Free Trade, Reasons for and Against

Topics: International trade, Mercantilism, Free trade Pages: 11 (3880 words) Published: December 8, 2010
To Henry Clay “free trade” was pure fantasy. Clay thought “free trade” was an oxymoron. In 1832, he cried: “Free trade, free trade... It never existed... It never will.” Drawing on the theories of international trade to support your arguments, critically evaluate the case for and against free trade.

“Free trade is the pattern of imports and exports that occurs in the absence of trade barriers.” (Wild et al. 2010)
Free Trade zones have emerged on the scene as a planning tool to help boost economic development. They have their advantages but their policy pitfalls too. Free Trade as with most political and economic topics is very subjective and discussions can become heated. This is because opinions on the advantages and disadvantages of free trade depend largely on a person’s experience, personal beliefs and their knowledge about the issue. Some negative feelings come from misunderstandings of the subject of international trade. International trade is opening doors to new entrepreneurial opportunity across the world. It is also providing countries with a greater choice of goods and services while being an important engine for creating jobs in many countries. Trade theories are constantly being reviewed to try and improve the economy; however there will never be a method that will satisfy everyone and help those opposed to free trade see the benefits. Some of the key reasons why groups are opposed to globalistaion and international trade are because they blame it for eroding standards of living and ruining ways of life. However on the other hand supporters of international trade say it improves standards of living and makes possible new ways of life. Trade between many different groups of people has occurred for many thousands of years. But it wasn’t until the 15th Century that people began to explain why trade occurs and how it can benefit both parties. Efforts to refine existing trade theories and to develop new ones still continue. Below is a timeline of when the main international trade theories were proposed.

Trade Theory Timeline

(Wild et al. 2010)

The trade theory of mercantilism was developed in Europe in the 16th century. One of the main principles of mercantilism was that it was in a countries best interest to maintain a trade surplus by encouraging exports and discouraging imports. This was in order to accumulate financial wealth in the form of gold. A disadvantage of the mercantilist trade theory was that a nation’s well-being such as living standards or human developments was irrelevant to them and financial wealth was all that mattered. Government intervention and colonialism were another two key elements in implementing mercantilism. Governments actively intervened in trade to help maintain trade surplus, the governments of mercantilist nations did this by either banning certain imports or imposing various restrictions such as tariffs or quotas. Mercantilist nations also acquired territories around the world to serve as a source of inexpensive raw materials which they would ship back to their home nation and sell them as finished goods to the colonies. The trading between mercantilist countries and their colonies was a huge source of profit, which allowed them to build armies and navies to control their colonial empires and protect them against attack from other nations. Europe followed this economic way of life from the 1500’s to the late 1700s. The main mercantilist nations were Britain, France, the Netherlands, Portugal and Spain.

Despite mercantilism being an advantage for any nation in relation to profit, implementing it was naturally flawed. Mercantilist nations believed that the world wealth was limited and therefore they could increase their wealth at the expense of its neighbors, called a zero-sum game. This causes arguments against international trade, if all nations blocked their markets from imports and force their exports onto other nations, international trade would become...
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