Free trade remarkably contributes to economic development. Countries can boost their economies through collective economic activity. Besides all the good things about free trade, it also has negative impacts as well:
Disadvantages of Free Trade
- Fewer trade barriers mean people from other countries can come to avail jobs in local companies. This lessens the chances for the local people to get the job.
- Free trade relations damage the demand for local goods and services. The damage has to be faced by the domestic industries. People prefer buying foreign goods and services. Easy foreign direct investment means the dominance of foreign industries on the local market.
- It is a known fact that the Developing industries often benefit from domestic strategies that have a great influence on their production, such as protective tariffs or tax breaks. The removal of these protections makes it difficult for developing industries to establish themselves.
- Free trade hinders the tendency of tax revenues that could be collected as tariffs. Countries allowing free trade don’t apply high taxes on imports that reduce the tax revenues.
- Free trade can raise vulnerability risk when analyzed strategically. If a county’s dependency gets higher for the trade of critical goods and services, it can be politically pressurized which is a danger against the sovereignty of the state.
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