The Economic Benefits of Trade
- Free trade is the movement of goods and services across borders without barriers to trade
- There are no or limited taxes, quotas, subsidies, regulations on the trade of goods or services
Diagram: The Economic Benefits of Free Trade
Free trade is the movement of goods and services without government restrictions
- Greater choice: with access to a wider variety of goods/services, the standard of living improves
- Lower prices: As the amount of competition increases, firms benefit from economies of scale, causing costs to fall and consumers benefit in the form of lower prices
- International cooperation: required for trade helps countries build better relationships, which leads to lower levels of hostilities
- Flow of new ideas: innovative ideas and technology can be shared between countries
- Access to resources: output can increase and costs of production can fall with increased access to raw materials
- Increased efficiency: international competition allows the most efficient firms to emerge and this improves the use of global resources
- Economic growth: exports are a key component of the gross domestic product of many countries and an increase in exports can lead to economic growth
- Economic development: Increased output leads to lower levels of unemployment, which leads to higher incomes and a higher standard of living