Free trade allows traders to trade freely. They act and transact without any interference of government. Free trade policy comes under the law of comparative advantage. With the development of globalization, countries are getting benefited by this free trade.
Free trade has many advantages. Some of them are listed below:
- Increased production: Free trade enables countries to specialize in production of those goods, on which the countries have a lower opportunity cost. Thus it increases production as well as economic welfare for all countries.
- Promotes innovation and competition: The purpose of free trade is to access to a greater variety of goods and services. It offers consumers the best choices and opportunities to enhance their standard of living. Free trade promotes healthy competition, which pushes to new innovations and develops better products.
- Generates economic growth: Free trading generates economic growth by increasing sales, market share and profit margins. It gives more buying power to the people, and thus more money is circulated all over the ecomony.
- Fosters economic growth: Free trade increases choices, opportunities and standard of living to a great extent and reduces inflation.
- Broadcasts democratic values: Free trade reduces the opportunities for corruption, thus helps in disseminating democratic values.