higher level of exports and imports augments economic growth. High-economic growth is closely associated with the creation of jobs in the economy (Baier, and Jeffrey 74). Such developments result in an improvement in the quality of life of developing nations.

Active participation in free trade enhances foreign direct investment where investors can invest in developing nations. The foreign direct investment adds capital that can be used in the expansion of local industries and boosts local businesses (Schott 7). In addition, it brings in foreign currencies such as the US dollars in nations that could be isolated. Access to foreign currencies protects a nation against unfavorable economic conditions such as local inflation. The foreign currency reserves can be used as a substitute for local currencies whenever hyper-inflation develops in the local markets. Elimination of barriers to free trade helps reduce government spending.

Engagement in trade agreements in regional communities requires governments to eliminate subsidies to their local industries. Such funds can be directed into alternative uses, such as responding to pressing community needs or infrastructure. However, nations that do not open up to free trade embrace protectionist measures that involve intensive government spending (Schott 7).

Free trade often comes under heavy criticism from policymakers who perceive it as a substantial threat to local industries. However, policies that promote free trade gained support from notable economists such as Adam Smith, David Ricardo, and John Maynard Keynes. Nations that engage in free trade have benefited from increased efficiency, specialization, the reduced market power of monopolies, access to expertise and advanced technology, and economic growth. Such benefits should motivate nations to continue moving towards free trade and eliminate all barriers to trade.

Works Cited

  1. Baier, Scott L., and Jeffrey H. Bergstrand. "Do free trade agreements actually increase members' international trade?" Journal of International Economics 71.1 (2007): 72-95.
  2. Krugman, Paul. "The move toward free trade zones." Economic Review 76.6 (1991): 5. Milner, Helen V., and Keiko Kubota. "Why move to free trade? Democracy and trade policy in developing countries." International organization 59.1 (2005): 107-143.
  3. Smith, Adam. "Smith: Wealth of Nations, Book IV, Chapter 2 | Library of Economics and Liberty". Web.Archive.Org, 2020,
  4. Schott, Jeffrey J. "Free trade agreements: boon or bane of the world trading system." Free trade agreements: US strategies and priorities 3.11 (2004).

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Should Global Economies Continue Moving Towards Free Trade or Rather Increase Trade Barriers?. (2021, Oct 31). Retrieved from

Should Global Economies Continue Moving Towards Free Trade or Rather Increase Trade Barriers?
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