Free Trade

The case for free trade rests on comparative advantage. When countries specialise in producing what they are relatively best at and trade with each other, total output rises, consumers get access to a wider range of goods at lower prices, and businesses can sell to larger markets.

Countries often promote free trade through agreements. Some are regional, such as the single market of the European Union, while others are bilateral agreements between two countries. The World Trade Organization sets rules for trade among its members and works to reduce barriers.

For example, a free trade agreement might remove tariffs on cars, food and machinery traded between two countries, making those goods cheaper for consumers and businesses in both.

Free trade also has costs and critics. Some industries and workers face strong foreign competition and may lose jobs, especially in regions dependent on those industries. Critics also raise concerns about dependence on foreign suppliers for important goods and about weaker labour or environmental standards abroad. Most economists support free trade overall, while recognising the need to help those who lose out.