By definition, free trade is an arrangement of governmental guiding principle that permits dealers to act and or carry out with no obstruction from regime. According to the rule of comparative benefit, the guideline authorizes transacting associates shared gains from trade of services and goods. The Federal Reserve Bank of Dallas asserts that, "approximately several American superstore doubles as an intercontinental food bazaar. Along potatoes from Idaho and beef from Texas, stores display melons from Mexico, olive oil from Italy, coffee from Colombia, cinnamon from Sri Lanka, wine and cheese from France, and bananas from Costa Rica" (5). America depends heavily on import good and services they also export products. For instance, in the year 2001, U.S imports translated to $1.6 trillion while exports stood at $1.3 trillion and this is from U.S firms selling monetary services, bulldozers, movies, personal computers and thousands of additional goods to just about every parts of the world.
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United States of America is not the only one; all other countries have witnessed increase in interstates business. Countries such as China, German, France, and Japan are becoming the leading exports. However, there has been heated debate on the free trade with critics saying open market breeds poverty, obliterates home industries, and weakens culture among other negative impacts. Nevertheless, since no nation can have all resources available within its borders, these remarks are not valid as at any particular point and in one way or another, any nation must either import and or export goods and services. Unfortunately, we hear that free trade makes us shoddier, this is not true, with the right policies, free trade enriches countries since it allows workers and firms to concentrate in developing what they do greatest. With stiff competition from other firms as a result free trade, local industries will be more innovative and therefore consumers will harvest the reward of cheaper and improved services and goods. In the end, there is overall growth in the economy of a nation. All nations should bear in mind that each time they put up an obstacle to trade; they work against the gains from "free exchange and competition. Trade protection degenerates into a negative-sum game in which special interests jostle for advantage at the expense of the common good" (Federal Reserve Bank of Dallas 8).
American citizen should not pay attention free trade misleading notions. As a nation, they should opt between shielding home firms and opening markets.Being unwise on doing business amplifies the danger of making wrong selections that will undermine any nation's financial system and spoil associations with other states. Therefore, all nations are encouraged to participate in free trade without discrimination as getting it correct in terms of trade will uphold wealth and peace.
This effective intercontinental distribution of labor facilitates United States to make most of its proficiency in such as manufacturing aircraft engineering and monetary service while other nations make use of their edge in hand assemblage or oil production. Specialism and business dealings stem from the profit intention. With the exception of when business expenses are too high or administrations enforce obstacles, traders will always find each other. Furthermore, specialism and trade generates wealth while self-government turns out to be a fool's task. Take for an example according to Federal Reserve Bank of Dallas," The United States could grow its own bananas, but it would take a huge capital investment to reproduce the tropics' growing conditions. Using mammoth glass-domed greenhouses, artificial lighting and sprinklers, we could probably achieve banana self-reliance" (10). This one will beat the logic since American bananas will be the world's most costly banana. We ask ourselves, is it worth it? Of course, not, they will easily benefit from the fruits of free trade by simply important from areas where they can produce them cheaply.
Another valid example that demonstrates the benefits of free trade is the case of oil importation. United States oil consumption has been on the rise while effort to extract our own oil has been declining. U.S imports approximately 61% of oil consumed and therefore sustaining the economy without import will mean reducing oil consumption and increased pump price to cover product costs. According to Federal Reserve Bank of Dallas 2002 annual report,
"America oil prices would shoot to approximately to $145 a barrel to increase production 7.5 percent, to 3.7 billion barrels a year. We would still have to get by on 60 percent less oil, so pump prices would triple, to at least $7.50 a gallon. Energy independence would condemn consumers to sharply lower living standards and raise costs to just about every U.S. industry. Overall, GDP would fall 6.7" (11).
This case does not apply to only oil and America but also to other products and nations in general. All nations are better off exporting what they product cheaply and import what may cost them a lot to product if there is a cheaper source than trying themselves.
If free trade imports only increased diversity and quality to the market, they it will not be of any help to the consumer. By being more affordable, they compel American firms to lower their prices and thereby stabilizing the prices in the market. When all is said and done, consumers' interests, not company proceeds is the factual determinant of an economy's accomplishment. When different firms from different nations compete with any particular countries' market for example dollars, consumers will benefit in the end. The reports posits that, "people who live in free countries enjoy substantially higher living standards than those living in repressive countries" (Federal Reserve Bank of Dallas 18). Countries such as , Cuba, Zimbabwe, Laos, and Libya are nations where citizens are suffering due to poor free trade polices. However, free trade has its own shortcomings. These include dumping of poor products in a certain market, loss of jobs among others.
All countries benefit from free trade since there are improved goods and services. Courtesy of competition, consumers will get variety superior products at cheaper price and this will generally improve the well-being of citizens and the economy. Therefore, fruits of free trade by far outweigh the negative impact it brings with it.