Question

In todays world, How do free trade and free market economy affect ? Please elaborate on the arguments that supports free trade policies, as well as the critiques that are raised against these policies.

Answer 1

Free trade and free market economy affect in many different  ways. The first way of the impact is that free trade and free market economy complement each other. It means that it is the free market economy that becomes the causative reason for the nations to enter into free trade agreements that can be bilateral or multi-lateral nature. The second way is the ability of free trade and free market economy to make the country or economy to rely on their own competitive advantage that can be based on comparative advantage, or factors abundance or presence of all the elements for the growth of the industry in the country. It makes expansion of overall world GDP and creates more jobs. The third way is that free trade and free market expansion make market forces to be more dominant and labor force also can move from one labor market to another. It can be seen in the free trade are of EU. It helps also develop strategic alliances and  nation's GDP also increases other than increase in global GDP.

It makes formation of arguments that promote free trade and free market economy. The first argument is that it adds competitiveness in the market and consumers can get quality goods at lower price. The domestic players also get the benefit of technological spill-over effect and they also become competitive. The second argument is that it can create more Jobs, bring more FDIs and help in development of infrastructure so that economy expands with an accelerated growth rate.

Though, there are some critiques as well to the policy of free trade and free market economy. The first critique is that it harms the domestic industries that are in a nascent stage and it can cause job losses and increased unemployment due to this reason. It is also said to be an infant industry argument. The second critique is the national defense reason that says that making free trade and companies coming to the country can share sensitive data to the outside world. It can harm to the defense of the country. So, free trade is not good. The third critique is the lack of development of regulatory framework in the economy, leading to the development of tendencies such as economic rent, exploitation of resources and corruption that cause more harm than the good to the economy. So, free trade is not justified in the economy.