International trade has greatly increased since the industrialization era of the late nineteenth century, and even more so in the past couple decades. The creation of trade agreements among nations and advancements in technology have made trade a more viable option, with the reduction in overall costs and time required for transportation. Despite this, some see free trade as a detriment to domestic economic growth. The Global Economics video on free trade and protectionism addresses both these sides on the free trade debate, discussing the advantages and disadvantages that accompany free trade for developed and developing countries.
Proponents of free trade emphasize comparative advantage, economies of scale, and product differentiation. These three components facilitate free trade, improving the overall welfare of a country. To have a comparative advantage for a particular good, a country must have a lower opportunity cost, the cost of the next highest-valued alternative that was foregone, relative to another country for that good. The country should export this good that it has a comparative advantage for and import other goods that would be relatively more costly to produce on its own (Global Economics - Global Exchange: Free Trade & Protection). In operating according to economies of scale, a firm employs its greatest scale of production. This makes production more efficient and lowers the cost of production. Product differentiation results in products produced in the same industry appearing more attractive to consumers. Free trade supporters claim that without free trade, the variety of goods available to the domestic consumer is greatly diminished. In addition, when the scale of production is lower, cost of production, and therefore the cost of the final good, rises (Global Economics - Global Exchange: Free Trade & Protection).
Free trade opponents argue that free trade can lead to unemployment and greater wage inequality in developed countries....
Cited: "Global Economics - Global Exchange: Free Trade & Protection." YouTube - Broadcast
Yourself. 27 April 2009 .
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