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1、Free tradeWhat is free tradeFree trade, now sometimes termed International Trade, had the original intention that goods and services could be exchanged freely between countries with no barriers to this exchange.History of free tradeBefore the appearance of Free Trade doctrine, and continuing in oppo
2、sition to it to this day, the policy of mercantilism had developed in Europe in the 16th century. Two early British economists who were opposed to mercantilism were Adam Smith and David Ricardo.Economists that advocated free trade believed trade was the reason why certain civilizations prospered eco
3、nomically. Adam Smith, for example, pointed to increased trading as being the reason for the flourishing of not just Mediterranean cultures such as Egypt, Greece, and Rome, but also of Bengal (East India) and China. The great prosperity of the Netherlands after throwing off Spanish Imperial rule and
4、 pursuing a policy of free trade made the free trade/mercantilist dispute the most important question in economics for centuries. Free trade policies have battled with mercantilist, protectionist, isolationist, communist, populist, and other policies over the centuries.Wars have been fought over tra
5、de, such as the Peloponnesian War between Athens and Sparta, the First and Second Opium Wars between China and Great Britain, and other colonial wars. All developed countries have used protectionism due to an interest in raising revenues, protecting infant industries, special interest pressure, and,
6、 prior to the 19th century, a belief in mercantilism.History of free tradeMany classical liberals, especially in 19th and early 20th century Britain (e.g. John Stuart Mill) and in the United States for much of the 20th century (e.g. Cordell Hull), believed that free trade promoted peace. Woodrow Wil
7、son included free-trade rhetoric in his Fourteen Points speech of 1918:The program of the worlds peace, therefore, is our program; and that program, the only possible program, all we see it, is this: The removal, so far as possible, of all economic barriers and the establishment of equality of trade
8、 conditions among all the nations consenting to the peace and associating themselves for its maintenance.Features of free tradeFree trade implies the following features: Trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers) Trad
9、e in services without taxes or other trade barriers The absence of trade-distorting policies (such as taxes, subsidies, regulations, or laws) that give some firms, households, or factors of production an advantage over others Free access to markets Free access to market information Inability of firm
10、s to distort markets through government-imposed monopoly or oligopoly power The free movement of labor between and within countries The free movement of capital between and within countriesThe benefits of free trade First, each others needs, the excess use of exchange value. That is, the excess of d
11、omestic output of goods abroad, in exchange for their inability to produce or manufacture enough goods to meet the needs of both parties;Second, to increase social value, to obtain greater benefits. As the national labor productivity varies, the performance of the monetary value of the goods are not
12、 the same nature, so to get through the foreign trade of certain goods will exceed the number of the possible production of their own, thus saving the countrys labor force or increase the use of value;Third, mutual benefit and common prosperity. From a countrys foreign trade has been the main intere
13、st lies in the output of the domestic consumption of surplus goods can not, therefore, even if the bilateral trade balance, due to the remaining goods are provided for each others market, the two sides have an interest. Therefore, the common interest of foreign trade, and not one to get, one damaged
14、.Example for free tradeIn Nov.18, 2004, Chinese President and Chilean President declared the start of the FTA negotiations. According to the agreement, the two countries would start tariff reduction of goods trade from July 1, 2006. Tariff of products accounting for 97% of the total of the two count
15、ries would be zero in ten years. China and Chile would carry out free trade in education, science & technology, environment protection, labor, social security, IPR, investment and promotion, mineral and industry. This agreement has promoted the free trade between China and Chile successfully. The Un
16、ited Kingdom (UK) has to import wheat and discovers it can purchase what it needs from Canada. But Canada does not want to import anything from the United Kingdom. The UK will have to find the money to pay for Canadas wheat. Then the UK discovers that Nigeria has reserves of oil which it cannot deve
17、lop because it does not have the equipment to do so. The UK offers to sell the oil resource and export it to earn money. The UK does not want the oil but Nigeria is able to sell the oil to the West Indies. The West Indies is able to pay for this oil because Canada is one of the largest producers of
18、aluminum for which bauxite is the essential ore and the West Indies has very large reserves of bauxite .Current free trade areasMost countries in the world are members of the World Trade Organization (see map), which limits in certain ways but does not eliminate tariffs and other trade barriers. Most countries are also members of regional free trade areas (see map) which lower trade barriers among participating countries.Most states conduct trade policies that are to a lesser or greater degree protectionist. One ubiquitous protectionist policy employed by states comes in the form o
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