FREE TRADE

Free Trade and Globalization

(1) Free Trade

For more than two centuries, economists have persistently encouraged free trade among nations as the best trade policy. The concept of free trade and the substantial boost in global trade following World War II was a chief aspect behind the huge boost in wealth in certain parts of the world. The concept of free trade basically repositions the rules of competition, the rule of law, at all levels which are local, national or regional up to the global level.

Even today, the United States continues to support free trade, an example being NAFTA (North America Free Trade Agreement). The problem is that America s generosity has caused the foreign industry to take over the U.S. marketplace. This unfortunately has resulted in high unemployment rates just because consumers and firms can purchase foreign goods for little less than domestic products. But with this country's abundant resources, is free trade really necessary? (Whaples, 2006).

From a conservative viewpoint, the only remedy to decrease unemployment and stimulate our own economic growth is to abandon the free trade policy and raise tariffs. Free trade has only crippled the American work force, increased poverty, and added to our national debt. If the liberals in Washington D.C. need proof, look at the figures: today there are about 10 million unemployed citizens and 35 million Americans are living in poverty because of free trade.

Free trade is not free. It involves a trade-off. We limit our right to make decisions about our futures in return for expanding the flow of goods, services and capital across borders. There is no win-win situation here. Democracy suffers while mobility benefits (Fine, 2006).

Admitting that free trade will necessarily benefit a country materially, it does not follow that it will be best for that country to adopt it.

1. With the removal of trade barriers structural unemployment may occur in the short term. Increased domestic economic instability from international trade cycles, as economies became dependent on global markets.

2. International markets are not a level playing field as countries with surpluses may dump them on the world markets below cost.

3. Some efficient industries may find it difficult to compete for long periods under such conditions.

4. Developing or new industries may find it difficult to become established in a competitive environment with no short-term protection polices by governments.

5. Free trade can lead to pollution and environmental problems as companies fail to include these costs in the price of goods.

There is a very minor effect on societies, people and cultures. On one hand free trade allows opening the restrictive but on the other hand it also imposes a totally new culture and society. This is evident in the following quotation:

"In order for "free markets" to be "free," the exchange of labour, land, currency, and consumer goods must not be encumbered by elements of psychosocial integration such as clan loyalties, village responsibilities, guild or union rights, charity, family obligations, social roles, or religious ...