Domestic and international trade is the main issues usually considered as purely economic. All the same, it is very imperative to point out that trade assists governments in shaping the universe where we exist. Free trade together with protectionism forms the two main opposite axes in the international arena of trade which are a reflection of the contemporary world changes in a number of various ways. In order to be in a position to give a comparison and as well contrast protectionism and free trade, this essay will make an exploration of the perceptions on approaches of trade through major modern world arena like locations, events, boundaries and flows.
Absolute freedom from any kind of interference with trade is referred to as the policy of free trade. This simply means that countries lower down or erase the boundaries for international trade with plans of specializing in the production of products that are deemed to have a comparative advantage and ultimately offer an opportunity to the citizens of in the respective countries to consumer a little more goods than it would have been possible without the policy of free trade. Any move from free trade policy meant to offer some kind of protection to industries domestically from international competition is what would be considered as protectionism. Therefore, if an approach of protectionism is applied by a country, the government in that state makes an effort of building up barriers for international trade as much as it can and also try to establish all the industries in the country hence promoting self sufficiency.
It is possible make production anywhere; using resources from allover, through an organization located anyplace, for the products to be sold out anywhere. Free trade presents our world as a regular economy, which lacks boundaries. Looking at the mercantilist approach, economics is considered as political tool and a foundation for power of politics. Therefore, free trade could absolutely destroy the major goal of the countries building a “healthy state”. As free trade stands for removing international boundaries through the lower of barriers of trade, it also implies that by way of the open boundaries, states will lack some of the authority in politics in the international level. On the other hand, protectionist methodology enhances stronger boundaries of a specific state since international competition is not in a position to move businesses or even buy and sell products within the area; additionally, as many sources suggest, protectionism offers the state the ability to establish their own economy with very little interference from the international arena.
From the diagram above, line P1Sp shows the supply price based on protectionism whereas line FpSf represents the supply price from the free trade in the international arena. The creation of this trade has led to cheaper supplies which ultimately allow lower prices which benefit the consumers. A distribution of capital will see a minority class at the top whereas the majority middle class competing in the market to attain free trade benefits (Bhagwati, 2002). An extreme method of the hindrance to free trade has been seen through the increment of the states’ power by using aggressive mercantilist approach. This involves the policies of expansionary.
For instance, Russia whilst under a communist rule together with other republics of the Soviet Union was blocked from the international rule. All the same, they were in a position of being one of the main actors internationally. This was a result of the massive boundaries and also as a bonus power to escape much anticipated need for international trade. Whilst free trade promotes interdependence among countries, free trade countries are more likely to have huge benefits from the high growth of the economy and again the weakened borders could bring the countries together, strengthen international unity and cooperation and make states aim at sustaining international peace and policy of neutrality.
All the same, when making a comparison of the benefits and disadvantages of free trade, locations could play a very big role and the boundaries as well. The government’s decisions of trading must rely on the origin of the resources in the boundaries of a particular state or across boundary. If a certain country operates in a system of free trade, resources could be purchased easily at lower prices from the other state in the network which is ready to sell to the country or make an exchange with other goods. Thus there could be no conflict over the resources between borders given that countries will be found to benefit from the trade across borders.
All the same, if the approach adopted by the government of any country hinders free trade, then there could be a number of conflicts emanating over the availability and locality of the required resources. There is an additional point for location that affects the international arena through trade. Lack of free trade has a tendency of creating jobs in various economy sectors of a particular country. This is based on the fact there is a small chance of obtaining the required products elsewhere. A country which does not take part in free trade is therefore forced to produce goods on its own. This also amounts in higher rates of employment often regardless of the region (Bhagwati, 2002).
Skepticism of Free Trade
Skeptics state that, while free trade economy producers and businesses seek a way of maximizing profits and therefore, tend to take production to the countries or regions having lower costs, it becomes easy for any theorist to postulate that losses of jobs in an import-competing scenario in industry would be determined by the gains of the jobs the exporting firm is having. However, it is much difficult for an employee who has committed his life to a certain profession to pack everything and move to a peculiar town hoping that there could be a job which needs skills which he may not be having in an industry which is not familiar. Therefore, skepticisms in free trade state that free trade could amount in unemployment based on locations and ultimately undermine the anticipated objective of maximizing social and individual well being.
Looking at Fig. 1 above, the value of (Fp*Qs2) is less compared to (P1*Qs1). (Fp*Qs2) represents the total value of supply for a free trade economy whereas (P1*Qs1) is the total supply in a country adopting the protectionist approach. Basically, in protectionism, the government is toiling more to satisfy the economy. It is more likely that the citizens will have employment. In the other case, maximizing social and individual well being as seen through the less value of (Fp*Qs2) in a free trade approach is likely to cause unemployment as seen by skeptics. Only a minority group is apparently favored by the system.
Well, in my opinion, there is a considerable long-run versus short-run aspects to the issues. History in the recent past has realized a considerable border-opening in the world of economy as result of world trade. Free trade makes the world in which we live in more internationalized. Therefore, free trade enhances movements across borders between countries of investment, money, messages, ideas and goods. Additionally, it can be stated that flows could be seen as free trade tools which can never be seen in a protectionist approach to any country’s economy (Bhagwati, 2002). Open flows might be very imperative they are basically what contribute to the common wealth development including the stable and fast growth of the economy.
All the same, as earlier aforementioned, opening of boundaries could be undermining the sovereignty of the state which could be a consideration point whilst discussing flows. Flows in communication and general information are considered important based on the fact that people make a choice of the things they want to purchase and the place of production. By the way, people attain a lot of knowledge concerning what they are buying and the states as well. It would thus be correct to say that free trade economy makes people together with the governments before the choice of either moral values or cheaper prices.
The habit of trading with countries that allow shabby treatment of employees-or even acceptable abuses have a painful choice of morality not at least since goods from the said countries are usually cheaper. Whilst what occurs in the production based on the protectionist approach is usually maintained as a secret, the people cannot may be have such a great choice variety based on protectionism and if were that they had the information, they could not have rejected the product completely. Therefore, a free trade economy makes people aware of the things they buy and the consequential effects of politics on the product. With the opened barriers, immigration and traveling is becoming cheap and easy. Individuals can migrate to other regions for habitation as it is in the nature of human beings to search for satisfaction in economic terms and aspects.