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8 Meaningful Pros and Cons of Free Trade

navajocodetalkersadmin on August 10, 2015 - 6:22 pm in Pros and Cons

Free trade is a type of policy that two or more countries agree upon. It greatly relaxes the boundaries between the countries when it comes to trading and taxes, which is seen as a huge benefit to everyone involved. One great example of this is NAFTA, or the North American Free Trade Agreement, which has shown it’s own good and bad effects among the countries involved. Is free trade a truly beneficial thing, or are there some significant consequences that should be thoroughly examined? Let’s take an in depth look at the effects that a free trade agreement can have.

The Pros of Free Trade

1. It Drives Prices Down
With a free trade agreement, there is no longer large tariffs and taxes that have to be paid on imported goods. This means that many items can be bought for a much cheaper price then they would have normally been available. This benefits the entire economy because it gives more value to the dollar and provides the people much more buying power.

2. Working Together Is Safer
When countries become somewhat dependent, or rely upon, another country for goods that they produce, it can create a feeling of team work. The countries are more focused on keeping the relationship good and each others economy strong because if one begins to fail, it affects everyone.

3. A Greater Variety
Without a free trade agreement, the variety of products that are available in a country can be very limited. By allowing free trade to occur, you open up markets for entirely new products that citizens can enjoy. This also brings new cultural types of things to places where they may have not existed before.

4. A Creation of Jobs
When trade is opened among countries, this also typically means that new businesses and companies will begin to emerge. This brings in great amounts of jobs and opportunities for people that live in these countries.

The Cons of Free Trade

1. Increased Competition
While prices are dropped, the price of labor is also dropped too. This is because it allows people to transfer careers, making it more and more difficult to get a job. There are now people from two different countries going for the same job, which makes people be willing to work for less.

2. Harms Developing Countries
Some countries only have limited forms of profit. When free trade is implemented, other countries may be able to offer the same product at much cheaper than the developing country would be able to. This causes even more economic hardship.

3. Small Business Can’t Compete
Whenever you allow global leaders of production to come into a country and offer products at lower prices, the small businesses in the area cannot compete. This has been a growing problem in many countries for quite some time now. Big businesses come in and run out the small mom and pop shops that build up the economy.

4. Developing Dependency
One of the biggest issues that free trade can bring is a level of dependency on other countries. When a country begins to rely and depend on another country for some of their vital items, they no longer feel the need to manufacture them themselves.

Important Facts About Free Trade

  • One of the most known free trade policies to go into effect is NAFTA, which stands for North American Free Trade Agreement.
  • Developed nations dominate the trade world on a global scale. They export and import over 75 percent of all goods in the world.
  • Free trade costs poor countries over 50 billion dollars of agricultural business.
  • One free trade agreement that is in the works is the Trans-Pacific Partnership, or TPP.
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