The Pros And Cons Of Free Trade

1107 words - 4 pages

Free Trade is the ability to trade goods and services without barriers, and for prices to rise naturally through supply and demand. In theory, Free Trade was a way to break down the barriers between countries, banishing taxes and allowing prices to be naturally set through supply and demand. According to the World Trade Organization, this gives the poor countries the opportunity to specialize in the production of goods that derive from their environment and natural resources with the capacity to sell those same goods to the western world, while being able to buy back goods that may not produced in their native country. This idea is to be beneficial to all; however, the rich become richer while the poor remain poor.
Free Trade Agreements can create opportunities for Americans and help to grow the U.S. economy. According to the United States Trade Representative, “The United States is a Member of the World Trade Organization (WTO); the Marrakesh Agreement establishing the World Trade Organization (WTO Agreement) sets out rules governing trade among the WTO's 154 members.” To decrease poverty, developing economies need to grow faster, allowing the poor to benefit from this growth as well. Trade can play an important part in reducing poverty because it boosts economic growth consequently causing the poor to also benefit from that spurt in growth and development. According to Fergusson’s (2005) study, living standards in developing countries are not catching up with those in developed countries. They have made some progression yet are still lagging in comparison to developed countries and their living standards. What distinguishes developing countries versus countries that are poorer is their openness to Free Trade as stated in Fergusson’s study. The countries that are catching up with more economically stable countries are those that are open to Free Trade; the more open they are, the faster they are converging.

Those economically disadvantaged (poor) within a country generally gain from a loose trade. A loose trade is generally a strong positive contributor to poverty reduction. This allows people to exploit their productive potential, assists economic growth, restrains illogical policy interventions and helps to insulate against shocks. This corresponds with a new World Bank study which, used data from 80 countries over four decades, confirmed that openness boosts economic growth and that the incomes of the poor rose one-for-one with overall growth.
Economic analysts say trading among other countries with no stipulations improve global efficiency in resource allocation (Tupy, 2005). Free Trade delivers goods and services to those who value them most and allows partners to gain from specializing in the producing those goods and services they do best; according to Tupy’s findings, Economists call that the law of comparative advantage. Tupy also states when producers create goods they are comparatively skilled at i.e. Germans producing beer...

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