Advantages and Disadvantages of Free Trade

963 Words4 Pages
Every day Vietnam and vietnamese people benefit from trade. With a population of nearly 90 million people, trade opens up a global market of billions dollar for Vietnam. Vietnam has a surplus of resources so we can sell the surplus to other countries and use the export dollars to buy other goods and services from overseas. People all around the world are eating vietnamese food, drinking vietnamese coffee, and wearing vietnamese made shoes. This essay introduces the concept of free trade and examines the advantages and disadvantages for trading nations.Whilst many economists and organisations espouse the benefits of free trade, some groups oppose free trade and see it as disadvantageous to many people, particularly in developing countries, where local producers and employees are vulnerable to exploitation. These groups promote the idea of ‘fair trade’ Free trade occurs when there are no artificial barriers put in place by governments to restrict the flow of goods and services between trading nations. When trade barriers, such as tariffs and subsidies are put in place, they protect domestic producers from international competition and redirect, rather than create trade flows. Advantages of free trade i. Increased production Free trade enables countries to specialise in the production of those commodities in which they have a comparative advantage.With specialisation countries are able to take advantage of efficiencies generated from economies of scale and increased output. International trade increases the size of a firm’s market, resulting in lower average costs and increased productivity, ultimately leading to increased production. ii. Production efficiencies Free trade improves the efficiency of resource allocation. The more efficient use of resources leads to higher productivity and increasing total domestic output of goods and
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