Free Trade
This essay suggests that the concept of 'free trade' is fuzzily defined andpossesses both theoretical and practical flaws which render it unusable as arational basis of government policy making. [For alternative national tradepolicies, see http://www/mkeever.com/essay]'Free trade' seems to mean that trade between countries occurs with nogovernment regulation or restraint. Or, in other words, no quotas, licenses,taxes, safety concerns, inspections, or limits of any kind. Business peopleare free to do what they will in buying and selling products and servicesThis theory of trade has two categories of flaws: theoretical and practical.Consider the theoretical underpinnings of 'free trade' theory:'Free Trade' is a fuzzy concept which applies the concept of Adam Smith'sInvisible Hand [IH] to international trade. In order to fully understand'free trade', we must first look at the IH concept. 'Free trade' shares manycharacteristics and flaws with the IH.Basically, the IH holds that the greatest good will accrue to the greatestnumber of people when each agent in a market, both buyers and seller
Thus, it is not possible to secure a perfectly efficientallocation of resources through a 'free trade' policy because differingcultural standards reflected in commodity prices in differing countries makepure competition impossible. As aresult, firms in those countries have lower labor costs than do US firms. Mostmarkets have some form of monopoly or monopolistic competition where eachseller is able to differentiate his products from other sellers. In the theoretical world, any single market that is less thanperfectly competitive results in less than the optimal, perfectly efficientallocation of resources. Since 'free trade' is an impossibility, proponents acknowledge that it isonly an ideal, but that any progress toward that ideal is a good thing. This is not free trade; it's acrude system managed by political bartering among major interests. Taxpayers pay for theseindirect subsidies to auto makers. There is less regulation of products leaving the country. com and I will forward an essay onthat subject]Proponents of 'free trade' suggest that while citizens of high wagecountries may suffer some discomfort when competing with low wage countries,the policy is justified because the resulting efficient allocation ofresources will make the entire world a better place. Theoretical Flaws with 'Free Trade'The theoretical flaw with 'free trade' arises from the fact that governmentscreate markets: since trade crosses from one government created market intoanother government created market, trade from one country to another cannever be truly competitive. Thus, every transaction happens because governmentcreates and maintains the infrastructure of the market. Sadly, some localgovernments actively pursue international companies by suppressing localpractices which might cost more. , quickly displace higher costsuppliers in national markets. This gives an unfair advantage to those countries which do not protectworker safety.
Common topics in this essay:
Invisible Hand,
Nation December,
Parkin ECONOMICS,
ADM McDonald's,
Basically IH,
Volvo Toyota,
Theoretical Flaws,
GATT WTO,
Practical Flaws,
Comparative Advantage,
'free trade',
wage countries,
low wage,
low wage countries,
demand curves,
invisible hand,
efficient allocation resources,
demand curve,
elastic demand,
perfect competition,
market price,
trade war,
downward sloping demand,
flaws 'free trade',
perfectly elastic demand,
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Acceptance Essays
