Free trade is a trade model in which some of the countries and governments waiver all restrictions of imports from and exports to other countries. It is a model in which the government does not interfere with imports and exports by imposing tariffs and subsides. This trade model has a couple of advantages and disadvantages both to the economy and to the business people.
1. Increased economic growth: By not restricting trade between two countries and governments, free trade will lead to increased economic growth as it will allow free movement of people and goods from one country to another hence widening the market for goods and services.
2. More dynamic business climate: Free trade means that people and goods will be allowed to move between countries. This will allow the flow of goods and services that are not originally produced by one country which makes business more dynamic.
3. Lower government spending: Free trade means that governments and states will not be forced to spend on extra activities such as tariff accounting and immigration costs which means that more and more money will be channeled to other important activities.
4. Foreign direct investment: FDI is one of the most important advantages of free trade between countries. When goods and services are allowed to move freely between countries, they encourage influx of foreign exchange into the country which leads to growth of foreign direct investment.
5. Availability of expertise: Free trade encourages movement of people and goods between countries. This means that more and more people with different expertise will be allowed into the country diversifying the human capital within that country.
6. Technological transfer: Free trade encourages the transfer of technology between countries. The advancement in technology means that as people and goods move freely into the country, new technological advancements can be transferred into the country which leads to growth.
7. Less corruption: Free trade means more and more people will be allowed to work freely within the boundaries of another country. There would be no need to ask for additional charges in forms of tariffs which reduces the chances of corruption.
8. Reduced likelihood of war: Free trade will ensure that people of different countries can coexist peacefully and even do business together which reduces the chances of conflict leading to war.
9. Positive competitive advantage: Free trade will also lead to positive competitive advantage amongst countries as they will be competing to produce more advanced goods and diversification of services.
10. Creation of employment opportunities: Free trade will increase opportunities for the citizenry by providing a wider market for business people to sell their wares which also increases the employment opportunities.
1. Increased job outsourcing: Free Trade opens up opportunities for people from other countries to come into the country and offer their services which leads to increased job outsourcing.
2. Theft on intellectual property: Free Trade is detrimental because it may lead to the theft of intellectual property by citizens of another county.
3. Crowd out domestic industries: By allowing more and more people to come into the country and offer their services and goods, it may lead overcrowding of foreign companies which may eventually edge out local industries.
4. Poor working conditions: Free trade means more and more people will be allowed to into the country which my lower the quality of the working conditions for both citizens and foreigners.
5. Degradation of natural resources: As more and more people continue to pour into the country, it means more and more space will be needed to create homes to accommodate them. This will require some clearance of natural resources to pave way for the new developments which leads to degradation of natural resources.
6. Destruction of native cultures: As more and more people come into the country, they bring with them different cultures which may eventually erode the local culture.
7. Reduced tax revenues: Free trade leads to the reduction of revenue in terms of reduced taxes and tax cuts that may end up impacting on the growth of the economy.
8. Job losses: Free trade may also lead to job losses since foreigners bring with them expertise that may not be available locally. This leads to job losses for the locals.
9. Labor and environmental abuses: Free trade means that labor will be readily available in the market which may encourage some employers to abuse the labor since there is a variety to choose from.
10. Loss of domestic industries: Free trade threatens to consume domestic industries since foreigners bring with them different expertise and industries that may produce cheaper goods.