Case for Free Trade
The act of opening up economies for trading is known as free trade or trade liberalisation. This is done by bringing down trade barriers like tariffs. Trade liberalisation allows goods and services from everywhere to compete with domestic products and services.
Globalisation along with free trade can adversely affect the economies of developing countries by not giving equal playing field by imposing conditions which are unfavourable. With the development of transport and communication systems, goods and services can travel faster and farther than ever before. But free trade should not only let rich countries enter the markets, but allow the developed countries to keep their own markets protected from foreign products.
Countries also need to be cautious about dumped goods; as along with free trade, dumped goods of cheaper prices can harm the domestic producers.
Define the term 'globalisation'.
Solution and Explanation
Explain the importance of transport system in 'world trade'.
Solution and Explanation
- An efficient transport system enables the quick movement of goods and services between countries.
- It reduces the time and cost involved in international trade.
- Modern transport connects producers with markets across the world.
- It promotes global trade by making imports and exports easier and more efficient.
- Improved transport facilities contribute to economic growth and strengthen international trade relations.
Why can 'free trade' adversely affect domestic producers?
Solution and Explanation
- Under free trade, imported goods compete directly with domestic products.
- Foreign companies may sell goods at lower prices (dumping), making it difficult for local producers to compete.
- Domestic industries may suffer losses due to reduced demand for their products.
- Small-scale producers may face financial difficulties or even be forced to shut down because of intense competition from cheaper imported goods.
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