Free trade is a phenomenon that encourages the exchange of goods and services without strict restrictions in order to increase its benefits. Free trade can benefit all the countries involved in it because fewer restrictions mean free movement of goods and services. In the arena of free trade a very important term “comparative advantage” is used which means trade benefits all.
FREE TRADE AND ITS BENEFITS:
Free trade doesn’t mean that there will be a complete absence of any agreement. Countries who agree upon free trade sign a free trade agreement which means that they will implement little or no price control in the form of tariffs or quotas between each other. Such trade areas allow the agreeing nations to focus on their competitive advantage. Free trade agreements allow countries to freely trade for the goods they lack the experience at making and eventually this increases the efficiency and profitability of each country.
Foreign direct investment is another reason why free trade is beneficial. Investors do not hesitate to invest in foreign countries. This raises the financial power of the investor country and reduces unemployment in the country where the business is operating.
Free trade also transfers technological advancement. When developed countries invest in developing countries, local businesses can work efficiently through technological advancement. This allows local economies to grow.