What is free trade and how is it beneficial to the economy?

Question

What is free trade and how is it beneficial to the economy?

Answer 1

free trade is not beneficial to the economy.

The right wing would have you believe that it lowers the barriers for trade in foreign markets which allows the home country more trade opportunity there.

In practice, it just assists in businesses being able to completely relocate to take better advantage of wages, tax benefits, or lack of laws.

This has been blatantly shown in the US, where companies are offshoring by the boatload.

Edit-

Max.V

There is not an unlimited supply of "good" service or technical jobs, certainly not nearly enough to replace the comfortable manufacturing jobs lost.

This leads to massive underemployment, as those who have high levels of skills, number more then the jobs requiring those skills, and noone can afford to take the piddling $7-$10 an hour jobs that make up the majority of new positions created in this economy.

It also leads to rediculous requirements for almost every job.   Currently in the US, its pretty much standard to need a bachelors degree to be competitive for simple, mind numbing admin assistant jobs or fast food middle management, which many can be operated on an eigth grade education.   It is insane to obtain 10's of thousands of dollars of educational debt to qualify for a job paying 20k or less a year, but here in the US, that is a reality.

As for other countries buying US goods.....why exactly is the globe flush with our dollars then?  Why have we been upside down in the trade balance for decades, and it just keeps widening?

I have a degree in Finance, and Ive been through dozens of economics classes, and guess what I say.....they are garbage and not based in reality.  

Why?  Because none of those models EVER take one factor in to consideration.....the US is consuming the worlds surplus.  Unfortunatley, they have NEVER used that fact to their advantage.

As for $100 for a shirt.  A shirt can be constructed in the US and sold for the same price as shirts made in Indonesia are.  The only difference is the profit margin.   Greedy US capitalists want more in their pocket, so they sell out the American worker.  Period.   They cant mark up a pair of pants made in the USA 10 times and sell it for a reasonable price at retail, however, they can mark up pants made in Indonesia 10 times and sell them in the US for a reasonable price.

Answer 2

in free trade good and services flow from one country to another without any barriers or government restrictions.  That is to say no tariffs, quotas, taxes etc.

It is beneficial for the economy particularly to the consumers, because it allows the people to buy goods and services of comparable quality at a lower cost.  This is true because each country has what is called a comparative advantage that allows a country to produce a certain good or service at a much lower cost.  This lower cost is passed (not in full) to the consumer.  Say for example JAPAN, this country is really good at producing electronics and they can produce it at a much greater quality and for a lot less than if the U.S. would try to produce it.  So the U.S. takes advantage and imports a lot of electronics (computers, flat screen t.v., MP3 players, cell phones etc) So with free trade you allow a country to specialized and produce what they do best for less. Now think about the U.S. car companies, they produce cars but they are not so good at it.  For starters many people equate american made cars with lesser quality cars when compare to say Japanese cars or German cars.  One of the reason our cars don't cut it is price.  The cost to produce them is very high more so than German made cars or Japanese made cars.  American auto companies pay a lot for labor in part due to labor unions.  Other countries don't do this so they can afford to spend more money on making better quality products.  

Now the economy as a whole also benefits from free trade.  A country can't buy foreign made products if we are not selling our products. At some point money has to be exchange.  Free trade makes our products competitive in other foreign markets and demand for domestics good increases.  I guess what I'm trying to say is that protectionism (the opposite of free trade) hurts a nation by making your products less competitive in the global market.  

For all those people that complain about jobs being off-shored to other countries, they forget that the U.S. is primarily a services economy, the U.S. lead in financial services, entertainment, and other highly technical areas.  In order for people to make it in this type of economy people need to become well educated and have highly technical skills.  High school graduates and drops outs do not make it and are the ones that complain the most about free trade.  

Free trade is here to stay, as long as people demand cheap products companies will continue to import them from other markets to fill the demand.  After all how would you like to pay $300+ for a pair of shoes that you can now buy for $50 made in china or other industrial country?  How about a $100 shirt?  

Answer 3

Free trade allows for lower prices throughout the economy. For instance, if not for Free Trade, the very computer you are using right now might cost $20,000. Thus limiting the number of people using the internet. Not to mention the increase costs for businesses because they wouldn't have the benefit of productivity gains from affordable computers. We'd still have mail rooms delivering memos instead of emails.

Free Trade hurts in the beginning because it upsets the apple cart and people lose jobs. But over the long haul it actually creates more jobs and grows the economy stronger with diversity of employment.  How many people does Google, Microsoft, Apple, HP, etc employ because computers are affordable and made in China and freely traded back into the United States?  

Exactly....