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Free trade
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Free trade means trade between countries without barriers such as tariffs and quotas. It has winners and losers.
What free trade is
Free trade is international trade with no barriers, such as tariffs, quotas or subsidies.
Countries specialise in what they produce best and trade for the rest.
Countries specialise in what they produce best and trade for the rest.
Advantages
Consumers: lower prices and more choice.
Businesses: cheaper inputs (raw materials and components) from abroad, and access to wider markets to sell to, which may bring economies of scale.
Businesses: cheaper inputs (raw materials and components) from abroad, and access to wider markets to sell to, which may bring economies of scale.
Disadvantages
Domestic businesses may be harmed by cheaper foreign competition and may close.
This can increase unemployment in some industries and regions.
Countries may become dependent on imports for important goods.
This can increase unemployment in some industries and regions.
Countries may become dependent on imports for important goods.
A country removes tariffs on imported steel. Who gains and who loses?
- Car makers using steel get cheaper inputs.
- Domestic steel producers face cheaper competition.
Answer: Steel users gain; domestic steel makers and their workers may lose.
Free trade has no barriers. It brings lower prices and choice for consumers, and cheaper inputs and wider markets for firms, but can harm domestic businesses and raise unemployment.
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