Essay # 1. Introduction to World Trade: World trade has grown considerably over the years. The world merchandise exports grew from US$59 billion in to US$ trillion in , and imports grew from US$62 billion to US$ trillion during the same blogger.comted Reading Time: 9 mins Trade refers to the interchange of goods and services. Trade may be confined within a region or between the regions of a particular nation or between different countries of the world. When trade is confined within a region, it is called the regional trade; when it is within the regions of a nation, it is called national trade and when it is confined between the different nations, it is called international blogger.comted Reading Time: 4 mins 1/1/ · 5-In free trade (Trade liberalization) for that sort of domestic nations which can have a best 1- production efficiency 2- efficiency of resource distribution with have a lot of resources. 3- keep low rate of foreign exchange This kind of countries could be more productive and have more exports. Increase supply
Here is your short essay on trade
The policy of free trade is one which does not impose any tariff or non-tariff restrictions upon free exchange of goods and services between the trading countries. Such a policy permits a country to buy and consume those goods, which it either cannot produce at all or can produce trade essay at a higher cost.
Similarly it can dispose of in foreign markets, without encountering any restriction or hindrances, trade essay, those trade essay or services in the creation of which it has the comparative cost advantage.
free trade is the external trade system trade essay liberalism which opposes every interference by the state with the free play of economic forces. The essence of free trade, in the opinion trade essay Jagdish Bhagwati, is the complete absence of restrictions upon free exchange of goods and services. In this regard, R. In such a world, a country would import all those commodities that it could trade essay from abroad at a delivered price lower than the cost of producing them trade essay home.
A policy of free trade, trade essay, no doubt, implies an absence of trade barriers but the imposition of import duties for the consideration of obtaining revenues may be consistent with free trade, when these are not meant either to provide protection to home industries or to discriminate against the cheap imports from abroad.
It may be explained through an illustration. Suppose the home country A imposes an import tariff of 15 percent on the product of foreign country B. The latter has cost advantage over country A, say by 25 percent. In such a situation, country B continues to enjoy cost advantage over A despite the imposition of import levy.
The flow of goods from B to A can trade essay take place unhampered. At the same time, country A becomes able to secure revenues from imports. The import duty, in such a case, trade essay, does not violate the principle of free trade. In brief, trade essay, the policy of free trade means non-resort to any direct or indirect restraint upon the international flow of goods and services. The philosophy of laissez faire in the field of international trade came into prominence as a reaction to Mercantilist advocacy of trade barriers.
The powerful voice in support of free trade was raised by Locke, trade essay, Hume and Adam Smith. A renowned trade essay of economic thinkers, trade essay, including Ricardo, J. Mill, Bastable, Marshall and Haberler lent strong support to the cause of free international trade, trade essay. If there is no tariff or non-tariff restriction upon international trade, every country is likely to specialise in the production and export of that commodity in which it has the greater comparative advantage or the least comparative disadvantage.
The benefits of specialisation and division of labour can become available to all the trading countries and they will be able to make the optimum use of their productive resources. As a consequence, the world output is likely to get maximised, trade essay.
When each trading country produces those commodities in the production of which it is most suited and imports those commodities, which trade essay can procure more cheaply from abroad rather than producing them itself, trade essay real incomes of all the trading countries are likely to rise. Since the income of any community or nation is large just in proportion to the extent to which it specialises, the greater possible freedom of trade is justified.
The free trade leads not only to specialisation in production but also to factor specialisation, trade essay. The diversion of all scarce productive resources to such industries where their productive efficiency is the maximum implies their ideal or optimum utilisation. In the conditions of free trade, there is little possibility of under-utilisation or wastage of scarce resources.
Any scarcity of productive factors, at the same time, can be easily off-set through their import from foreign countries. Thus free trade paves the way for the optimisation of productive factors throughout the world, trade essay. In the condition of free trade, the factor units can easily and quickly move either within the same country or between different countries for securing larger remuneration for their services. It is, therefore, possible that factor incomes such as wages, rents, interests and profits are higher under free trade than otherwise.
The free international trade enables a country to import products from the cheapest market and relieve the domestic shortages of goods. It also provides opportunities for the consumers to trade essay and use superior varieties of products. The increased availability of consumable goods of better varieties at low prices assures the optimisation of consumption in the trading countries, trade essay. The absence of restrictions upon trade results in an enlargement of the size of market as every trade essay can dispose of its surplus production in foreign markets.
Products of all countries can have global demand. The extension in the size of market gives strong inducement to raise production and investment, to introduce improved techniques, and to introduce new, superior and cheaper varieties of products. Free trade implies free competition, trade essay. The producers from different countries try to expand their sales in the markets of other countries. The price competition and trade essay of newer varieties of products prevent the emergence of exploitative monopolies.
In this connection, it must be pointed out that free trade does not provide a complete safeguard from monopolies. Even under free trade, there can be emergence of natural monopolies or strong local or international cartels capable of restricting output and manipulating prices.
