Free trade is a misleading term for 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 typically harms a particular group of people in one nation, such as laborers or consumers. Free trade suppresses wages and reduces job opportunities in the wealthier nation (e.g., the United States), and transfers wealth to the elite in the poorer nation (e.g., China).
Misguided free trade can exist between a potential future enemy of a country, leading to national security problems and greater defense costs.
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. Additionally, free trade leads to reduced independence and sovereignty of a country, makes it dependent on other nations (including geopolitical enemies), and leads to one-world government.
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 as an alternative to the European Union for the promotion of free trade and economic integration to the benefit of its four Member States: Iceland, Liechtenstein, Norway and Switzerland.
- Trade, Economy, & Related Issues
- Center for Trade Policy Studies
- International trade and tariff data World Trade Organization.