Here's a quick definition from Investopedia:
Along with a justification of it:
Free trade allows nations to concentrate on what they do best. It is then assumed that that increases overall wealth in the nation better than if it made everything itself. Countries that engage in free trade with other nations control their economies less than those that do. Free trade might then be best described as what it lacks than what it has. It protects its domestic businesses less than other nations meaning that it is less likely to impose protective tariffs and duties. But nations that engage in free trade are more likely to see outside forces disrupt internal institutions.
It is closely related to the ideas put forward in classical economics, which held that government should disrupt the economy as little as possible. The wealth of a nation had less to do with how much gold it had, or how much it did on its own, but in the value of the trade it could engage in.
Some definitions:
- Protectionism: These are trade policies which seek to protect domestic businesses and workers that might be harmed by external competition.
- Protective Tariff: A duty imposed on imports to raise their price, making them less attractive to consumers and thus protecting domestic industries from foreign competition.
- Tariffs: A tariff is a tax on imports or exports.
- Subsidies: A form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.
For more:
- Library of Economics and Liberty: Free Trade.
The unrestricted purchase and sale of goods and services between countries without the imposition of constraints such as tariffs, duties and quotas.
Along with a justification of it:
Free trade is a win-win proposition because it enables nations to focus on their core competitive advantage(s), thereby maximizing economic output and fostering income growth for their citizens. Free trade enables nations to concentrate their efforts on manufacturing products or providing services where they have a distinct comparative advantage, according to the theory first espoused by economist David Ricardo two centuries ago. A free trade policy should enable a nation to generate enough foreign currency to purchase the products or services that it does not produce indigenously.
Free trade allows nations to concentrate on what they do best. It is then assumed that that increases overall wealth in the nation better than if it made everything itself. Countries that engage in free trade with other nations control their economies less than those that do. Free trade might then be best described as what it lacks than what it has. It protects its domestic businesses less than other nations meaning that it is less likely to impose protective tariffs and duties. But nations that engage in free trade are more likely to see outside forces disrupt internal institutions.
It is closely related to the ideas put forward in classical economics, which held that government should disrupt the economy as little as possible. The wealth of a nation had less to do with how much gold it had, or how much it did on its own, but in the value of the trade it could engage in.
Some definitions:
- Protectionism: These are trade policies which seek to protect domestic businesses and workers that might be harmed by external competition.
- Protective Tariff: A duty imposed on imports to raise their price, making them less attractive to consumers and thus protecting domestic industries from foreign competition.
- Tariffs: A tariff is a tax on imports or exports.
- Subsidies: A form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.
For more:
- Library of Economics and Liberty: Free Trade.
