FREE TRADE: No restrictions on trade. Free Traders say that unrestricted market forces will create the most good for the most people by directing resources to the most efficient countries. To achieve worldwide efficiency, trade must be conducted without regard to national concerns; therefore any temporary imbalance in a country’s foreign exchange settlements or domestic living standards is without consequence. Free Traders also believe that any action to interfere with free trade will result in a “trade war”, wherein a country’s trading partners will enact retaliatory laws to eliminate any benfefit the initiating country receives from a protectionist policy. Free Trade benefits multi-national corporations by opening markets to their products which might otherwise be restricted in some fashion. It also benefits consumers by making the manufacture of goods become as cheap as possible since manufacturers seek out countries with the lowest cost production.
Many countries which have adopted this policy have seen their economy grow as a result. The question is whether the benefits to individual citizens from imports which cost less than goods made in the home country are more than offset by the resulting loss in jobs and wages to local citizens. Some observers fear that a “race to the bottom” resulting from the mobility of capital in seeking low cost production will lower everyone’s wages to the lowest The United States of America is the prime mover behind this policy because it sees the opening of foreign markets as the best way to address its long standing trade imbalance of imports over exports. This is a new development since this policy began as industrialized countries opening their markets to poor, developing countries while ignoring them as export markets. Unfortunately, many international lending agencies have adopted this policy as a requirement for borrowers, although the effect of adopting this policy is frequently to eliminate any possibility of a favorable trade
... many third world countries. Most studies on trade effects of EU policy yield a positive result for developing countries, however the broad ... it is accepted that diversion will occur in markets for low-value, non-differentiated, price-elastic goods which indicates that ... those on which developing countries are likely to concentrate. Tsoukalis rightly points out that free access for industrial exports ...