NAOUFAL EL AMRHARI (Section B/ Gr.

4)

Free Trade

The unrestricted purchase and sale of goods ans services between countries without the
imposition of consraints such as tariffs, duties and quotas. Free Trade is a win-win proposition
because it enables nations to focus on their core competitive advantage, therby maximizing
econmic outpout and fostering income growth for their citizens.

Free Trade enables nations to concentrate their efforts on manufacturing products or

provinding services where they have a dintinct comparative advantage, according to the
economist DAVID RICARDO. A free trade policy should enable a nation to generate enough
foreing currency to pourchase the products or services.

When trade barriers, such as tariffs and subsidies are put in place, they protect domestic
producers from international competition and redirect, rather than create trade flows. Free
trade improves the efficiency of ressource allocation, the more efficient use of ressources
leads to higher productivity and increasing total domestic outpout of goods and services. As a
consequence of Free Trade : the employment will increase in exporting industries and workers
will be displaced as import competing industries fold in the competitive environment.

The countries involved in free trade experience rising living standards, increased real incomes
and higher rates of economic growth. This is created by more competitive industries increased
productivity efficiency and production levels.

Although free trade has benefits, there are a number of arguments put forward by protestors
who oppose free trade and trade liberalisation, these include :

 With the removal of trade barriers, structural unemployment may occur in the short
term, this can impact upon large numbers of workers, their families and local
economies.

 Free Trade can lead to pollution and other environmental problems as companies fail
to include these costs in the price of goods in trying to compete with companies
operating under weaker environmental legislation in some countries.

 Developing or new industries may find difficult to become established in a

competitive environment with no short-term protection policies by governments.

2013/2014