Free Trade Arguments

Free Trade Arguments

• The dictionary definition of free trade states it as a policy of allowing people of one country to buy and sell from other countries without restrictions. This idea originated with the influential British economist, philosopher, and author of The Wealth of Nations, Adam Smith. He inspired the writings of great economists such as David Ricardo, Karl Marx, Thomas Malthus, and others. According to Smith, specialization and trade is the best solution to create a flourishing American economy. William H. Peterson, holder of the Lundy Chair of Business Philosophy at Campbell University, agrees with Smith's philosophy.
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  Free Trade refers to the Trade between countries without any restriction or discrimination. In other words when the citizen of one country are free, either to import or export or to do both, with the citizens of the country, then the trade is termed as free. In more precise words, Free Trade is the restriction-less trade among the nations.Thus in a free trade no differentiation is made between the national or foreign industries. No policy exists to favour the national industries and shock the foreign industries.
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  Adam Smith defined Free Trade as the, "of commercial policy which drawn no distinction between domestic and foreign commodities and therefore neither imposes additions burden on the latter, for grants any special favours to the farmers."The definition does not however mean that under the 'Free Trade banner' various duties and levies will disappear. But it means that the duty is to be levied only to raise the revenue and not with any other purpose like the protection of the interests of the domestic enterprises.

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Advantages of the Free Trade:-

• In Free Trade no vested interests are created. All are equal, thus no industry can claim any special right. No differentiation is adopted in the governmental. policies, which removes any feeling of favouritism.
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  Free Trade attracts foreign capital. Foreign capital keeps the national producers alive to their duty and to fight in the competition with them. There are improvements due to tough competition.
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  Free Trade removes any chances of Monopolistic tendencies. No temptation emerges in the heart of the home-producers because of the foreign producers. Thus 'Monopoly-profit earning"'tendency is also removed.
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  In Free Trade policy the industrialists need not bribe the legislators for their protection. The corruption on this front is reduced to the minimum level.
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  Free Trade provides maximum protection to the interests of the consumers.
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  Free Trade leads to fair distribution of wealth. The centralising tendencies are removed
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  Free Trade promotes the division and specialisation at international level. It nourishes the feelings of co-operation among the producers of different countries.
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  Free Trade removes the feeling of hatred or every against other nations. It helps in establishing international amity.

Disadvantages of Free Trade:-

• Free Trade harms the new or infant industries. Due to absence of protection from the government, new industries find it very difficult to emerge and compete with the existing industries.
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  According to J.S.Mill, a new industry must be given protection till it develops. But in the absence of protection it is not possible.
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  Free Trade discourages the cottage and small scale industries, since they find it difficult to compete with the large foreign producers.
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  Free Trade does not help in the diversification of industry.
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  Free Trade also establishes the domination of the foreign capital and producers.
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  Under Free Trade government cannot create employment opportunities. It is also harmful for the economic development of the country.
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  Free Trade results into misuse of economic resources. Unless there is protection, national resources cannot be conserved in the national interest.
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  Free Trade also hampers the development of ordinance and defence industry. Sometimes; "Guns are better than butter, "and "defence is better than opulence."
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  Free Trade nullifies the revenue collection from certain industries. In Free Trade, revenue can not be collected according to the needs of the government.
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  Free Trade also does not provide any special place tokey industries. The development of key-industries is also of basic importance to the sound economic development.
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  Free Trade hampers the feelings of patriotism of using home made commodities.
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  Free Trade does not make any special provision for the self-sufficiency.
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  Free Trade encourages unfair competition arising due to dumping depreciated exchange, etc.