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Overview and definition of Free Trade

=
Types of Protectionism===

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• Definition of Free Trade
Free trade is a system that allows countries to trade and transact without government interference (e.g. through the uses of tariffs, quotas, subsides, etc.). An ideal trading

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situation is one of the free trade, because each country has comparative advantages in producing certain things.
Comparative advantages make trade the most efficient method of production and consumption. Free trade differs from other forms, such as trade policy where the allocation of goods and services amongst trading countries are

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determined by artificial prices that may or may not reflect the true nature of supply and demand.
• Tariffs

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• Tariffs
Tariffs are taxes that are placed on imported goods. They raise revenue for the government, but also raises the price for the citizens because the domestic equilibrium price is almost always higher than the international price. This

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hurts foreign suppliers because it raises their prices, lowering their consumption and cutting their overall revenue.
Tariffs are good for the domestic producers because their goods seem relatively cheaper with tariffs on foreign goods. Tariffs are also good for the government because of the money the government collects with the tariff in place. Tariffs are bad for the consumer, the foreign producer and create a dead weight loss. However, tariffs are in
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