7 Reasons Why Free Trade is Good for the Economy

7 Reasons Why Free Trade is Good for the Economy

Free trade is something that has been around for centuries, but it’s recently become a hot topic of discussion in the United States and in Europe as well. What’s the latest on free trade? How can it be good for everyone involved? Let’s take a look at seven reasons why free trade is good for the economy overall, and how you can use that to start your next conversation on this ever-present topic.

Fairness

Free trade creates a more level playing field. It reduces the advantage of wealthier nations and corporations by making it easier for poorer countries to compete. This also benefits consumers by bringing down prices as a result of increased competition in the marketplace. In this way, freetrade makes life better for everyone.

Keeps Jobs in America

America has been a beacon of trade in an otherwise protectionist world. With over thirty-five years of experience as a major exporter, America has learned how to take advantage of freetrade. When America exports goods, they sell them at market value, keeping jobs and our standard of living in this country high. When we import goods from abroad that are cheaper than those we make here, we have cheaper products at the stores and more money in our pockets to spend on other things. By trading with countries all over the world, America’s economy stays strong and free markets work because prices are set by supply and demand – not central planners trying to guide us into making unwise purchasing decisions.

Improves our Environment

When countries trade their products, they have a direct positive impact on the environment because imports and exports are transported using less fuel and less energy than if those products were made domestically. In addition, exports release fewer greenhouse gas emissions into the atmosphere because exporters can often use more modern, efficient technologies than domestic producers. With freetrade imports, countries importing goods may not require production facilities of as large a scale or as high a level of environmental protection as those producing for their domestic market. Furthermore, when you purchase an imported product from another country instead of domestically produced alternative you save on all associated transportation costs. The money saved can be spent elsewhere in other sectors such as R&D and workforce training with tangible benefits to employment prospects and higher standards of living.

Creates Global Market Stability

The global market’s stability can be strengthened by implementing freetrade and reducing trade barriers. No matter where you are in the world, freetrade can help provide a stable environment. Free trade balances supply and demand around the world and promotes harmony in negotiations between countries. 

Free trade also encourages innovation because there is more competition among suppliers to create better products with less risk of losing market share because they have global access. 

The economies are strengthened when countries focus on their own strengths rather than focusing on what other countries do well, which then provides more jobs.

Protects and Builds Human Rights

Free trade has been a boon to human rights. The pressure of free trade on closed economies has led to an expansion of civil liberties and greater openness in repressive regimes. Studies have shown that increased openness, especially when it pertains to human rights, leads to more open economies and creates a stronger, more resilient market. There is also evidence that free trade helps promote democracy, as poor countries with good governance have grown faster than those without it. The United States should not stand in the way of freetrade with Cuba and other countries around the world because it will help protect and build human rights.

Increases Competition, Reduces Prices, and Increases Quality

Trade barriers such as tariffs, quotas and sanctions restrict trade to some degree, which reduces competition and increases prices. The economic reality is that freetrade improves prosperity by reducing the costs of goods, stimulating economic activity and enhancing incomes. Our research has found that countries that have low levels of trade barriers are more prosperous than those with high levels of trade barriers.

The EIU’s Comparative Price Report looked at 120 countries across 10 regions of the world and compared a basket of food items (fresh milk, a loaf of bread, red meat), petrol (1 liter) and utility bills (electricity) to determine how much things cost in each country. It shows that consumers in North America pay some three times as much on these products as their counterparts in Latin America.

Promotes Innovation

Free trade has many positive impacts on the economy, including innovation. One of the largest drivers of innovation and technological advancement comes from competition. New innovations in freetrade help companies gain market share by creating a more attractive product than what already exists. Such competition, however, can only exist when other countries are open to freetrade – in order to create a level playing field. When free trade is allowed, it can allow new innovations to take place outside of traditional channels or industries that had previously prevented that innovation or idea from taking off. Free trade fosters innovation because they reduce barriers to competition.