Benefits of Trade
Trade refers to the exchange of goods and services. Free trade takes place when governments have not placed any artificial barriers to limit trade between various countries. The benefits of trade are immense as illustrated in the following article.
1. Benefits consumers
Since free trade occurs on an international market, consumers are going to profit from the variety and competition brought into the market. When other nations produce cheaper items, the consumer buys products and services at lower prices.
2. Better quality products
Due to the expansion of free trade, competition between different nations will also increase. In order to remain competitive, firms must seek new methods of creating a comparative advantage. There is going to be an increase in innovation and this eventually leads to better quality products and services.
3. Economic growth
Free trade promotes a considerable increase in jobs in both the importing and the exporting sides. An increase in productivity in exporting and importing usually leads to a rise in wages. This means that people can also improve their living standards due to their increased pay. Nations that engage in trade experience enhanced real incomes as well as higher economic growth rates.
4. Encourages development
Nations that lift their trade restrictions to enable free trade enter the international market and this increases income for their respective countries. In fact, developing nations that remove trade barriers tend to grow faster than nations that have restricted trade. This is usually created by competitive industries, enhanced efficiency and levels of production.
5. Reduces war
As nations work professionally together, there is an increase in mutual respect. Prejudices and fears diminish and nations have a low likelihood of fighting each other.
Free trade has several drawbacks as well. It may lead to environmental problems like pollution because companies do not include these expenses in their prices in attempting to compete against other companies.