In international trade, free trade is an idealized market model, often stated as a political objective, in which trade of goods and services between countries flows unhindered by government-imposed prices. Intellectually, this arrangement is supported by followers of the neoclassical and microeconomic schools of thought, who argue that the benefit of trade is a net gain to both trading partners. It is opposed by anti-globalization and some labour campaigners due to what they see are many tendencies for abuse by wealthier states.
The term is given to economic policies, as well as political parties that support increases in such trade.
Free trade is a concept in economics and government, encompassing:
International trade of goods without tariffs (taxes on imports) or other trade barriers (e.g., quotas on imports)
International trade in services without tariffs or other trade barriers
The free movement of labour between countries
The free movement of capital between countries
The absence of trade-distorting policies (such as taxes, subsidies, regulations or laws) that give domestic firms, households or factors of production an advantage over foreign ones
Trade-distorting policies to enforce property rights so as to ensure the above conditions
The relative costs, benefits and beneficiaries of free trade are debated by academics, economists, governments and interest groups. Aspects of the ongoing debate are addressed below.
Depending on the specific context, use of the term free trade can signify one or more of the above conditions. However, it is fundamental that only governments can restrict trade: they have the legal monopoly over the use of physical force in a geographical area.
The term free trade has become very politically based, and it is not uncommon for so-called "free trade agreements" to impose additional trade restrictions. Such restrictions on trade are often due to domestic political pressure by powerful corporate, environmental or labor interest groups seeking special protections of their perceived interests.
Free trade agreements are a key element of customs unions and free trade areas. The details and differences of these agreements are covered in their respective articles.
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