Question

In your opinion, should the world economy move towards a greater implementation of free trade without government intervention, or a greater restriction and regulation of free trade? Explain.

Answer 1

Answer in my opinion free trade is better as compared to government restriction based trade.

Advantages of Specialization:

Firstly, free trade secures all the advantages of international division of labour. Each country will specialize in the production of those goods in which it has a comparative advantage over its trading partners. This will lead to an optimum and efficient utilization of resources and, hence, economy in production.

ii. All-Round Prosperity:

Secondly, because of unrestricted trade, global output increases since specialization, efficiency, etc., make production large scale. Free trade enables countries to obtain goods at a cheaper price. This leads to a rise in the standard of living of people of the world. Thus, free trade leads to higher production, higher consumption and higher all-round international prosperity.

iii. Competitive Spirit:

free trade keeps the spirit of competition of the economy. As there exists the possibility of intense foreign competition under free trade, domestic producers do not want to lose their grounds. Competition enhances efficiency. Moreover, it tends to prevent domestic monopolies and free the consumers from exploitation.

iv. Accessibility of Domestically Produced Goods and Services:

free trade enables each country to get commodities which it cannot produce at all or can only produce inefficiently. Commodities and raw materials unavailable domestically can be procured through free movement even at a low price.

v. Greater International Cooperation:

free trade safeguards against discrimination. Under free trade, there- is no scope for cornering raw materials or commodities by any country. Free trade can thus promote international peace and stability through economic and political cooperation.

Finally, free trade is free from bureaucratic inter­ferences. Bureaucracy and corruption are very much associated with unrestricted trade.

restricted trade prevents a nation from reaping the benefits of specialization, forces it to adopt less efficient production techniques .