Without free trade, the modern world economy would collapse

Résumé du document

Free trade is an economic doctrine which commends free traffic of goods and services between different countries. This theory applies to international levels. The liberal principle according to which we admit we let the market act itself (i.e. we eliminate obstacles and foreign interventions, as well as quotas fixation or customs duties) in order to lead to best possible economic situation.

The world's economy structure and strategies have evolved a lot since 1950's. A strong tendency of acceleration of international exchanges has been developing since the end of the 20th century with the recourse of the free trade, the doctrine which encourages the free traffic of people, capital and goods in the form of free trade areas (example: the European Union).

Of course, each country keeps its own autonomy to take decisions concerning custom taxes for the non-members countries of the euro zone. However, if we want to verify the efficiency of free trade it is necessary to measure its effects on economic growth, in other terms, the increase of the Gross Domestic Product during a long period of time.

Extraits

[...] Free Trade: Is it the best solution? Free trade permits the international division of work This is the advanced theory by Smith and completed by Ricardo which shows that a country can obtain some goods or services thanks to the international exchanges by selling a part of its production abroad. That implies that the country has to produce more in some sectors of activity and has to produce less or not at all in others sectors of activity. Countries which participate in the free trade can specialize themselves in one or several productions. [...]

[...] Actually the French Pascal Lamy manages the OMC in Switzerland. To conclude, we must say that the purpose of GATT and WTO is the progressive reduction of the protectionist barriers to favour the world growth without damaging infant industries or industries in difficulties. Free Trade actors A free trade area is established by different countries which decide to eliminate their customs duties as well as the quantitative limitations in the import, but keep each their own commercial policy towards the third countries. [...]

[...] Free Trade advantages Recommended by the classic authors (Smith, Ricardo), neo-classic and liberal, but also criticised by the Marxist economists, the free trade has numerous arguments in its favour: Free Trade allows an international specialization international Division of the work Each country would dedicate to the production of its best product focusing on their “comparative advantage” Free trade favours the competition between countries and companies, stimulating the innovation (the technical progress) and allows lowest prices for consumers; Free trade, by enlarging markets, also allows to realize "economies of scale", and thus make the prices lower for goods and services Free Trade is a more general way of limitating inflation in a country, because a foreign offer can answer easily an excess of internal demand in a given sector Free Trade is a peace factor (mailman) between people, favouring agreement and international cooperation, contrary to protectionism. Free Trade: Which are the limits? The essential quality of the free trade is to develop imports and exports but in a crisis period, imports can be accused of causing dismissals. Moreover, exports may be suspected of sacrificing wages and employments to rationalize the production. Free trade destroyed full employment. [...]

[...] However, if we want to verify the efficiency of free trade it is necessary to measure its effects on economic growth, in other terms, the increase of the Gross Domestic Product during a long period of time. Therefore, the free trade makes the exchanges of products between industrialized nations and developing countries easier. This stimulates the international demand and increases the production and international trade accordingly. This explains the increase of economic growth. But sometimes, the free trade has some negative effects and disturbs the balance of the economy. [...]

[...] The United States opened a little more their frontiers. Until 1947, this cooperation will take the shape of the General Agreements on Tariffs and Trade (GATT). The World Trade Organization is also created as a real international institution endowed of a real disciplinary power. Free Trade authors The GATT The GATT was signed on October by 23 countries to harmonize the customs policies. The treaty came into effect in January 1948 and the secretarial department took place to the Villa Bocage, in Geneva. [...]