PROS AND CONS OF FREE TRADE
The free trade which result in countries that specialize in
the production of certain goods efficiently and preferred than other countries
which defined comparative advantage. To put simply, a country will import goods
and services that they cannot produce while they focusing on certain
products. Smith, Adam (1904) stated they
prefer to buy commodity from foreign countries as they offering much cheaper
than they make it by themselves. Free trade give benefit to many companies in another
country to gain experience in producing for foreign markets.In fact, it gives
an opportunity to consumers in choosing a wider variety of goods and services.
Plus, it also will increase purchasing power for businesses.Under a policy of
free trade, specialization will increase wealth, production of goods as well
maximizes the labour.
For instance, China is very rich in growth for
textiles and apparel while on the other hand UK industries grew rapidly in
machinery, transport equipment and electronic. This proof that trade between
China and the UK being highly complementary. Bilateral trade exchange began in
the 1950s whereas China is the UK’s largest investment source while UK’s is
China second largest trading partner. It reached by $785bn by 2015, which
approximately $596bn is from exports, accounting for 75.9 percent. With that,
it provides consumers with a variety of goods that they can gain from different
countries as well with cheaper prices (Chen, 2017).
Another example, Middle Eastern countries such
as Qatar are very rich in reserves of oil but without trade, there would be not
much benefit in having so much oil. Japan on the other hand, has very few raw
materials, So, if they intend not to trade with other country, Japan would be
very poor (Economics Help Website, 2010). So, it will benefit them if they began to trade with each other. Besides,
it gives an opportunity to farmers for having a fairly-paid wage for their job
promoting good farming, as a lot of fair-trade produce is also organic. The
highest level of production is from specialization. In fact, each nation can
consume the amount of the good that it wants to consume through trade.
Consequently, nations become more efficient because of they maximized in their
own production. The advantage of economies of scale will lead to lower prices
for consumers. Free trade will balance the needs,supply and demand plus
allowing the trade become easier. Within a nation, it can be a positive vibe
Some of the researchers frequently oppose free
trade because it will increase job outsourcing.Many countries employed foreign
employees to help them with local marketing, contacts and language. In result,
there will be high unemployment in their home country. Besides that, free trade
will encourage manufacturers to hire foreign labour with cheap prices
indirectly rob the opportunities of local labour to get a job. Other than that,
outsourcing is time consuming when a company waste their time in training
foreign employees who don’t understand rule and policies of the company.
According to the article written by Kimberly Amadeo, free trade give a huge
impact on American workers. American worker believes that security is another
big issue that a company will confront when hiring foreign workers. There will
be a potentially high risk for Information Technology security breaks such as
their business process secrets will be exposed.With that, in 2016 presidential
campaign Donald Trump once said he would bring the job back by renegotiating
with NAFTA. He threatened to impose tariffs on imports from Mexico and China,
so that the price of the products from those countries will become higher and
difficult to compete in America market.
But, basically tremendous advantaged of
international free trade have flowed from U.S free-trade agreements which cover
U.S, Mexico and Canada. NAFTA was executed between these three countries as
they have a common border and high potential as economic leaders of the region.
The first formally North American Trade Agreement (NAFTA) was conducted in
January 1994. In terms of the agreement, trade restrictions such as tariffs,
non-tariff and quota barriers were scheduled to be eliminated within 5 years of
period (Hashemzadeh, 1997).When NAFTA was fully
implemented, manufacturers in US gaveuncontrolled
access to the growing market in Mexico for high technology product while giving
consumers in US a lower price on goods. With that, NAFTA is expecting to raise productivity
by shifting jobs to the most efficient sectors in the economy. Besides, Mexico
also got the benefit from good capital inflow and outflow and creation of
better job at higher wages. It has increased the foreign direct investment in
Mexico through NAFTA. According to NAFTA Now website, “Mexico has received
US$156 billion from its NAFTA partners between 1993 and 2008 and become one of
the biggest recipients of foreign direct investment among developing the market.
However, economic arguments oppose free trade because
they said that free trade only give benefit to the wealthy within countries.
Companies that produce well in less-developed countries will impose a lower
wage on the labour.So, the rich become richer and the poor become poorer.
According to Bunzl (1999) it is difficult to see those in poor countries
improve their lot and thus narrow the gap between rich and poor, globalisation
therefore only serves as a productive, low-cost method for TNCs (Transnational
Corporations) to gain an advantage of low taxes, weak regulations and vulnerable
labour during penetrating the economies of developing countries. Everything
getting more complicated day by day. For instance, products being exported from
the poorer countries. However, with labour being paid less than their fair
wages in the poorer nations, the richer nations still the one that dominated
As a conclusion, there will
be pros and cons when free trade is being implemented. Some of the economists
will agree on free trade because one country only focusing on producing a certain
product called as comparative advantage. Besides of that, the implemented of
NAFTA give a huge advantage to the growth of the economy which cover the U.S,
Mexico and Canada. There will be also people who disagree with free trade
because they believe that implementation of free trade will increase job outsourcing.
It will give a huge impact, especially to American workers. Plus, they believe
that only wealthy within countries who gain advantages from free trade.
Consequently, poor become poorer and rich become richer