Question

In: Economics

When it comes to international trade and government intervention, which is a better policy for a...

When it comes to international trade and government intervention, which is a better policy for a country to adopt to enrich itself: free trade or protectionism?

-Please no plagiarizing and cite sources if needed.

Solutions

Expert Solution

In my view, free trade is a better policy for a country to adopt to enrich itself.

Following are the reasons why free trade is a better policy for a country to adopt to enrich itself:-

( I ) Theory of comparative advantage shows that trade results in higher total output of goods produced in two countries that are trading with each other even if a country has no comparative advantage in any of the traded goods.

( II ) Trade provides higher number of choices of goods to choose from at different market prices which leads to higher utility to the people in the trading nations.

( III ) Free trade provides nations opportunity to increase their income by exporting goods which they are more efficient at producing, and importing those goods which they are not very efficient at producing.

( IV ) And the most important reason is the evidence of trading nations such as China, Germany, etc., that have traded to their prosperity whereas countries such as North Korea which chose protectionism have remained stagnant and poor.

Therefore, we can say that counrties should choose trade over protectionism to enrich themselves.


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