Free Trade and National Policies Research Paper

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Updated: Feb 2nd, 2024

Introduction

Debate concerning whether to encourage free trade remains a controversy. Some countries favour free trade while others underscore the benefits that accrue from free trade. Trade plays a vital role in ensuring economic growth and a decline in deficits.

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Free trade function perfectly compared with fiscal and monetary policy adopted in counteracting the effects of subprime crisis. Additionally, regional trade and international trade experience barriers to trade.

Different states and countries have barriers that restrict trade from going on smoothly. The degrees of the restrictions that prevail in an economy are in relation to the movement of services and goods across territories.

The two-trade experiences a considerable number of restrictions such as exchange control, tariff duties, and quota restrictions among others.

As such, the economy experience similar problems, as a result, of the tariffs that are being imposed by the countries involved. The governments, therefore, should favour free trade against national interests (Cavusgil & Knight, 2012).

Discussion

Free trade among nations will accelerate development of the least developed nations. Free trade implies that tariffs will be minimal, or there will be no barriers to trade, thus opening up the global market for the non-competitive industries in developing nations.

Europe and United States maintain prohibitive barriers that restrict exports from a developing nation’s especially agricultural products and textiles. The development of poor countries rests in free markets and at the same time on their competitive participation in the world market (Young, 2009).

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This will form a platform for economic growth since developing countries will increase their exports and elevate foreign direct investment in their countries.

As a result, they will gain much in terms of capital formation than from the foreign assistance they receive from a developed nation. Capital formation will ensure a sustained growth of the economy, hence mitigating the country’s poverty standings. In addition, free trade will be helpful to developed countries since they will have a ready market for their products.

Free trade supports the aspect of globalization and liberalization around the globe. Countries indicate success in adopting universal decisions that call for imitation by other countries.

For instance, when US liberated the communication sector with success, other countries eliminated trade barriers in this sector. This move has encouraged the progress of world trade organization (WTO). More so, free trade will yield low mortality rates, reduced poverty levels, improved health, and decreasing hunger.

With trade liberalization, chronic hunger has reduced by half with life expectancy increasing in developing countries, according to WTO. The other indicator of economic development is increased literacy levels.

This is evident in countries that have adopted unilateral decisions reforms and as such, countries with increased contacts and trade with others records a credible progress (Bhagwati, 2002).

Liberalization and globalization act as a channel for extending rights to women. The reforms reveal women as potential and valuable resource. Women can engage in business activities, generate new ideas, go to work, acquire skills and knowledge, as well as inherit money.

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As a result, all opportunities are identified and utilized economically. Furthermore, the free mobility of labour facilitates new alternatives and innovation because individuals from developing nations can witness how their counterparts in western settings are treated.

Countries such as India and China prove that lack of protectionism leads to higher national income, increase in economic growth, as well as higher health costs. The relationship between per capita income and the proportion of GDP spent on health indicates the variation.

For instance, in sub-Saharan Africa they spent approximately 4.5% of GDP on health while Western countries spent as high as 17 percent of their GDP on health. As such, people, who have a higher standard of living, spend considerable amount of money on health issues. As countries improve their income, focus shift to health and the resulting income are channelled to improvement of health.

China and India, in the period 1970-2000, approved market-based institutions thus becoming market oriented. In addition, they received less of foreign aid; thus, poverty levels decline during the period despite a skyrocketing population numbers.

It is evident that the change in national policies translates to an increase in economic growth levels and economic success. Countries such as India, Chile, China, Singapore and Hong Kong are examples (Chang, 2008).

Legacy of colonialism and foreign aid is the greatest impediment to economic liberalization. Colonialism legacy creates economic and political centralization in the developing world coupled with dictatorial and less accountable leadership.

As a result, personal interests take a centre stage compared to engaging in trade. Therefore, a reduction in foreign assistance will stimulate economic growth and national policy changes, as well.

Reforms such as economic and trade liberalization remain the only panacea for developing countries problems compared to foreign assistance. Developed countries should favour opening up their markets to developing countries in order to boost their economic power.

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Conclusion

In conclusion, free trade facilitates globalization and the countries can engage in a competitive environment hence maximizing on the gains of competition. This will encourage domestic industries development as well as increasing efficiency.

Moreover, it will encourage the development of the economy due to international investment that will foster economic growth (Free, 2010). It also facilitates the availability of cheaper imports due to the reduction of barriers involved in trade, and there will be a fall in prices of import.

Free trade will also facilitate the creation of new technologies, hence an improvement of production processes and systems. Additionally, free trade result in an increase in consumer income and this will increase the wage levels of the workforce.

This is as a result of multinationals that offer a competitive wage packages. Again, free trade facilitates increased investment opportunities. The opportunities arise due to mobility of capital that is encouraged by fair return abroad creating attractive investment environments.

References

Bhagwati, J. N. (2002). Free trade today. Princeton, N.J.: Princeton University Press.

Cavusgil, S. T., & Knight, G. A. (2012). International business: the new realities (2nd ed.). Upper Saddle River, N.J.: Prentice Hall/Pearson.

Chang, H. (2008). Bad samaritans: the myth of free trade and the secret history of capitalism. New York, NY: Bloomsbury Press.

Free, R. C. (2010). 21st century economics: a reference handbook. Thousand Oaks, Calif.: SAGE.

WTO (n.d.). . Web.

Young, M. (2009). Free trade. Detroit: Greenhaven Press.

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IvyPanda. (2024, February 2). Free Trade and National Policies. https://ivypanda.com/essays/free-trade-and-national-policies/

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"Free Trade and National Policies." IvyPanda, 2 Feb. 2024, ivypanda.com/essays/free-trade-and-national-policies/.

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IvyPanda. (2024) 'Free Trade and National Policies'. 2 February.

References

IvyPanda. 2024. "Free Trade and National Policies." February 2, 2024. https://ivypanda.com/essays/free-trade-and-national-policies/.

1. IvyPanda. "Free Trade and National Policies." February 2, 2024. https://ivypanda.com/essays/free-trade-and-national-policies/.


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IvyPanda. "Free Trade and National Policies." February 2, 2024. https://ivypanda.com/essays/free-trade-and-national-policies/.

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