Table of Contents
One of the economic policies that have been controversial since the 1500s is free trade. It allows the trading between various nations without the intrusion of the government. The protectionists regards free trade as a policy the hurts the economies of some countries especially the developing ones whereas the proponents maintain that it gives room for countries to prosper. For instance, the United States of America has been a protectionist nation that imposed very heavy tariffs on imports for a long time but it has been forced to reduce the tariffs due to its industrial supremacy. This essay describes free trade and it discusses the various environmental gains and losses of moving towards the trade.
Free trade is defined as a system through which various goods, services, labor and capital freely flow between countries without the barriers that interferes with the trading process. For example, tariffs, taxes and import quotas are removed while the domestic producers benefits from tax breaks, subsidies and other support forms. In addition, the currency flow restrictions that hinder trade are lifted. Generally, free trade allows many foreign companies to have easy, efficient and effective trade just as the domestic companies. In the world, there are many international organizations and several countries that promote free trade among their members and have free trade agreements respectively.
Environmental gains and losses of free trade
The free trade may involve the removal of subsidy systems which are sometimes barriers to free trade. If these subsidies are in the form of the price support, over- production will be reduced thus benefiting the environment. In addition, moving to free trade may lead to increased specialization whereby the nations with many natural resources will use more while the ones with lower natural resources endowments will use less. When the latter nations start with low environmental standards, the reduced usage's impacts will be beneficial to the environment. Finally, the free trade may enhance the expansion of the consumption possibility set leading to high income. This may increase the demand for environmental goods and the governments may be forced to respond by raising the environmental standards.
On the other hand, free trade may be dangerous to the environment. Firstly, it may lead to agricultural and industrial reorganization in order to capture the larger market's economies of scale. This may be achieved through the use intensive agricultural techniques and large productive units which may be aesthetically unpleasing. Secondly, the free international trade may neglect the environment the same manner that the domestic market fails to account for various environmental losses. Finally, free trade will lead to increased economic activity implying that more materials will be dragged into expanded economic system. This expanded economic system may involve some changes such as land use which poses threats to the natural environment.
In conclusion, free trade is likely to give rise to some environmental gains and negative environmental externalities or losses. These losses can be minimized by coming up with appropriate policy designs that will assist in the uncoupling of the environmental effects from the economic activities.