The Economic and Social Impact of Free Trade - Essay Example

The Economic and Social Impact of Free Trade The Economic and Social Impact of Free Trade We can define free trade as absence of restrictions such as tariffs and duties in trading between two or more countries. Free trade involves the opening up of economies or trade liberalization, which enables the trading countries to maximize their competitive advantage and increase their output with an aim of boosting the economy of their citizens (Greenpeace, 2013). Free trade assumes there will be no government in­tervention and ensures all parties benefit from the interaction.

Globalizations foster free trade, which further allows goods and services from all over the world to compete with domestic products and services (Hanson, 2010). Notably, free trade favors the larger and developed countries, which are seeking to expand their market base. Mores so, not all countries in the world adopt the free trade policy. This paper discusses the merits and demerits of free trade and its impact in our society. The advantages of free trade include providing the customers with high quality goods at low prices due to lack of restrictions (Edge, n.y). Moreover, free trade leads to the generation of domestic employment in the developing nations that take part in the free trade.

This comes because of allowing poor nations to access the markets of strong economies, which further leads to results to improved economic growth in the trading nations (Hanson, 2010). Under normal circumstances, such employment opportunities would not suffice. More so, the creation of domestic employment in the poor nations prevents illegal immigration by encouraging citizens to remain in their countries. In addition, free trade makes it easier for export and import activities thus facilitating improved access to customers and product and hence the increase in the potential market (Kroon, 2007).

Moreover, free trade increases production by enabling trading nations to specialize in production where they derive comparative advantage. Similarly, free trade fosters democracy and unity among trading nations by enhancing transparency and discipline. Ultimately, free trade derives foreign exchange gains and ensures that countries produce and sell efficient products (Cherunilam, 2008). Furthermore, free trade leads to the introduction of improved technology and capital in their economies. Most significantly, free trade promotes regional integration, improves the living standards, and boosts the economy of the trading nations.

Nevertheless, free trade has numerous demerits that include the unequal distribution of trade gains among the trading nations with the developing nations enjoying more benefits (Hanson, 2010). At the same time, the success of free trade relies on the willingness of the trading nations to cooperate (Kroon, 2007). More so, free trade leads to economic dependence on the developed nations, which further leads to political slavery, which is not a good aspect. At the same time, free trade offers unfair and unhealthy competition through the establishment of international monopolies and can even lead to dumping of products in the less developed nations (Edge, n.y). Indeed, under this policy, the less developed nations find it challenging to compete with the developed nations (Cherunilam, 2008).

As such, the less developed nations cannot protect their infant companies thus destabilizing their economies. Addition, free trade offers a leeway to switch the workforce from one country to another thus de4menaing the gains of domestic employment. In this case, multinational corporations will increase their profits from the low costs of goods to create unemployment. As such, we can establish that free trade mostly benefit the developed countries though it domestic employment in the emerging countries.

However, it does not take away good paying jobs from developed countries but consistently gives an unfair advantage to multinational over small companies. References Cherunilam, F. (2008). International Economics 5E. New York: Tata McGraw-Hill Education, 2008. Edge, K.(n.y). Free trade and protection: advantages and disadvantages of free trade. Retrieved from: http://hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html Greenpeace. (2013). What is free trade? Retrieved from: http://www.

greenpeace.org/international/en/campaigns/trade-and-the-environment/what-is-free-trade/ Hanson, D. (2010). Limits to Free Trade: Non-tariff Barriers in the European Union, Japan and United States. London: Edward Elgar Publishing, 2010. Kroon, G.E. (2007). Macroeconomics the easy way. London: Barron's Educational Series, 2007. Annotated Bibliography Barry, D. (2012). Free Trade Agreements: 20 Ways to Grow Your Business. New York: Printing Office, 2012. This scholarly source discusses the U.S free trade agreements.

More so, it discusses the challenges and benefits of such agreements. It also defines how these agreements apply in various government departments. The source is current, reliable, easy to understand and relevant to this study. Kim, K. H. (2010). Is free trade good for working Americans: Lessons from North American free trade agreement? The Business Review, Cambridge, 15(1), 33-38. This source identifies free trade as a hot issue in the business and specifically in America. It addresses free trade in the American context, discusses its impact, and establishes some free trade agreements in America.

The source is up-to-date and on a scholarly source that is reliable for academic studies. It is also easy to read and understand and hence applicable for this study. Li, X. (2011). Study on the contest between free trade and trade protection in the current global economic recession: A perspective of public international law. Frontiers of Law in China, 6(1), 17-34. This source defines the contest between free trade and trade protection in enhancing local and global economies. It also reckons that the recent global recession only heightens this contest.

As such, it addresses this contest in context of global recession. The source is current, reliable, easy to understand and relevant to this study. Shah, A. (2013). Free Trade and Globalization. Retrieved from: http://www.globalissues.org/issue/38/free-trade-and-globalization This article reckons that globalization is now inevitable and that neoliberalism, free trade and open markets face huge criticism. As such, it discusses free trade in the context of globalization. The source is up-to-date and on a scholarly source that is reliable for academic studies.

It is also easy to read and understand and hence applicable for this study. Trakman, L. E. (2008). The proliferation of free trade agreements: Bane or beauty? Journal of World Trade, 42(2), 367-388. This article establishes the foundations of regional and bilateral trade agreements and their application in global trade. It also evaluates the merits and demerits of such agreements. More so, it establishes the international standards to drive such trade agreements. The source is up-to-date and on a reliable scholarly journal.

It is also relevant, easy to read and understand, and hence applicable for this study.