Free trade

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Free trade is a term meaning unregulated trade between nations without tariffs, quotas or subsidies applying to the goods exchanged. Since one nation has little control over another nation, without some sort of agreement between two nations, free trade might harm a particular group of people in one nation, such as laborers or consumers. However, the overall welfare of each country increases with free trade.

It is possible that free trade can exist between a potential future enemy of a country, leading to national security implications.

Free trade can have undesired side effects, such as a massive loss of manufacturing jobs by the wealthier trading partner though a mechanism known as offshoring jobs to a trading partner having cheaper labor. Moreover, nearly all of the benefits of free trade can accrue to the trading partner or its government, which may be an enemy of the wealthier trading partner.

Free trade raises moral issues as well, such as the use by a nation of slave labor or use of proceeds from the trading to build military weapons to be used against other nations.

The basic argument for free trade is based on the economic theory of comparative advantage: each region should concentrate on what it can produce most cheaply and efficiently and should exchange its products for those it is less able to produce economically. Cf: Columbia Encyclopedia.

There are some regional free trade agreements like the North American Free Trade Agreement (NAFTA) and the Free Trade Area of the Americas (FTAA); in Europe, The European Free Trade Association (EFTA), which is an intergovernmental organisation set up for the promotion of free trade and economic integration to the benefit of its four Member States: Iceland, Liechtenstein, Norway and Switzerland. [1]

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