Free Trade Video

Idea about free trade today

• That it’s “natural”

• It isn’t just something that happened, it was built → all of it happens because its allowed to happen

What is the objective of free trade?

Removing barriers to trade

Why do barriers to trade exist?

Groups and countries put them up to protect the economies of their own countries

What does free trade imply?

• More trade across boundaries, borders, b/w societies

• Can be threatening to those who believe they won’t benefit

What is the principle free trade is built on?

• Mutually beneficial exchange

• World’s resources are used more efficiently

• More people will become more wealthy

• Countries can specialize economically in what they do best, and trade for resources that they don’t produce efficiently/aren’t available to them

Policies that promote trade → reduce tariffs

• A tax on a product that comes into a country → cost is passed onto the consumer, makes imports more expensive

• Citizens are less likely to buy it → trade interrupted

• Reducing tariffs means costs are lowered, domestic citizens are more likely to buy it → stimulates trade between states

Eliminate/reduce non-tariff barriers (NTB)

• Quotas, export subsidies, licencing

• Promotes trades

Non-Discrimination Policies

• State C might also produce the same thing as State A and export it to State B

• The principle of non-discrimination says that State B can’t treat the product from State C any differently than the product from State A 

• Fairness of access

• State B extends most-favoured-nation trading status to both States A and C

National treatment

Any product coming from State A and C cannot be treated any differently than the domestically-produced equivalent

Principle of reciprocity

All countries should benefit, the trade agreement should help everyone equally

Exemptions

Negotiated by states → states might wanna protect certain sectors of their economies, such as cultural products, agriculture

Free trade has a political component = more peace?

• Idea that the more free trade, the more peace

• If you promote more mutually-beneficial exchange between countries and people, they’ll be less willing to go to war with one another

• Increasing interconnectedness means you want to maintain peace → war damages self-interest