Free Trade - Advantages and Disadvantages

Free Trade - Advantages and Disadvantages

Introduction

Free trade is the removal of all barriers to trade between countries is needed. Economists consider it has many qualities. It leads to international specialization and benefits all. Yet some voices to denounce because it is the cause of many evils in our societies. Free trade would lead to inequality. Free trade, despite the apparent unanimity is debated: for some, it has advantages; disadvantages for others. The FTAs ??are part of a long-term business strategy that seeks to consolidate markets for products in order to develop a competitive export supply, which in turn generate more and better jobs (Archer, 2010).

Experience shows that countries that have managed to develop in recent years are those that have successfully incorporated international trade, thus expanding the market size for their companies. The need to promote trade integration as market expansion mechanism is quite clear in the case of Africa, whose local markets, because of their small size, offer limited business opportunities and thus job creation.

Discussion

Trade can primarily improve living conditions through economic growth. A recent study shows, by comparing the income growth in seventy countries over the last thirty years, as countries open their economies to international competition had a higher income and a higher growth of the latter. It is during this period that some countries have joined the WTO and lowered their tariffs; others persisted in their protectionist policies. The study shows that the countries participating in multilateral reform of international trade have experienced stronger revenue growth than others. It is also interesting to note that a significant proportion of these growth differentials are due to lower import tariffs on intermediate goods and factors of production (Leontieff, 1999).

Let the case of Africa. The decline in poverty in this country during the 1990s can be partly attributed to trade liberalization has contributed to the growth, lowers consumer prices and made available a wider range of products. However, gains were not consistent across the country. A study shows that the decline in poverty was lower in rural areas whose activities are focused on areas where the level of protection has fallen sharply. Workers in areas that had been protected have seen their wages decline relative to those sectors benefiting from trade liberalization. This is due to a low mobility, among others related to rigid labor legislation preventing workers move to firms, sectors and regions that have benefited from trade reforms (Kapstein, 1994).

Factors limiting the mobility of workers in poor countries to firms, sectors and regions that offer the greatest opportunities are numerous. Understanding is still subject to debate in the academic world. Some have noted that labor law plays an important role through redundancy costs: employers reluctant to hire if they knows that they has to pay these costs in the event of termination due to a decline in demand. Others point out that not everyone is able to enjoy the benefits of globalization. If they lose their job in a company that affected ...