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Pros and Cons of Free Trade

In: Business and Management

Submitted By s379318
Words 346
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I. Introduction
Free trade, the ever present driving force behind our national and world economy, is a trade policy embroiled in controversy. It is considered by most economists to be an almost perfect trade policy, barring a few negative effects. Free trade has been shown to increase production, output and income levels in an economy. However, there are many people that view free trade as destroyer of economies and a catalyst of poverty. Critics of free trade have pointed out that in the short-run, free trade causes a loss of jobs which in turn causes a rise in poverty levels. It is interesting to note that the argument for free trade and the argument against free trade are inverses of each other. Proponents of free trade see it as a tool to stimulate an economy while detractors see it as a policy which exacerbates poverty, causes dependency and reduces economic stability.
In general, there is no consensus on free trade. Economists see free trade as the devil that we know. While imperfect, it is the best we have to work with. Popular opinion sees free trade as a cause of inequality. Even though it alleviates poverty and causes economic stimulation in the long-run, it can cause the exact opposite in the short run. The pros and the cons of free trade must then be weighed, which will then allow us to determine if free trade is truly a beneficial trade policy.
Therefore, this discussion will weigh the benefits and harms of free trade and will prove that although imperfect, free trade is the best trade policy we have to work with. While free trade can cause some harm, adopting economies would overall be worse off had they not adopted free trade. Furthermore, it will be shown that most domestic distortions can be solved by a surgical policy aimed directly at the source of the market failure rather than a change in trade policy (Krugman, 1993). Through weighing the pros and cons of free trade, I will establish – based on the evidence provided in...

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