The Economics of Free Trade

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Free trade is a system in which capital, goods, and labor flow easily between nations. Free trade leaves behind any barriers that may hinder the process of trade between these companies (McMahon, 2013). In fact, “many nations have free trade agreements, and several international organizations promote free trade between the members” (McMahon, 2013). However, there are economists on either side of the argument for free trade, and there are clear advantages and disadvantages of it.

There are a few advantages of free trade. It helps to reduce prices as well as encouraging innovation. This works because competition between companies because it ignites a spark; this needs to come up with newer ideas and solutions to any problems that a marketplace or a country’s trade may encounter (McMahon, 2013). “Free trade can also foster international cooperation, by encouraging nations to freely exchange goods and citizens. Agreements between trading partners can also promote educational advantages, such as sending engineers to train with people at the top of the engineering field in one nation, or sending agriculture experts to rural areas to teach people about new farming techniques and food safety practices” (McMahon, 2013). ). One of the ideas behind the concept of free trade is that it will aid in lowering prices for goods and services because it promotes competition. Competition is a healthy part of the business world, and free trade in services keeps things flowing smoothly between companies.

There are disadvantages as well. Product safety is a common complaint. As well, “other people have suggested that free trade encourages companies to relocate because when barriers to foreign trade are lifted, domestic companies have no reason not to move operations overseas to take advantage of cheaper labor, inexpensive supplies, and lax regulatory systems” (McMahon, 2013). Most likely, free trade – as anything else – will bring about both its advantages and disadvantages. However, it is important to remember the core aspects of a concept instead of concentrating on its extremes.


McMahon, M. (2013). “What is Free Trade?” WiseGeek. Retrieved from