Haberler explained that free international trade can inculcate in the population of a country such qualities as competitiveness, inventiveness, urge for excellence, trade essay, efficiency, acquisition of advanced skills in production, trade essay and organisation, trade essay. These educative effects emanating from free trade make the trading countries to achieve higher production frontiers.
Haberler has greatly emphasized upon free trade as a means for accelerating the process of economic transformation in the developing countries, trade essay.
According to him, free trade can contribute in the process of growth in different ways. Firstly, it enables the unrestricted import of raw materials and capital goods, which are essential for industrial expansion. Secondly, free trade assists in an easy transfer of advanced technical know-how and entrepreneurship trade essay the advanced to the less developed countries.
Thirdly, free trade facilitates large scale international capital movements to trade essay up the process of growth. Fourthly, free trade promotes competition, efficiency and productivity and can create such capacities in the poor countries, which enable them to achieve higher levels of production, employment and income. Despite strong classical advocacy of free trade, the world drifted away from free and unrestricted trade, trade essay. The less developed countries have been viewing it as an instrument of colonial exploitation.
Even the advanced countries have been taking trade essay to restrictions upon international trade for the realisation trade essay their economic and trade interests. A number of theoretical and practical objections are raised against the policy of free trade, trade essay. i Absence of Pre-Requisites of Free Trade:. The theoretical objection against the policy of free trade essay is that conditions necessary for it do not actually exist in the trade essay life.
Some of pre-requisites of free trade policy are prefect competition, perfect factor mobility, free working of price system and laissez faire. The absence of these requirements invalidates this policy altogether. The free international trade leads trade essay chaotic trade conditions because the advanced countries try to capture trade essay and more trade essay markets for their products by dumping their products at very low prices in other countries.
For instance, flourishing Indian handicrafts were completely wiped out in the nineteenth century on account of relentless competition from the British mill-made manufactures. Free trade underlines the specialisation in production and export in these industries in case of which a given country has comparative cost advantage over others. The adoption of this principle means that other industries and sectors should trade essay undeveloped. The less- developed countries, which have comparative advantage in agriculture, will remain condemned as agricultural countries alone, trade essay.
Such lop-sided or unbalanced growth has serious economic and social consequences. When a country adopts a policy of free trade on the basis of the principle of comparative cost advantage, it becomes excessively dependent upon the foreign country for the disposal of its production and for the import of varied products. Such an excessive dependence is detrimental to its interests both in the times of peace and war.
The free trade results in the transmission of prosperity or depression from one country to another. For instance, if country A is plagued by recession or depression, the trade essay in purchasing power trade essay the people causes a reduction in its imports, trade essay. The reduced imports signify the reduction in the exports of country B.
A decline in exports of country B causes a reduction in income. Thus, the fluctuations get transmitted from one country to the other and an economic crisis assumes global proportions. The trade restrictions can effectively prevent such a possibility. Where there are no restrictions upon trade, there is a danger of large inflow of harmful and sub-standard products from abroad. The unrestricted import of such commodities is injurious for the health and efficiency of the people.
It will have the effect of reducing the welfare of the society. In view of such adverse implications of free trade on social welfare function, the countries, trade essay, at some stage, feel compelled to adopt restrictive measures. The free international trade and intense foreign competition eliminate many business firms. Consequently, local monopolies or international cartels emerge.
Their manipulation of supply and price to maximise profits results in the exploitation of people and hinders the free working of price system. The possibility of emergence of monopolies necessitates the imposition of restrictive measures upon trade.
The international exploitation of the raw materials and markets of the poor countries by the advanced countries through free trade for the last two centuries is ample evidence of the fact that it has serious adverse effects upon the growth process of the former.
The development of infant industries and subsequent industrial diversification are unlikely to take place unless effective restraints upon foreign imports are enforced by the less developed countries.
In view of the reasons given above, both advanced and less developed countries have continued to drift away from the policy of unrestricted international trade since the First World War, trade essay. No doubt, the international monetary and trade organisations have their avowed goal of reestablishing restriction-free trade, much success has, however, not been achieved in this direction.
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Free Trade simply is the absence of government interference or numerous restrictions, which has been labeled as laissez fair economics. Free Trade grants easier access to goods and services, promote faster growth for the economy, and also allows for the outsourcing of production of goods, which hurts the economy Fourthly, free trade promotes competition, efficiency and productivity and can create such capacities in the poor countries, which enable them to achieve higher levels of production, employment and income. Essay # 3. Arguments against Free Trade: Despite strong classical advocacy of free trade, the world drifted away from free and unrestricted blogger.comted Reading Time: 9 mins 1/1/ · 5-In free trade (Trade liberalization) for that sort of domestic nations which can have a best 1- production efficiency 2- efficiency of resource distribution with have a lot of resources. 3- keep low rate of foreign exchange This kind of countries could be more productive and have more exports. Increase supply
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