Free Trade

The concept of free trade was propounded by classical economists Adam Smith and David Ricardo. In free trade, the government allows the complete freedom to import or export legitimate goods and services.

Even if the government imposes taxes on the import and export of goods and services, the objective is not to discourage trade (imports and exports) but to collect revenue.

Therefore, if the government adopts a policy of allowing the unrestricted import and export of goods and services without any control, this type of policy is called a free trade policy.

Advantages of Free Trade (Arguments in favor of Free Trade)

The advantages of free trade are as follows:

1. Increase in Production: Due to free trade policies, countries can sell their goods and services in the international market. Therefore, each country specializes in the production of goods that it can produce at a comparatively lower cost. Consequently, production increases. As the production of goods and services increases in large quantities, production capacity further increases, and production costs decrease.
2. Benefits to Consumers: In free trade, consumers have the opportunity to choose and consume the goods and services they need from the global market based on their purchasing power, taste, and preferences. Due to the import of quality goods at lower prices through free trade, consumers experience complete freedom in the purchase and consumption of goods and services.
3. Expansion of Domestic Market: Free trade provides an opportunity for inexpensive but quality domestic goods and services to enter the international market. As a result, the sale of domestic goods and services increases, leading to market expansion.
4. Promotion of Healthy Competition: When goods produced by domestic industries enter the international market, they have to compete in terms of price, quality, and quantity. To compete with goods from other countries, new technologies and market strategies have to be adopted in production, which leads to the development of the competitive capacity of domestic producers and helps in market expansion.
5. Improvement in Technology: Free trade provides an opportunity for any nation to adopt modern technologies used worldwide. The free exchange of information, widespread use of the internet, and rapid development of transportation and communication have transformed the world into a small village (global village). The use of the latest technology improves production quantity and quality, benefiting both producers and consumers.

Disadvantages of Free Trade (Arguments in against of Free Trade)

The disadvantages of free trade policy can be presented in the following points:

1. Unhealthy Competition: In free trade policy, the products of developing countries, produced with limited knowledge, skills, and experience of the workforce, using old technology and with less investment, have to compete with the products of developed countries, produced with a highly knowledgeable, skilled, and experienced workforce, using the latest technology and with large investments. Therefore, competition between developed and developing countries in free trade can be likened to a fight between a bull and a calf.
2. Exploitation by Developed Countries: Developed countries exploit the resources and means of developing countries in various ways. Developed countries import raw materials and labor available in developing countries at low prices. Using these imported goods, they produce expensive and luxury goods and then export them back to the same developing and underdeveloped countries, thus engaging in economic exploitation.
3. Crisis in Domestic and Small-Scale Industries: Industries from developed countries, with long experience, large capital investment capacity, high-level technology, and highly skilled workforce, enter developing countries to produce goods and services. In contrast, industries in developing countries are just starting and struggling. As a result, new and small industries have to face intense competition and suppression from developed countries in terms of capital investment, technology, and managerial experience.
4. Risk of Economic Disputes: Free trade creates interdependence among the countries involved in trade. As long as there is a cordial relationship between nations, every activity is smooth and simple. However, if political and economic relations between trading nations become strained for any reason, the citizens of the trading countries face the risk of experiencing unpleasant times such as conflict, blockades, and wars between countries.
5. Danger to Public Health and Safety: Free trade provides an opportunity for every participating nation to freely import and export goods and services. Along with legitimate goods, illegal goods such as weapons, narcotics, alcohol, cigarettes, etc., can also be smuggled in cross-border trade. The trade of such goods poses a serious threat to public health and safety.