The total global gross domestic product (GDP) is right around $85 trillion. GDP is the total valuation of all goods and services available in the marketplace. The benefits of free trade have let the global GDP flourish to these heights.
While not all countries have free trade policies, those that do tend to be more economically successful than those that don’t. This may lead one to question “is free trade good or bad?” The answer to this question is contextual.
A free trade agreement between nations can benefit or destroy a country depending on the context they find themselves in. They are beneficial if done right, however. Read about the social and economic benefits of free trade here.
What Is Free Trade?
Free trade is unrestricted trade between two or more national entities. Having a free trade network means keeping tariffs, embargoes, and other means of economic control out of the trading process.
Free trade is an inherent state between two nations. As long as nations don’t levy any additional restrictions or fees on each other, their trade is said to be free.
Free Trade vs Protectionism
In a free trade situation whoever can produce goods and services for the cheapest price will reap the most rewards. If a country has a domestic market that produces the same thing, this market may be handicapped by free trade.
The cure for this is ingenuity and streamlining production processes. Some countries however take the easy way out and levy tariffs or make restrictions to help protect domestic marketplaces. This is known as protectionism.
Economic Benefits of Free Trade
Having free trade policies opens up the door to new markets. These markets may have products and services not found within the borders of your nation. Free trade can also get you products for cheaper than domestic markets.
Free trade also fosters ingenuity in your domestic sectors. To compete on a global scale, your business leaders will need to step up their game. Joseph Stiglitz highlights some other important economic benefits of free trade.
Social Benefits of Free Trade
In addition to fostering positive economic conditions, free trade also benefits society in general. It is conducive to diplomacy and helps strengthen relations between different nations. It also helps spread the idea of multiculturalism.
A populace in a country reaping the rewards of free trade will have access to a wide variety of goods and services for affordable prices. In this way, free trade raises standards of living and improves the lives of all your citizens.
Live Free and Prosper
The best way to ensure prosperity for a nation’s people is to have free trade policies in place. The benefits of free trade don’t only extend to the economic sector, they also make people’s lives better for their day-to-day existence.
Use the information in this guide as part of your understanding of the global economic system. If you are allowed to vote, lean on the side of free trade for a better tomorrow.
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