Question

Is free trade fair and what are the potential results of free trade?

Answer 1

Each country differs from the others not only in terms of resources, type of abundance of the factor of productions, but also in terms of regulatory framework, robust banking and infrastructure development projects. It makes very difficult for free trade to be fair, as there is an asymmetry in resources owned and robustness of the regulatory framework among most of the nations. For example, free trade between USA and Mexico under NAFTA still infuriates Mr. Trump and he wants better terms of trade, even if Mexico's Economy is heavily dependent upon the USA and Mexican people working in the USA.

It makes potential results of free trade that are as follows:

A. Treating each country in the agreement as a market by the other countries

B. Free movement of capital, labor and technology, creating scope of job opportunities & specialisation of trade

C. Scope of exploitation of resources in those countries where the regulations are in formative stage

D. Poor and low income countries can find their domestic industries to be spoiled as people prefer foreign imports of superior quality

E. Economic rent taking place where the regulatory framework is not sound.

Above results will take place due to free trade.