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What Exactly is Free Trade and Why Does it Matter?
Free Trade Explained
Free trade is an important concept in business & economics. Free trade, sometimes referred to as ‘laissez-faire’ or let-it-be economics, is a reference to a free marketplace between nations and business organizations. Essentially, it refers to the free movement of goods and services. So, what does this mean at a more practical level?
The often-perceived nemesis of free trade is that of protectionism. This is a reference to the protection of national products & business in the face of foreign competition. Essentially, the use of such things as protective tariffs imposed on imports or quotas limiting the number of imports. Such mechanisms will either force the costs and prices up on imports, in relation to both the business and consumer, or limit the number of foreign imports altogether.
At any rate, such measures, imposed widely in the 1930s and still used today, do not stimulate competition. Free trade aims to break down these protective barriers on imports and exports by removing such things as tariffs and import quotas on foreign goods. Proponents of free trade argue that this will stimulate business competition, leading to a better deal for consumers the world over.
The economist David Ricardo made a strong argument for free trade in the form of…
