sales Clerk
To what extent do you agree with the suggestion that free trade is the basis of increased international well being?. Explain your reasoning.
Economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.[
Globalization, since World War II, is largely the result of planning by politicians to break down borders hampering trade to increase prosperity and interdependence thereby decreasing the chance of future war.
Their work led to the Bretton Woods conference, an agreement by the world's leading politicians to lay down the framework for international commerce and finance, and the founding of several international institutions intended to oversee the processes of globalization.
These institutions include the International Bank for Reconstruction and Development (the World Bank), and the International Monetary Fund. Globalization has been facilitated by advances in technology which have reduced the costs of trade, and trade negotiation rounds, originally under the auspices of the General Agreement on Tariffs and Trade (GATT), which led to a series of agreements to remove restrictions on free trade.
Benefits of Free Trade.
1. The theory of comparative advantage.
This explains that by specialising in goods where countries have a lower opportunity cost, there can be an increase in economic welfare for all countries.
2. Reducing Tariff barriers leads to trade creation
Trade creation occurs when consumption switches from high cost producers to low cost producers
• The removal of tariffs leads to lower prices for consumers and an increase in consumer surplus
• Imports will increase
• The govt will lose tax revenue
• Domestic firms producing this good will sell less and lose producer surplus
• However overall there will be an increase in economic welfare
• The magnitude of this increase depends upon the elasticity of supply
Economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.[
Globalization, since World War II, is largely the result of planning by politicians to break down borders hampering trade to increase prosperity and interdependence thereby decreasing the chance of future war.
Their work led to the Bretton Woods conference, an agreement by the world's leading politicians to lay down the framework for international commerce and finance, and the founding of several international institutions intended to oversee the processes of globalization.
These institutions include the International Bank for Reconstruction and Development (the World Bank), and the International Monetary Fund. Globalization has been facilitated by advances in technology which have reduced the costs of trade, and trade negotiation rounds, originally under the auspices of the General Agreement on Tariffs and Trade (GATT), which led to a series of agreements to remove restrictions on free trade.
Benefits of Free Trade.
1. The theory of comparative advantage.
This explains that by specialising in goods where countries have a lower opportunity cost, there can be an increase in economic welfare for all countries.
2. Reducing Tariff barriers leads to trade creation
Trade creation occurs when consumption switches from high cost producers to low cost producers
• The removal of tariffs leads to lower prices for consumers and an increase in consumer surplus
• Imports will increase
• The govt will lose tax revenue
• Domestic firms producing this good will sell less and lose producer surplus
• However overall there will be an increase in economic welfare
• The magnitude of this increase depends upon the elasticity of supply