For College Course -- Introduction to Microeconomics - Research Paper Example

Smith is credited with being the first to examine the importance of the division of labor and worker productivity and for advancing the idea that free markets thrive on the basis of mutual self-interest. Although Smith warned against monopolies and mercantilism, his notion that markets are driven toward the public good by an "invisible hand" has made him a venerated figure among free market doctrinaires. (Answers.com). The purpose of this paper is to describe the pros and cons of free trade. Trade allowed nations to obtain the goods and services the population needed in order to survive.

In the 20th century the ability to trade with other nations became a critical success factor for many nations including the United States of America. Today free trade is practiced by many nations in the world. More than ever before in history we see that free trade agreements are being sought by the world’s most powerful countries, as well as the developing nations. In short, free trade agreements are now high on the political agendas of many nations and the World Trade Organization. The globalization movement has been instrumental in forcing nations to enter into free trade agreement.

In North America the free trade agreement that is enforceable is the NAFTA agreement. The NAFTA opened up free trade between the United States, Mexico, and Canada. “NAFTA was designed to promote economic growth by spurring competition in domestic markets and promoting investment from both domestic and foreign sources” (Teslik). The reason that NAFTA was initiated was because President Bill Clinton in 1994 saw the European Union as a threat to the Americas. A free trade agreement between the United States and its two neighbors was crafted to be a plausible solution that would offset the growing global economic trading power of the European Union.

The implementation of free trade agreements eliminates the imposition of tariffs in the trade of goods. As a consequence of the