Free trade consists on the liberalization of trade, which abolishes all restrictions and barriers to international trade, and therefore, there is an unrestricted flow of goods and services (WTO,
n.d.). The WTO (n.d.) defends that free trade ‘sharpens competition, motivate innovation and breed success’. Moreover, it has been demonstrated that countries with lower barriers to international
trade experience faster economic progress (Rodriguez and Rodrik, 200: 261). Ben-David and Loewy (1998: 166) explain how this is true because of the exchange of foreign knowledge that occurs when
countries conduct trade with each other.
Some governments, however, are concerned about the negative effects that free trade may have on their countries and, therefore, implement protectionist policies in order to maintain employment
levels in developed countries preventing their lose over developing countries, and to protect infant industries of developing countries that are not able to compete against well establishes
companies form overseas (Wall et. al., 2015: 98). Moreover, some protectionist policies are also in place in order to prevent dumping of foreign goods on domestic markets at low prices, and to
protect strategically important industries such as steel in the UK (Wall et. al., 2015: 98). These protectionism policies, however, reduce the exchange of foreign knowledge between trading
counties, and therefore, hamper the global economic growth (Ben-David and Loewy, 1998: 166). Moreover, as Wall et. al. (2015: 99) explain, protectionism policies have negative effects on
multinationals, as it ‘disrupts the flow of goods from one stage of the production process to another’.
Do you think that if all countries adopted free trade policies, without applying any kind of protectionism policies or barriers, would there be an economic growth that would benefit everyone or
would there be regions that would be adversely affected? Do you think global free trade is possible?
support and justify your answer.
consider the question from the following perspectives:
Comparative and competitive advantage
International institutions and world trade
Barriers to trade and protectionist policies
By the end of the discussion, you should:
Understand the concept of free trade and how this manifests itself in the world today
Appreciate the influence that international institutions have on international business
Understand the practical limitations of classical trade theories