Free trade is system in which the capital, goods, and labor can have free flow between the nations without any barriers which can hinder trade’s process. Many of the nations have free trade agreements with other countries. Many international organizations such as World Trade Organization work in order to promote free trade between the members of the organization. The free trade practice has number of arguments both which are for free trade and against the free trade from eminent people such as the industrialists, social scientists, many economists, and many politicians as well.
In free trade many barriers are struck down in the agreement for free trade. Barriers such as taxes, tariffs, and import quotas are eliminated and to the domestic producers the tax break, subsidies and other forms of support are not given to domestic producers. There are no restrictions on the flow of the currency. Many regulations are lifted which are considered as the barrier to free trade. To explain it simple free trade makes foreign companies able to trade just as easily, effectively and efficiently as the domestic producers.
Idea of the free trade is it is thought to be able to lower the prices of products and services because of the competition. Promotion of competition like domestic producers is not able to rely on the government and many forms of assistance such as quotas that used to force citizens to buy from the domestic producers. The foreign companies are able to make inroads on the new markets when there are no barriers to trade. With reduction in prices, free trade also leads to encouragement in innovation. This is because due to competition the companies need to create and innovate to come up with more products, solutions and services to be able to capture large market share.
Free trade also fosters international cooperation and encourages nations to free exchange of goods as well as citizens. Agreement in trading partners also promotes educational advantages such as sending people to learn new technologies or send people in rural areas to teach about the new techniques etc.
The opponents of the free trade have argued that free trade hurts the domestic producers with stiff competition from the foreign companies where in their nations where they are less stringent about labor laws. Free trade has concerns of product safety where they have incomplete regulatory systems.
Free trade encourage to relocate where they can get cheap labor, inexpensive supplies or tax regulatory systems.