The policy of free trade - what is it? The pros and cons of the policy of free trade

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2020-05-27 08:20:10

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A Consideration of some theories in the field of international trade allowed us to determine the causes of the countries ' trade with each other. However, another important issue is the choice by States of a certain kind of politics of international trade.

Based on theoretical aspects, we can distinguish the policy of protectionism and free trade. Two main types of international trade, which would produce positive results for the economy of the state. Let us dwell on each of them.

The definition of the term “free trade”

of free trade is

Free Trade – it is a policy in implementation of which the state should refrain from interference in the sphere of foreign trade. This behavior is happening in the country the development of international trade under the influence of supply and demand. There is also another name of free trade. It is the policy of free trade, which mostly needs to serve the interests of any state that leads to maximum production volumes at each of the trading parties.

Definition of protectionism

However, there is another kind of politics of international trade – protectionism. In this case, the national market is protected from foreign competition with the use of customs tariffs and non-tariff mechanisms of regulation.

Among the supporters of both free trade and protectionism there is a continuing debate about the feasibility of one or another of the politician. Each of the parties to the dispute in support of their positions put forward certain arguments.

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Free Trade: pros and cons

free trade pros and cons

This type of policy proves that any interference by the state in formed international trade is economically harmful.

The Arguments of free trade – the use of a theoretical thesis, based on the comparison of production costs, thanks to which the world economy reaches the rational allocation of resources and a high standard of living. Production technology and structure resources in each country have their peculiarities, which determine the differences in national production costs of different products and resources, and this is called specialization in the field of division of labor in the international arena. There are allocated less costly and more high-quality resources and products.

With all these positive aspects of free trade the benefits of free trade do not consider the following features. As the population might prefer domestic products over imported ones high quality, the Russian producers will reduce their production with the subsequent dismissal of employees. This fact will lead to lower tax revenues to the state budget. There's also the possibility of increasing the state, depending on foreign-made goods, the prices of which will rise and a large part of the population they will not be able to buy. The best result of implementation of free trade – stimulate manufacturers to improve their products while reducing costs. This fact will lead to lower prices for finished products.

Other arguments in favor of applying the principle of free trade

There are other evidence of the use of free-trade. These are the arguments:the politics of free trade

- the increased competition in the domestic market of the States by bringing in external suppliers, which significantly limits the monopoly of local manufacturers;

- stimulation of economic activity of domestic producers who are forced to fight with foreign rivals for customers;

- the extension of choice for buyers where there is an opportunity to compare the price and quality of foreign and domestic products.

Arguments in favor of protectionism

It is Necessary to allocate the following main provisions:

free trade is a policy

in the interests of national security, there is a need of sufficiency economy according to the main strategic sectors, which allowed the food and resource dependence on other States through protection of domestic production from foreign suppliers;

- the need to preserve jobs and their subsequent increase;

- the need to support domestic demand for the products of domestic producers but not their foreign counterparts.

- ensuring economic stability through diversification due to the high risk of occurrence of various economic fluctuations in the world economy with specialization of the domestic economy;

- the need to protect new industries of the Russian economy, not able, without support from the state to compete with such foreign producers;

to create favorable conditions for the improvement of certain industries at the expense of profit, which may be obtained by the growth of prices with the introduction of customs duties.

History of the implementation of free trade inforeign countries

what is free trade

What is the trade, can be seen on the example of management in 19th century England. At that time, the freedom of trade appeared in a total exemption from various customs duties imported into England and exported from her goods. During this period, due to duty-free sales of its products and the importation of cheap imported raw materials and food, England managed to successfully get good results in its domestic market.

England in the 60s of the 19th century on the principle of mutual favored were concluded bilateral treaties with Belgium, France, Italy, Sweden and Austria. Special attention should be paid to the Anglo-French Treaty (1860). At first glance, the agreement would be more beneficial to France, as England canceled all duties on silk and allowance of French production, and France only reduced the tariff on English coal, machinery and wool. However, English goods, despite the partial duty, was much cheaper and therefore flooded the French market. Thus, the policy of free trade helped to maintain the dominant position of Britain in the world market.

Examples of the use of free trade policies in Russia

the benefits of free trade do not belong

The Policy of free trade was used in different periods of economic development of Russia. Not venturing deep enough, refer to the economic theory of the 20th century. So, in 80-e years the Russian market was characterized by shortage of absolutely all consumer goods. The prices were quite low, and the queue – is significant. 1992 marked the abolition of the state monopoly on foreign trade, which was the prerequisite for a rapid flow of foreign goods to the domestic market. Trade began to develop actively, emerged a stratum of entrepreneurs, known as “pods”. They were mostly imported from China and Turkey cheap goods, which were sold directly on the streets near the markets and shops.

Current state of the Russian economy

Today, this stage has passed, and the buyer had a choice – to purchase domestic or imported. A vivid example in this matter is the food market. For example, the Russian production has a number of benefits such as naturalness, freshness and absence of various additives. However, it has a price somewhat above its foreign counterpart. Yes it looks a little worse overseas products.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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