Debate on Free Trade Issues - Coursework Example

Nations that adopt free trade policies tend to remove or decrease policies that can result in restrictions on the number and kind of goods and services that can be imported into and exported out of the country. The debate that has been taking place for several years in the case of international trade is whether free trade should be encouraged or nations should adopt trade policies. Free trade is more beneficial for a nation than the adoption of trade protection policies because free trade leads to an increase in exports from developing regions and it even leads to the betterment of the living standards of people living in developing nations.

Restrictions on trade levied by governments to protect local organizations should be removed since such restrictions harm local organizations and free trade assists local organizations in the development and increase exports. According to Vernon, organizations first develop a good or service for their domestic region, and later when the product becomes highly popular, they tend to develop these products in other nations that are equally developed as compared to the host nations, later when the competition between the same products produced by developed nations elevate, the manufacturers tend to start producing the same product in underdeveloped or developing nations (PENG, 2009, p.156). Goods are mostly produced at lower cost in developing regions, due to this, citizens and businesses of developed regions purchase the same goods from developing regions. For example, the photocopier machine was first produced in the region of United States and used to export to developed regions such as Japan and the Western side of Europe, later due to an increase in demand, these photocopiers were even produced in these developed regions with the assistance of joint ventures between host nation organizations and organizations in the United States (Steers, 2006, p.37). Later the photocopier was even produced by competing organizations in Japan and Western Europe which leads to a decline in imports of US-produced photocopiers. Due to this, organizations in developed nations started looking towards producing photocopiers in developing nations to reduce production costs. When photocopiers started being manufactured in developing nations, organizations in developed nations started importing them from developing nations.

Free trade can assist in solving the economic issue of scarcity for both developing and developed nations; due to this, it should be promoted. Certain nations have an abundant amount of certain resources and skills, while other nations may experience a scarcity of those resources and skills. The comparative advantage theory of Ricardo states that nations should produce more of those goods for which they have more resources and can produce them in an efficient manner (PENG, 2009, p.152). If one nation experiences scarcity of certain resources and cannot efficiently produce certain goods and services, it will end up experiencing a shortage of those goods and those goods will no longer be in the reach of all of the citizens of a nation and will only be accessible to those who have more money. A major benefit of free trade is that it leads to a decrease in the prices of goods and services for consumers and goods become easily accessible. Due to this nations should concentrate on producing more of those goods that they can produce efficiently and exchange them with other nations for goods that cannot be efficiently produced in the same nation. For example, a developing nation such as Pakistan is quite efficient in producing textile products and is inefficient in producing automobiles and a developed nation such as the United States is quite efficient in producing automobiles and inefficient in producing textile products, thus Pakistan can trade textile products with the United States in exchange of automobiles and due to this automobiles will become easily accessible for citizens of Pakistan and the citizens will experience better living standards.

Trade protection policies hamper the development of local organizations in developing regions and decrease the living standards of people living in developing nations, while free trade policy leads to the development of local organizations in developing regions and enhances their citizen’s living standards.