Case for free trade Assignment Help

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Case for free trade:

A situation of free trade is one where countries engage,b  international  trade without imposing any policy restrictions that interfere with the free flow of goods and services across  international boundaries.

Assuming that countries specialise  in the production of goods and services  in which  they have a comparative  advantage, each country will export the good(s) which  it produces relatively efficiently and imports goods in which it has a comparative disadvantage. In the absence of policy restrictions on the international exchange of goods and services, prices of goods in the domestic economy  tend  to  be the same as  those prevailing in the rest of the world.  

With  free trade domestic  firms are  hlly exposed to  competition from international firms. If a domestic firm charges a price which is higher than the price prevailing  in the world market, then domestic consumers would prefer to import this good instead of buying it from the domestic firm. Thus with free trade fixms are subject to the discipline of international competition and domestic consumers  tend to benefit most in this situation.

Benefits of Free Trade
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