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Debate:Does "free trade" increase wealth rather than simply redistribute it? (view source)
Revision as of 21:30, December 7, 2006
, 21:30, December 7, 2006no edit summary
[[User:BenjaminS|Ben]]
[[User:BenjaminS|Ben]]
From a global perspective, free trade certainly increases the overall amount of wealth in the economy. By eliminating barriers to trade, governments encourage members of the economy to specialize in doing whatever they do best and then trading to fulfill their wants and needs. When trade is efficient, a firm can focus its production capability entirely on the area in which it has a comparative advantage. Thus, opportunity costs are minimized and each firm is as productive as possible. Production will be greater, and production costs will be lower than they were without free trade. However, it is crucial to realize that this analysis is from a global rather than national point of view. Free trade certainly does redistribute wealth, and it is quite possible that free trade will benefit the economy as a whole, but harm a specific nation by redistributing wealth away from that nation. Free trade can put industrialized nations such as the United States at a disadvantage relative to less developed nations. Businesses in the United States are heavily restricted by health, labor, and environmental regulations. This often makes production in less developed nations less expensive than production in the US. While free trade is optimal from a worldwide perspective, it may be very dismal from our point of view. EWJ
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