Minute Economics: Free Trade

Why does America need free trade? Humans, especially Americans, bear the mark of diversity and individuality. Usually, when American’s want a product that is rare in one place yet common in another, they will make the effort to get that product from a place where it is more readily available. This is the underlying reason for free trade. Free trade is, “a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs [to imports] or subsidies [to exports].”

In other words, it is essentially trade without infringement. This is a positive thing because trade is done to make both parties better off. If America can make product x better than another nation, which can make product y better than America, then free trade allows those nations to trade those products which they are better at producing for their mutual expedient growth. This principle is known as comparative cost advantage, and is a vital reason to free trade around the world.

2894039918_414144184bHowever, free trade has its share of weaknesses. One of its greatest weaknesses is that by opening the market to an international scale, it makes it nearly impossible for small businesses to successfully grow, and that it exports a lot of jobs to other nations where labor is cheaper than in America. This was a cause for great debate during this previous election as Mitt Romney was lambasted for shipping jobs overseas to China and other nations. However, he was doing what any smart businessman would do: utilizing the international market for the most cost efficient way to employ labor. Even though people complained that this was unethical and immoral behavior, they failed to understand that economics is an amoral business, and shipping jobs overseas was simply one of the drawbacks. Despite its drawbacks, free trade is still vital for economic growth in America.

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Follow Caleb Casto on Twitter @Caleb_Casto. 

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